Pension funds’ future bleak, Zitto warns

Thursday, 14 February 2013 22:32

Kigoma North MP (Chadema) Zitto Kabwe                                By Zephania Ubwani, The Citizen Bureau Chief Arusha. Stakeholders at a meeting here have warned that pre-mature withdrawals from social security schemes could end up strangling the funds. The trend by members opting out could also impact on the economy as it may be necessary to increase taxation in order to manage paying pensioners whose number keeps rising. “If we allow withdrawals there would be no social security in the country”, warned the Kigoma North MP (Chadema) Zitto Kabwe in his presentation at the stakeholders conference of the National Social Security Fund (NSSF).   He wondered what the fate of thousands of social security members would be after retirement if they were to be encouraged to withdraw their benefits while still working and how the pension funds would operate profitably. The outspoken opposition legislator cautioned that the social security schemes in Tanzania were still fragile and that proposals to allow total withdrawals should be discouraged for the time being. “We are at a crossroads,” he cautioned, noting that although some people favoured voluntary withdrawals, there were dangers both to the pensioners and the country’s economy. The MP -- who until recently chaired the disbanded Parliamentary Parastatal Organisations Accounts Committee (Poac) -- further warned that the pension sector would face serious crises in future due to a myriad of problems. He observed that many people were opting out of the social security schemes because of the little trust they have in them, as funds use the money to invest in areas that do not seem to benefit members in tangible ways. Despite the myth held by many people, the social security bodies combined injected only 22 per cent of their investments in commercial buildings, which have shorter pay-back periods. The rest is invested in Treasury Bills and Bond and financing of mega government projects whose returns take a long time. He cited the government financing of construction of universities, saying the flow of recovered funds for the loans extended was slow. Mr Kabwe challenged the social security institutions to direct their investments to project.s which would create employment. This will not only spur economic growth but also increase membership