Regulator to improve social security

Sunday, 02 January 2011 21:36
By Polycarp Machira
The Citizen Reporter

Dar es Salaam. Tanzania has potential opportunities that remain uncovered by the social security schemes and which call for the government’s intervention to increase coverage.

The establishment of the Social Security Regulatory Authority (SSRA) in effect is expected to play an important role in regulating and supervising the provision of social security services in the country.

It has been created under the Social Security Regulatory Authority Act, 2008 which President Jakaya Kikwete assented to in June last year, and became operational in September this year.

The newly-enacted law will now help supervise and regulate the functions of all social security schemes in the country. The authority has the role of ensuring the funds are sustainable, project interests increase coverage and reduce the burden to the government.

Tanzania trails Kenya and Uganda in security scheme coverage. Only 6.5 per cent of Tanzania’s working population and 3.5 per cent of the entire population are covered by the social security schemes.

At least eight per cent of the Kenyan population is covered by the schemes, compared to 11 per cent of the Ugandan population which is covered by the social security schemes.

The SSRA director general, Ms Irene Isaka, told reporters in Dar es Salaam this week that the authority would facilitate the extension of social security coverage to non-covered areas, including informal groups, and conduct awareness, sensitization and tracing on social security.

“We look forward to increasing coverage to farmers, pastoralists and other rural-based populations that seem to have been neglected by the funds. The issue here is to create awareness so that such groups of people may see the importance of being included in the security funds” said Ms Isaka.

She said the authority has established a taskforce that draws its members from the Attorney General’s chamber, the ministry of Finance, the Bank of Tanzania, experts on Social Security from the International Labour Organization (ILO) and the ministry of Labour, Employment and Youth Development to address key challenges ahead.
Some of the key challenges facing the social security sector include fragmented legal and regulatory framework where different schemes report to different ministries.

“Most funds just provide traditional benefits without flexibility to cover variety of pensioners’ needs” she said.
Every pension, according to the authority has its own investment policy, some of which are not favourable to pensioners. There are seven pension funds under different ministries, with different rules and regulations, but have limited coverage.
At least three schemes - Parastatal Pension Fund (PPF), Public Service Pension Fund (PSPF) and Government Employees Pension Fund (GEPF) - report to the ministry of Finance.

The National Social Security Fund (NSSF) reports to the ministry of Labour, Employment and Youth Development while the Local Authorities Pensions Fund (LAPF) reports to the Prime Minister’s Office (Regional Administration).
The National Hospital Insurance Fund (NHIF) reports to the ministry of Health and Social Welfare.

To achieve the desired goals, the regulatory authority plans to conduct actuarial valuation of all social security schemes in the country by the first quarter of next year in an effort to solve problems facing the sector. The valuation, among other things, will determine the lifespan of the security schemes as some may not live to benefit pensioners at the retirement age.

A well-designed social security scheme, according to Ms Isaka, should be broad-based with adequate coverage and be sustainable for over 70 years. The valuation will also help determine regulations for transferability of membership from one scheme to the other.

As at now, the rules and regulations of the social security funds make it difficult for workers to transfer their benefits to another fund in case the worker changes his job. It has also been noted that the pensions have different pension factors, although all have the same contribution rate of 20 per cent, they have different benefit packages, a factor which is to be reviewed too.

She said there is a need to improve the sector so as to increase national pension coverage, adding that the institution would, among other things, be responsible for advising the government on how to extend the social security coverage into other sectors, including the informal sector.

Data shows that 10.5 per cent of the population comprises paid employees, 1.8 per cent are self-employed with employees, while 9.1 per cent are self-employed without employees.
According to the DG, the authority that was formed two months ago would ensure schemes remain secure and sustainable, members’ interests are protected and coverage is increased.

It would also ensure that funds are invested according to rules or investment guidelines as the government looks at the possibility of widening coverage of social security services in the country, to include people who are self-employed in the informal sector.
It would conduct public awareness for all stakeholders of social security before issuance of regulations and guidelines.

On the other hand, the authority will put in place capacity building programmes and establish a research department with a robust database and an in house actuary to facilitate development of social security products.
Recently, the World Bank’s Financial Sector Support Project (FSP) prompted the Bank of Tanzania to invite consultants to bid for the reviewing of the existing investment portfolio of the social security schemes in the country.

The objective was to review the funds’ investment markets, portfolios and policies with a view to structuring sharp investment guidelines for them.

Apparently, the new project seeks to control the hitherto unregulated schemes. Allegations are high that some of the funds are investing in unviable projects, lending to non-members and taking overly long to issue members’ benefits.
It is expected that the harmonization of the legal and regulatory framework will start during the first quarter of 2011.

The regulator will make sure the schemes remain secure and sustainable, members interests are protected, there is increased coverage and funds are invested according to rules or investment guidelines.

It would ensure appropriate disclosure as schemes, managers and custodians provide timely information. Above all, it would guarantee that shortfalls are identified and appropriate actions taken.