National Social Security Funds (NSSF) in Tanzania

Introduction

Every human being is vulnerable to risks and uncertainties with respect to income as a means of life sustenance. To contain these risks, everyone needs some form of social security guaranteed by the family, community and the society as a whole. Such socioeconomic risks and uncertainties in human life form the basis for the need of social security. Social security is rooted in the need for solidarity and risk pooling by the society given that no individual can guarantee his or her own security.   

National Social Security Funds is one of the Security Scheme which provides different benefits in order to overcome these risks. NSSF covers the following categories of employers and employees Private Sector which includes:- Companies, Non-governmental organizations, Embassies employing Tanzanians, International organizations, Organized groups in the informal sector, Government ministries and departments employing non-pensionable employees, Parastatals organizations, Self-employed or any other employed person not covered by any other scheme and any other category as declared by the Minister of Labor (www.nssfug.org).

Year of National Social Security Funds (NSSF) and its establishment and Act

The National Social Security Fund (NSSF) was established by the Act of Parliament No. 28 of 1997 to replace the defunct National Provident Fund (NPF). NSSF is a compulsory scheme providing a wider range of benefits which are based on internationally accepted standards, (http://www.zoomtanzania.com/NSSF--National-Social-Security-Fund).

Vision and Mission of National Social Security Funds (NSSF)

Vision

The Fund envisions becoming a leading provider of social security services in Africa by 2020.

Mission

The Fund is committed to meet members’ evolving social security needs using competent, innovative, motivated staff and state-of-the-art technology.

Core Value

The fund will undertake the operations on the basis of:

• Integrity
• Innovativeness
• Accountability
• Teamwork
• Transparency

Objectives and Functions

1.     To provide a wide range of benefits which are based on international accepted standard to members and families in need of social security in Tanzania

2.     To provide Social Security protection. It offer social security coverage to Employee of private sector and non pensionable Parastatal and government employee

3.     To ensure a the provision of all benefits for the member of National Social Security Funds (NSSF) for the purpose of providing income, security in a case of any contingencies such as old age, invalidity, death, occupational risks.

4.     To collect contribution from the respective members and employer.

5.     To facilitate and organize the provision of health and social services for the member

6.     To cooperate with the respective organizations involved in the educate and promote strategies for occupational risks prevention and promote measures on health and safety at the work place.

7.     To cooperate with relevant organizations to study and investigate occupational diseases

8.     To manage the investments of Social Security Funds

Target group

NSSF is a leading provider of social security services to employers and employees covered under the following categories: Private Sector, which includes Companies, Non - governmental organizations, Embassies employing Tanzania, International organizations and organized group in the informal sector. Government Ministries and Departments, Parastatal Organizations, Self-employed or any other employed person not covered by any other scheme and any other category as declared by the Ministry of Labor. 

Entry conditions (membership criteria)

The National Social Security Fund Act No. 28 of 1997 provides for registration of both employers and employees. Section 11(1) of the Act provides that every employer, unless such employer has been registered under the existing Fund, shall register with the NSSF within one month. The period of one month begins upon the commencement of the Act or the date when the concerned person becomes a contributing employer. The registration of employees is provided under Section 11(6) of the Act. The Section provides that every contributing employer who is registered by the NSSF shall register as an insured person every person who is an employee in his firm by notifying the Director General of the particulars of such employees as may be prescribed. The registered insured person automatically becomes a member of the Fund. Registration of an employer and employees must be done first before payment of contributions begins and the activity is accomplished at NSSF field offices.

Membership Modality of contribution

An employer legally is responsible to pay membership contributions within one month after receiving salary. The contributions are being paid by filling special contribution form and sent nearby NSSF office. An employer can contribute through cash on hand, through check or bank transfer commonly known as electronic transfer. The membership modality of contribution is twenty percent (20%), where 10% from employee and the remained 10% contribute to an employer.

 

Duration of being pensionable

Old age pension is paid at age 60 with at least 180 months of contributions. Retirement benefits (form of payment): Retirement benefits are paid in two forms: as a lump sum (commuted pension) and a monthly pension. For a person to be eligible for pension and lump sum he/she must attain statutory retirement age (60 years compulsory, 55-59 voluntary) and make at least minimum number of monthly contributions  180 contributions. Those who do not meet the named conditions receive lump sum payment only Insured persons who were within 14 years of the pensionable age in July 1998 and who have fewer than 180 months of contributions at age 60 may receive a basic pension, as determined by the Director 

General of the National Social Security Fund. Early pension is paid at age 55 with at least 180 months of contributions. Deferred pension: A deferred pension is possible. There is no maximum deferral period. Previous contributions made to the National Provident Fund (now known as National Social Security Fund NSSF) are converted into contribution credits. Minimum benefits represent 80 per cent of the legal monthly minimum wage.

Type of benefits and its time of offering

The scheme provides seven benefits which are categorized as long term benefits and short term benefits as follows;

Long Term Benefits/Pensions

Retirement Pension

The main objective of the Retirement Pension is to guarantee income security to elderly members by providing periodic payments.

Qualifying Conditions

Attainment of compulsory pensionable age of 60 or early retirement at 55 – 59 years. Must have made at least 180 monthly contributions to the Fund. The ILO Social Security convention No 102 of 1952 (Minimum Standards Convention) stipulates a maximum qualifying period of 30 years of contributions. However, under the NSSF the qualifying period has been set at 15 years or 180 months.

Invalidity Pension

Invalidity Pension is paid to an insured person who has lost at least 2/3 of his/her earning capacity due to physical or mental inability as certified by the medical board. From the NSSF point of view, Invalidity can be defined in three different concepts:

Qualifying Conditions

Certification by the Medical Board that the insured person has lost at least 2/3 of his or her earning capacity. Has made 180 monthly contributions or at least 36 contributions out of which 12 have been made to the Fund immediately before the occurrence of the invalidity
must be under pensionable age.

Survivor's Pension

Survivors’ Pension is paid to a spouse and/or children of the deceased insured person under 18 or 21 years if in full time education. If a deceased insured person had no surviving spouse and children, the pension shall be paid to parents and if all are not around a family member will be paid in accordance with the inheritance Law of Tanzania

Qualifying Conditions

• The survivors’ pension shall be paid to dependants if at the time of the death the insured person;
• had attained pensionable age and had filed a claim for which he/she had qualified for old age pension,
• was entitled to invalidity pension if he/she was suffering from invalidity

Short Term Benefits/Pensions

Funeral Grant

Funeral Grant is paid as reimbursement to a family member who incurred burial expenses (costs) for a deceased NSSF insured person.

Qualifying Conditions

• The deceased must have been an active insured person at the time of death
• The deceased must have made at least one contribution to the Fund
• There must be an expense incurred for the burial of an insured person.
• The claim for Funeral Grant must be made within 60 days from the date of death

Maternity Benefit

Maternity benefits are payable to insured female members of the Fund who is expecting confinement. It’s paid for memberships who contribute not less 36 months and 6 month continuous.

Qualifying Conditions

• Must have made at least 36 contribution credits, of which 12 credits must be immediately or before the expected week of confinement (EWC)
• Expects delivery of a child or has delivered a child
• Payable after every three years unless the pregnancy ended with a still birth or if the child died within the first 12 months
• The claim for maternity benefit must be made within 90 days after confinement.

Maternity Medical Care

Covers medical treatment costs for ailments directly related to pregnancy. Treatment period begins from the 24th week of pregnancy and ends 48 hours after confinement or seven (7) days in case of a caesarean delivery. Treatments are made by accredited medical providers.

Employment Injury Benefit

This benefit is paid to an insured person who sustains injury or contracts occupational diseases as a result of his/her employment.

Qualifying Conditions

• The member must have been registered by the Fund as an insured person even if no contribution was remitted.
• If the member is incapacitated or disabled as a result of his/her employment/in the cause of his/her employment.

Health Insurance Benefit

Insured person, spouse and up to four children include biological and legally adopted below 18 or 21 years if in full time education.

Qualifying Conditions

• At least 3 months contributions
• 3 months access of service after stoppage of contributions
• 6% deduction of pensions for pensioners willing to join after retirement

Coverage

Employed workers in the private sector (except in private companies covered by the parastatal special system), organized groups (such as cooperative members) in the formal sector, and public employees and self-employed persons not covered under the parastatal special system. Some of the previous provident fund conditions have been carried forward to the pensions scheme and it is still possible for a member to withdraw his contributions and accumulated interest for instances of unemployment. Voluntary coverage is possible. In term of membership and income revenue, NSSF is the largest pension scheme in Tanzania which has been extended to cover employees in the private sector (informal economy) on a voluntary membership basis.

Success

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ADVANTAGES OF NATIONAL SOCIAL SECURITY FUND

Maintain the welfare of aged people, through provision of various old age services and grants. NSSF provides a lot of grants concerning aged people who were members of the scheme. The scheme tries to develop a sense of better ending to its members through provision of aged benefits.

Ensures access to health care, NSSF through its various health schemes has ensured its member with health provision as it has developed a scheme of healthy services to its member. Examples there are health fund provided to the members of the scheme, but also various maternal assistant and children assistant provided to members.

Provides (Accommodation) Housing services, NSSF also has played a great part in developing assurance to its member and other community allies in accommodation and housing services. The scheme has the tendency of building houses and lands them to its members but also building the houses and rent them to community in cheap return.

Contribute in economic growth; through taking part in various economic development projects as well as in supporting various development schemes, example NSSF was engaged in helping of rural people to access water services, but also funding various community banks commonly know “vikoba” in rural areas.

Contributed on development and Improvement of Education sectors, through its policy of return their favor to community the scheme has contributed a lot on development and improvement of education sector in Tanzania. Example the construction of the University of Dodoma was contributed a lot by this scheme as a lot of fund was derived from this scheme.

Provide sympathy and Funeral grants, also the scheme has the tendency of supporting the members especially during the disaster especially death. The scheme has the tendency of supporting the members on death of either its member or the relative of the member. They provide either transportation or financial.

CHALLENGES OF/FACES NATIONAL SOCIAL SECURITY FUND.

Awareness, this has been a key challenge to most of sectors specifically in this scheme. Most of the people are unaware of these schemes therefore the number of enrolment to these schemes specifically NSSF is very low. Therefore education and awareness should be provided in order develop high enrolment to this scheme. 

They are urban oriented, many of operation canters of these schemes specifically NSSF are urban oriented and most of the operations are taking place in urban areas where by the rural people have low access to these scheme. Therefore the high number of the clients are urban oriented and where by rural people have been discriminated from these services

 Limited Growth of the Formal Employment, in Tanzania the growth of formal sector has been limited; the population that takes part in formal sector is very low compare to population that takes part in informal sector. Problem comes, most of these schemes specifically NSSF has focused much in formal sector where there is formal and openly stipulated work contracts and where there is constant and assured payment to workers rather than in informal sectors. The slow growing of informal sector has been a great challenge to this social security schemes.

 Low levels of income, Incomes for the majority of the people in Tanzania are generally inadequate to meet their basic requirements and save for future use. Hence many of Tanzania fails to save for their future as the faces high current expenditure due to low income they have rather than thinking about the future saving. Therefore the number of people joining the schemes is low.

Declaration of Low Insurable Earnings, Some employers provide remunerations composed of basic salaries and allowances, while deductions for social security are based on basic salaries only, leading to lower benefits from social security institutions upon retirement. This challenge caused a lot by organization and nature of employers.

Rationale for a Social Security Policy, The existing social security system has many shortcomings that include low coverage of the Tanzanian Society, fragmentation of legislation, lack of regulatory framework, lack of a mechanism for portability of benefits and inadequacy of benefits provided.

Ways Forward for the articulated challenges faces/of national social security fund.

   Reform on social security policies, Therefore, the need for a well-articulated national social security policy is more eminent now than ever. In view of the foregoing, there is a need for having a comprehensive national social security policy that shall address the needs of employed people in the formal sector, self employed population in the informal sector, the elderly, people with disabilities and children in need of special protection. 

   Therefore the social security policy is expected to widen the scope and coverage of social security services to all the citizens. Harmonize social security schemes in the country so as to eliminate fragmentation and rationalize contribution rates and benefit structures Reduce poverty through improved quality and quantity of benefits offered. Institute a mechanism for good governance and sustainability of social security institutions through establishment of a regulatory body, Establish a social security structure that is consistent with the international labor organization (ILO) standards but with due regard to the socio-economic situation in the country; and Ensure more transparency and involvement of social partners in the decision making with respect to social security institutions.

Increase investment so as to expand more, this would help them to acquire more funds that will help in expansion of this scheme rather than dominating only urban areas only. More than this they can also develop some agents who will work in rural areas rather than operating only in town areas by doing so they will increase the member as well as the provision of their services to majority Tanzania.

Both government and individual should play part on increasing the levels of incomes, this can be explained from the two perspective which are that form of government role and individual efforts, both parts should play part in increasing the income so as to develop a well being of household and individuals so as to create the  ability of people to  save for their future, this point is opposite to that of low income to among Tanzania a factor that develop inability of people to save and join in these schemes for futures uses.

Provision of awareness to majority concerning these, especially NSSF, despite of their existences of these schemes and ability of people to save what they have by joining these schemes problem is that majority of residents’ lacks knowledge, awareness, purpose and the importance of this schemes. education and awareness must be provided to people in order to attract people to join these institution willingly as people are attentive of their activities, by the time being the advertisement of these schemes was low thus why many people remain dormant in joining these schemes specifically NSSF.

Priority to both formal and informal sectors, these social security schemes must reduce their conditions like by also putting into consideration these informal sectors, although currently some schemes specifically NSSF has also included and put into consideration people from these informal sector still the progress is not good. More emphasis and measure should be taken in order to improve the enrolment of members comes from informal sectors.

CONCLUSIONS

    Social security is first and foremost a human right and hence an obligation for all societies. It also acts as a social and economic facilitator of change and has the capacity to function as an effective financial stabilizer. Social security systems not only prevent people from falling into poverty and reduce the likelihood of social unrest, but also embody an indispensable investment in people’s productive capacity through enhanced access to better nutrition, health and education. They help to better manage risk and uncertainty and stabilize aggregate demand in times of economic crisis. 

     Widespread consensus exists for the expansion of social security in Africa as a means to reduce poverty and as a form of investment in the future. However, this commitment falters. When it comes to matters of practical implementation and how to introduce the necessary changes within each country. The focus is uncertain, varying from mechanisms to identify and focus services on the most vulnerable groups (more specifically amongst children, people with disabilities and the elderly) to recommendations for approaches to longer term poverty

REFERENCES

Van Ginneken, W. (1999). Extending Social Security: Policies for Developing Countries.

Geneva, International Labor Office

World Bank (2001). Social Protection Sector Strategy: from safety net to springboard.

Washington, World Bank.

Retrieved on 25^th 2014, from http://www.nssfug.org, at 14:00 hours

Written by Ausi  R. Chiwambo (June, 2014)

Tefilo Kisanji University

chiwambo@hotmail.com

0753110740