'PSPF in intensive care unit'

PSPF acting Director General, Adam Mayingu

 

By The guardian reporter

The Public Service Pension Fund (PSPF) will collapse in three years’ time if urgent steps are not taken to rescue it by injecting more funds, Parliament was told here yesterday.

Briefing the Parliamentary Standing Committee on Public Accounts, PSPF acting Director General Adam Mayingu said his organization is “currently in a serious financial crisis.”

He said the Fund’s financial liabilities were growing more than the increase of contributions and investment income, making payment unsustainable.

He said the best practice required a Fund to have a funding of around 80 percent of its liabilities but PSPF is currently 10.1 percent funded.

“If this trend is not checked immediately, PSPF will in the near future resort to government to meet the liabilities of its members,” he said.

The Public Accounts Committee (PAC) summoned the PSPF management and the Social Security Regulatory Authority (SSRA) to Dodoma yesterday to try to get a clear picture of the Fund, including looking for means to address its precarious financial position.

Deputy finance minister Janeth Mbene and the Deputy Permanent Secretary Elizabeth Nyambibo attended the meeting.

Explaining, Mayingu said the financial crisis was initially triggered by failure by the government to inject 250bn/- as a response to address the pre-July 1999 actuarial deficit.

He said the same report that came up with the actuarial deficit of 250bn/- also projected that the liabilities would jump to 658.23bn/- in year 2006 of which it would need raising the contributions to meet the liabilities.

In explaining how things went from bad to worse for PSPF, Mayingu said in 2003 before the Fund started paying benefits, the first official actuarial valuation was conducted showing a deficit of 933.4bn/-.

The shortfall was to be paid by the government as the liability related to the period when the scheme was non-contributory (before 1999). The funding level at the time of valuation was 93.3 percent, he said.

“However, the government did not pay despite the Fund’s effort to make a follow-up,” he noted.

He explained that the second actuarial valuation was conducted in 2007 after the Fund started paying benefits. In that valuation it was noted that the financial position of the scheme had deteriorated further mainly due to non-repayment of liabilities in respect of the pre-July 1999 actuarial deficit, this time reaching 3.3trn/-.

Mayingu said PSPF’s board of trustees tabled the report of the second actuarial valuation to the government, the defunct Public Corporations Accounting Committee (POAC), for action after which the Controller and Auditor General and the Social Security Regulatory Authority (SSRA) to verify authenticity of the liability.

According to Mayingu, the third actuarial valuation was conducted in 2010. In this valuation SSRA and the Bank of Tanzania (BoT) undertook the task to establish an independence of the results after which it was established that the Fund’s financial situation had further deteriorated with the liability reaching 6.4trn/-.

The third actuarial valuation observed that the Fund was 10.1 percent funded compared to 43.9 percent in 2007.

Mayingu said that the non-repayment of the liabilities has been a challenge to the scheme as it increases its financial burden.

He said several government entities borrowed from the Fund under government guarantee but such entities have failed to honour their commitments.

Minister Mbene responding acknowledged the debt the government owed PSPF, stating that in the 2013/2014 financial year a total of 50bn/- would be paid to the Fund.

PAC ordered the government, SSRA and PSPF to ensure the allocated 50bn/- is paid to PSPF and report back to it in a week’s time.