Friday, September 14, 2012

Pension funds get new investment guidelines

By The guardian reporter
10th May 2012
The Social Security Regulatory Authority (SSRA) has finally launched guidelines which all pension funds will have to follow when planning investments in any project in a bid to protect members’ interests.

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).


Minister: We`ll increase pension depending on availability of funds

By Correspondent
20th July 2012

The Government has acknowledged that the use of sub-treasuries to coordinate pension services has helped to easy the process, Deputy Minister for Finance Saada Mkuya, told the House in Dodoma on Wednesday when responding to a basic question posed by Salome Mwambu (Iramba East, CCM).

Mwambu had wanted to know how the government intended to simplify the process for retirees to receive their pensions, also, why there were differences in pension payments to retirees and whether there were any plans to increase the amount paid.

“The government recognises that the rate of pension paid to retirees currently does not satisfy their needs and that is why it has been adjusting the payment whenever the budget allows: July 2009 pension pays were adjusted from 21,601/- to 50,114/- per month,” explained Mkuya.

“The government foresees its ability to afford the minimum pension increase and if capacity growth becomes sustainable, it will not hesitate to increase the pension again…,” she assured the House.

She stressed that the only difference between the government social security package and other social funds such as the National Social Security Fund (NSSF) and Parastatal Pension Fund (PPF) is in the methods adopted to calculate the pension funds, she said. However, she did not specify the different methods or formula.

Social Security Regulatory Authority (SSRA) in cooperation with the Bank of Tanzania (BoT), is evaluating means to ensure that social security funds use one formula to calculate retiree pensions without affecting the development of the fund.

“The result of the evaluation will be handed in to pension stakeholders today for discussions and recommendations ahead of sending it to the minister’s committee for an agreement…,” she declared.

In reaction to the basic question posed by Muhammad Ibrahim Sanya (Mji Mkongwe, CUF) the deputy minister assured Tanzanians that their government recognises the difficult conditions TPDF retirees are facing and as a result it will continue to increase the level of pension dependant on fund availability.

Sanya had wanted the government’s explanation on the fate of Tanzania People’s Defence Forces’ retirees living under very difficult conditions due to, among other things, rocketing inflation while pension levels remain grounded.

Pensions are payments generated by contributions of both retirees and their employers, the procedure does not provide an opportunity for retiree to increase their pensions when, for example, low levels of salaries is increased.

 Anxiety over changes to social security law

By Correspondent
23rd July 2012

There is growing concern over recent amendments to legislation on social security that effectively bar employees from enjoying their benefits before they reach retirement age.
Most people airing their views online, through a popular network, argue that the changes to the law benefit the government at the expense of deserving social security scheme members.

They say the government borrows hefty amounts of money from social security funds but does not repay it in good time, and hence the delays in making requisite payments to eligible retirees.

Tanzania Teachers Union president Gratius Mukoba suggested in a phone interview yesterday that the government routinely takes money from social security funds for investment in long-term projects.
“Social security funds are playing with workers’ money…,” complained Mukoba, adding that some of the projects take up to 100 years before the returns trickle back.

“Look at the Machinga Complex in Dar es Salaam, he said, adding: “The government, through the National Social Security Fund (NSSF), invested 31bn/-. With that money, one could construct six Mwalimu Towers.
Legal and Human Rights Centre executive director Dr Hellen Kijo-Bisimba meanwhile said she was convinced that the law as amended would not work “since most employment is on contract basis anyway”.
She said there was little difference between the law as it now stands and the one previously in use which allowed employees to enjoy their benefits before retirement and which she said was much better because it allowed them to invest their money in projects of their choice before they retired.

“This law humiliates workers. I have already received complaints from people in Geita and from my voters in Nzega,” said Nzega Member of Parliament Dr Hamis Kigwangala.

He said he had telephoned the minister who oversees security funds, Gaudensia Kabaka, “who said the amendments were tabled in Parliament back in April and endorsed and are now awaiting presidential assent”.

According to the MP, Kabaka explained that the government did not intend to give social security fund members a raw deal but amended the law “to prevent frequent withdrawals that tend to leave security schemes short of funds”.

“The minister stated that the government would have the opportunity to express its good intentions when employees lose jobs and need the funds from their social security accounts,” noted the MP.
He promised to work on the concerns of the aggrieved workers “and everything will be settled before the Labour ministry’s budget estimates are tabled next month”.

Social Security Regulatory Authority (SSRA) director general Irene Isaka said in communication to African Barrick Gold that laws on social security funds and laws guiding authorities were amended and approved by the National Assembly on April 13, 2012 and sent to the President’s Office for presidential assent. The withdrawal benefits that benefit workers who opt to quit their jobs have been cancelled until the retirement age of 55 years and 60 years, explained the letter.

“We still have some benefits that remain for miners such as, that on disability and the injury,” she reassured the miners, promising that SSRA officials would visit mining workers across Tanzania in the first week of next month to elaborate the changes and what should be expected.

Section 30 of the Social Security Regulatory Authority Act No.8 of 2008requires all employers to give newly engaged employees the opportunity to join a social security fund of their choice.

The amendments open the doors for competition in membership registration and additional products are offered as stated by the ILO Convention 102. 

Tucta: We`re studying new pension law

By Gadiosa Lamtey
24th July 2012

Trade Union Congress of Tanzania (Tucta) has told its members that it has no power to reverse the law suspending withdrawal of benefits before a member attains either the voluntary retirement age of 55 years or compulsory one of 60.

Speaking to The Guardian yesterday in Dar es Salaam TUCTA Deputy Secretary General, Hezron Kaaya said it was difficult to change the laws, adding that the pension funds were meant to help the elderly.
“Though it has alarmed many workers, this is a professional matter. The fact is that we, Tucta cannot argue against the move because it is also an international matter that exists even in developed countries,” he said.
The deputy Tucta boss urged workers to be patient, saying the matter will be discussed in the coming meeting, where according to him, they were expecting big changes.

“I want to emphasise that this law has not been approved officially. These are recommendations made by the evaluator of social funds, instructed to do so by SSRA. We expect to further discuss the draft when presented at meetings and we should expect major changes,” said Kaaya.

Kaaya added that the congress will give an official statement on their position when they receive the draft legislative changes.
“What we are doing now is to provide education for employees to understand the way the law works,” he said.

Kaaya said most of those who complained against the suspension of withdrawing benefits until they reach 55 years old, argued that the estimated current life expectancy in Tanzania is 45 years, and that is only a small percentage who can reach the required age.

He said for that reason, the government has a responsibility to protect the welfare of the people so that they can live longer, as well as finding out the reasons why employees leave work before the age of retirement.
“Many things affect life expectancy. The government has a responsibility to reduce the deaths of people by maintaining a conducive environment, especially in access to social services, but to also work on the factors making people leave work early,” he said

The SSRA yesterday allayed fears that the recent decision to suspend withdrawal of benefits before retirement age which are issued by pension funds are aimed at improving members’ welfare including those in mining industry and not otherwise.
The SSRA director general Irene Isaka noted that the benefits were provided when the employees’ services were terminated or they have resigned.

“From now onwards members of pension funds will receive their payments after reaching voluntary retirement age of 55 years or compulsory retirement at 60 years,” she said.
She urged the management of Tanzania mines and construction workers union (Tamico) to educate their workers on the decision taken by the government that the pension funds would continue issuing the other benefits.

“We still have some benefits that remain for miners such as for disability and the injury,” she reassured the miners, promising that SSRA officials would visit mining workers across Tanzania in the first week of next month to elaborate on the changes and what should be expected.

She said the authority continues to harmonise various regulations aimed at protecting member’s benefits.
The DG said the authority has prepared guidelines which would be discussed by various stakeholders before being forwarded to the government for approval.

According to her the SSRA has been drawing up various guidelines aimed at improving the health of pension funds and protecting members.

In May this year the authority launched investment guidelines which all pension funds have to follow when planning to invest in any project for the purpose of protecting member's interests.
Lack of social security investments guidelines has been one of the key challenges which members have been complaining about, especially on how they benefit.

At the moment Tanzania has six pension funds namely 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).