SSRA allays fears as pension formula harmonisation starts
24th August 2011
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Members
of social security schemes have been urged to be patient as the Social
Security Regulatory Authority (SSRA) works on a system meant to
harmonise the formula for paying members their terminal benefits.
According to Eric Shitindi, Permanent
Secretary in the Labour and Employment ministry, the formula will be
used by social security funds throughout Tanzania.
The PS made the remarks at a just-ended
stakeholders meeting on proposed amendments to pieces of legislation
establishing social security funds held in Dar es Salaam.
He said the planned amendments seek to
make it mandatory for social security funds to recognise SSRA, to
facilitate the operationalisation of the respective pieces of
legislation and enhance good governance, and to make the regulatory
agency function as per best principle practices.
“This is last in a series of stakeholders
meetings on amendments of pieces of legislation establishing social
security funds so that they work in tandem with the SSRA Act,” said
Shitindi.
“As during all previous meetings,
stakeholders wanted to know when the social security system will be
harmonised, why the funds are not merged, why members cannot benefit as
much as they would like to while continuing to pay their contribution
obligations and why is it so difficult for one member to transfer from
one social security scheme to another,” he added.
The PS explained that the harmonisation
plan would be impossible to implement without first amending the laws
under which the individual social security funds were set up “because
the benefit packages and general operations of the funds are stipulated
in the respective Acts”.
He said the first step would logically be the harmonisation of the legal and regulatory framework, followed by that of benefits.
Dr Aggrey Mlimuka, Director General of
Association of Tanzania Employers (ATE), submitted at the meeting that
the Social Security Act and Social Security Regulations were not in
agreement.
“The Act is more powerful than the
Regulations, and members need to be educated about this. Social security
is a serious issue and we as stakeholders want these regulations to be
mentioned in the Act so that the regulator (SSRA) will have the capacity
to reach the expected goals,” he said.
“ATE has conducted a study and prepared
some recommendations which it will be pleased to share with SSRA to
ensure that members’ interests are well taken care of during the
implementation of social security reforms,” added the legal expert.
SSRA Director General Irene Isaka
meanwhile revealed that they are busy conducting “a comprehensive
actuarial valuation using uniform assumptions in respect of all social
security schemes in order to come up with a harmonised benefit
structure.”
She said the structure would be inclusive
of a pension computation formula, “aimed at improving members’ benefits
and increasing the sustainability of the social security schemes”.
“We are seriously working on ways to
address the various challenges facing the sector. The results of the
actuarial valuation will give the direction of the reforms,” she
elaborated, adding: “Here we are looking at how best we can enhance
members’ benefits without compromising the financial stability of the
sector and the sustainability of the social security schemes
themselves”.
Tanzania has six major social security
funds, among them PPF Pensions Fund, National Social Security Fund,
Local Authorities Pensions Fund and Public Service Pension Fund.
The biggest challenges facing the schemes
include the different formulas they use in computing their members’
benefits although the contribution rate is the same, lack of indexation,
lack of a transferability mechanism and lack of uniform investments
guidelines.
The Act under which SSRA was established
provides for the protection of fund members’ interests by considering
the sustainability of all the social security schemes.
SSRA’s Isaka elaborated at the Dar es
Salaam meeting that her agency and the Bank of Tanzania are jointly
conducting “a portfolio review for all social security funds in Tanzania
in order to develop effective investment guidelines.”
She explained that the thrust of the
exercise was on three critical areas: review of existing investment
policies and portfolio allocation, review of investments processes, and
analysis of investments performance as per national and international
benchmarks.
She saw the envisaged guidelines becoming operational by January next year.
Commenting on members of social security
funds having access to their benefits before retirement, Isaka said:
“The law allows members to access mortgage products using their
contributions as collateral. SSRA is developing mortgage regulations and
guidelines to effect the same.”
She admitted that social security funds
in Tanzania are grappling with “a narrow customer base” and urged them
to educate the public on the benefits of enrolling with social security
funds.
“Each social security fund has a
comparative advantage in terms of products and services which, if well
designed and promoted, could boost their memberships coverage,” she
noted.
While urging employers to ensure that
fund members’ contributions are remitted on time, she commended social
security schemes that have introduced amnesty with respect to delayed
contributions. She advised all the schemes to be more creative and
designing more efficient and workable means of fostering compliance.
PS Shitindi said after the stakeholders
meetings, a paper would be prepared for approval by the Cabinet before
the amendments are tabled in the national Assembly.
He confirmed that the Labour and
Employment ministry is determined to ensure that the amendments are made
by the projected January 2012 deadline so that, while fund members
benefits are enhanced, social security schemes remain solvent on a
sustainable basis.
SOURCE:
THE GUARDIAN
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