Pension funds get new investment guidelines
10th May 2012
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SSRA Director General, Irene Isaka
Speaking at the launch of the guidelines
in Dar es Salaam yesterday, the SSRA Director General, Irene Isaka, said
lack of social security guidelines in this area has been one of the key
challenges for the funds, and a source of complaints from members on
the type of investments and benefits to them.
The new guidelines follow a portfolio
review of investments of social security funds by a consultant
commissioned by the Bank of Tanzania (BoT) in collaboration with SSRA.
Isaka said the study brought out number of
issues that already the authority has started working on to improve
governance and investment returns.
She pointed out that because of lack of
uniform guidelines some funds’ earnings have been lower than others with
the level of internal rate of return inadequate to meet the level of
benefits they had promised.
She said critical areas that the
guidelines address are investment policy, benchmarks, targeted returns,
governance structure in decision making process and sanctions for non
compliance.
The benchmarks in the guidelines include
allowing the funds to invest up to 70 per cent in government instruments
such as treasury bills and bonds, while direct loans to the government
are now limited to 10 percent.
She said the funds can invest up to 40
percent of its funds in commercial papers, promissory notes and
corporate bonds of which unlisted debt is 10 percent.
The funds can also invest up to 30 per
cent of its portfolio in real estate, of which non-earning income
property is allowed a maximum of 5 percent.
Ordinary and preference shares are allowed
to a maximum of 15 percent of which private equity is 5 percent. The
guidelines have also allowed investment of a maximum of 25 of the funds
in infrastructure, stressing that such undertakings be based on
viability of the project and not a guarantee from the government.
Isaka said fund deposits in licensed banks
and financial institutions will now be limited to a maximum of 35
percent, mainly to accommodate funds such as the National Health
Insurance Fund (NHIF) that offer short term benefits and for treasury
management of the other social security funds.
Under the guidelines collective
investments have been given a maximum of 30 percent while loans to
cooperative societies are limited to 10 percent.
She urged board of trustees of every
scheme to ensure that real return on investments are positive and any
investment from treasury instruments shall have return above risk free
rate. She stressed that any investment yielding lower than risk free
should seek prior approval.
However, the SSRA boss noted that the main
challenge facing the pension funds is inflation. “Much as we strive to
increase returns on investments, real return remains a big challenge.
Given that the inflation rate in March this year remained at 19 percent,
real return remains negative,” she said.
She said the situation had multiplier
effects, noting that apart from realising negative returns on
investments, it eroded the value of pension to members.
“I would like to assure our members that we are working hard to ensure that their interest is protected,” she added.
The pension funds under SSRA are the
National Social Security Fund (NSSF), Parastatal Pensions Fund (PPF),
Government Employee Provident Fund (GEPF), Local Authorities Provident
Fund (LAPF), National Health Insurance Fund (NHIF) and Public Service
Pension Fund (PSPF).
SOURCE:
THE GUARDIAN
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