PARASTATAL PENSION FUND (PPF) IN UNITED REPUBLIC OF TANZANIA

TABLE OF CONTENTS

1.1Introduction

1.1.1Definition of key terms

1.1.2 PPF establishment and its Act

1.2 Vision, mission, core values, objective and function

1.3 Organizational structure

1.4 Target group, entry and membership criteria, member’s modalities of contribution

1.1.6 Types of benefit and duration of being pensionable, coverage

1.6 General success

1.7 Challenges

1.8 Way forward for improvement

1.9 Conclusion

1.1 BACKGROUND INFORMATION OF SOCIAL SECURITY

All people through out all human history have faced uncertainties brought on by employment, illness, disability, death, and old age. Family members and relatives as always felt some degree of responsibility to one another especially for aged or infirm. Traditional source of socioeconomic security were assets, labor, family and charity. As society advances in social and economic complexity, gave the rise of urbanization as the result to the decline of traditional form of social security. 

The first English poor Law is termed as the foundation of modern social security emerged during and after industrial revolution. Modern social security system is said to have begun in German between 1883 and 1889 when social insurance were introduced. For example sickness insurance in 1883, employment injury 1884 and old age insurance 1889. For many European countries to use resources and organization of the state to protect their people against many of economic hazards were obvious. Limited form of social security begun in as a measure to implement social insurance during the Great Depression of 1930s, when poverty rate among senior citizens exceeded 50 percent. The stock market crash did destroyed value of many American retirement servings and bank failure did further damage. 

In Africa modern social security were introduced during colonialism when the British Empire established social welfare in her colonies following enactment of “Colonial Development Act 1940. Upon accession of independence new government of most African countries continued the existing scheme which were introduced before independence, and modified them slightly in order to fit the demand of new society. At the same time attempts were made to establish new additional schemes in older to cover larger number of population. 

1.1.2 Social security describes a program that uses public funds to provide a degree of economic security for the public formally involves contribution to designed institution by employee and employer and returned via various benefits (US Department of social protection, 1994).

1.1.3 Social security schemes are schemes imposed and controlled by government units for the purpose of providing social benefits to members of the community as a whole or of particular sections of the community (http://esa.un.org/unsd/sna1993/introduction.asp)

2.0 PARASTATAL PENSION FUND (PPF) IN UNITED REPUBLIC OF TANZANIA

 2.1 Year of establishment and its Act

Parastatal Pensions Fund (PPF) was established by the Parastatal Pensions Act, No. 14 of 1978 to provide pensions and other related terminal benefits to all employees from Parastatal and private sectors. The current operations of the Fund are guided by Parastatal Organization Pensions Scheme Act [CAP 372 R. E. 2002] (URT, 2002). For example, the act in section 1 and sub section 1 of section 2 state that, this Act may be cited as the Parastatal Pensions Act, 1978 and shall come into operation on such date as the Minister may, by notice in the Gazette, appoint ‘Board'' means the Board of Trustees of the Parastatal Pensions Fund established by Section 17, and section 4 state that, there is hereby established a scheme to be called the Parastatal Pensions Scheme (URT, 1978).

2.1.1Vision Statement
The Fund is desirous of freeing members from hardships arising out of loss of income due to old age, disability, death and the related risks.

2.1.2 Mission

To provide quality pensions and allied benefits to members through utilization of dedicated human capital and modern technology with high degree of accuracy and promptness.

2.1.3 Core values

PPF will achieve its vision through a developed corporate culture that has the following core values and that is Integrity, Commitment, Teamwork, and Innovativeness

2.1.4 Objectives and functions

The Parastatal Pensions Fund (PPF) was established by the Parastatal Pensions Act No. 14 of 1978, as amended from time to time, with the objective of providing pensions and other related benefits to all employees in the Parastatal and private sectors of the economy. Major functions of the Fund include registering members, collecting contributions, investing and paying pensions and other allied benefits to its members.

1.4 Target group, entry and membership criteria, member’s modalities of contribution

1.4.1 Target group

All Parastatal Organizations and Public Institutions, all Private companies in which Government own shares private Companies that are not covered by any other social security Fund, in addition all Parastatal organizations which have been restructured through privatization, sale, lease or liquidation are obliged by law to continue with PPF membership and most of all is self employed

1.4.2 Entry and membership criteria

Section 2 (1) of the fund Act  provides categories of employer who are eligible registration with PPF (a) any body corporate established by or under he written law, employee employed by an employer as mentioned under item 1.1.2 above or any other self employed in formal or informal sector or a person under specified contract.

To be a member of fund a customer will have to register with PPF immediately after securing employment, if you have not been and if its self employment the same registration will be followed except in some cases self employed will not involve such procedures connected to employer. 

For employee transferred from one employment will have to fill a designed transfer form for membership continuity. A customer should ensure that, the submitted membership particulars are correct and accurate and constantly obtain contribution statement to ensure that the contributions are properly credited into account. Further more, a member should oblige to the terms and condition of the agreement or contract entered with the Fund as well as to abide to various legal requirements as stipulated in various Law of United Republic Tanzania before and after enter into business dealing with the Fund.

1.4.3 Member’s modalities of contribution

Current contribution rates are 15% or 10% for employers and 5% or 10 % for employee to make a total of 20% of member’s salary. Contribution are organized by employer and brought to the fund on monthly basis with 30 days grace period. If the fund will not be presented within 30 from a month when salary was provides, then additional payment will be made under the basis of penalty which will cover 5% until when defaulting employer will present the contribution.

1.5 Type of benefits, benefit offered and duration of being pensionable

1.5.1Types of Benefits

Traditional Scheme; is a mandatory and basic scheme which operates under clearly defined terms, conditions and procedures for the guaranteeing and awarding of benefits to members as stipulated in the Act. 

Deposit Administration Scheme; This is contributory scheme set to employees and any body else who do not qualify for membership of scheme under pension or any other scheme under the current social security/pension funds. 

1.5.2 Benefits offered

Parastatal Pension Fund offers the following benefits to members, Old age pension, Sickness/disability benefits, Death benefits, Survivors benefits, Education benefits, Gratuity benefits, and Withdrawal benefits.PPF is committed to deliver both effective and efficient services to our members. We are dedicated to continuously developing and improving our members’ services by focusing on keeping our members’ at the centre of all of our activities.

1.5.3Time of offering

(i) Old age benefit

 There are two types of benefit which a retired person can receive and that is, Commuted Pension Gratuity benefit, which is paid immediately on retirement as lump-sum as well as Old Age pension, the benefit is paid to the claimant monthly in amount outstanding for guaranteed period of three 3years after the date of retirement, and thereafter, for life.  If a pensioner dies before the expiry of the guaranteed period 36 months, his/her dependants shall be entitled to his/her monthly pension for the remaining period. 

 (ii) Death

Section 39 of PPF Act provides payment for death benefit where a member dies whilst in service. It shall be lawful for the Board to grant to his legal personal representative a gratuity of an amount not exceeding either his annual pensionable emoluments or his commuted pension gratuity if any, whichever is greater.

(iii) Education benefit

The benefit is granted to not more than four (4) children of the deceased member, education benefit is payable from nursery to ordinary secondary school level. Each child is granted an amount not exceeding 1/12 of the deceased member's annual pension able emolument (APE).

(vi) Survivor

Is granted to the deceased member’s dependants: wife or husband: children below the age of 18 years or deceased member’s parents who were wholly or substantially dependent on the deceased. The benefits are granted in the same way as monthly old age pension for 36 months, if the beneficiary is the wife, the benefit stops if she re-marries within 36 months. If the beneficiary is the husband must prove to the Board of Trustee that he was wholly or substantially dependants on his spouse.

1.5.4 Duration of being pensionable

 Benefit is being paid accurately and within one month from the date of receipt of a dully intimated claim. Monthly Pension and Survivors Benefit payments shall be credited to the respective pensioners’ bank accounts by 25th day of each month.

1.6 Coverage

PPF has its headquarter situated in Dar es salaam  PPF House, Morogoro Rd/Samora Av and covers all the areas of Tanzania with its offices Centred in various zones like Ilala, Temeke, kinondoni, Southern highland, Eastern and Central zone as well as lake zone. These zones have responsibility to serve various regions which sometime do not have the offices.

1.7 General success of the fund

PPF has reduced expense ratio from 15% in 2005 to 13% in 2009, claim settlement has improved from manual payments to electronic payment, timely payment of monthly pension by 25th day of every month by which Pensioners’ accounts are credited with respective monthly pension amounts, 

PPF also have raised minimum pension from Tsh 21,000 to Tsh 50,000 with effect from January 2010. There is also an increase of 2% to all pensioners receiving above minimum pension with effect from May 2010. Improved information technology and communication (ITC) by acquiring Member Administration System (MAS) and E Business systems through which members benefits are paid, members can also view their particulars, contribution statement, status of their claims using internet or mobile phone (PPF TAARIFA), 

Accumulated size of the Fund has grown from Tsh 264.4 billion in 2005 to Tsh 625.51 billion in year 2009, in addition to that, various product have been developed such as SACCOS loans and low cost housing to members and non members, Decentralized some of PPF operations to Zonal offices and thus drastically improved efficiency in member recruitment and services delivery.

1.8 Challenges of the fund

Despite the achievements attained, there are number of challenges facing the Fund, including volatility of banks interest rates, insufficient investment avenues, depreciation of Tanzania shilling against foreign currencies, repeated calls for harmonization of pension formula and unfair competition from other social security funds, inadequate offices in various regions, low coverage to informal sector, late presentation of contribution as well as low awareness of communities on the importance of formal social security schemes.

Ways forward for improvement

Increasing focus on informal sector

The fund still concentrates on employed members from formal sector who are few in number from both private and public. We there for advice the fund to strengthen its strategies in ensuring that majority of the people from informal sector are being converted into fund membership. This is possible where appropriate intervention will be made to mobilize and to have formalized system which will help this people to give out their contribution. For example despite of medium income earners like small businessmen and women having high income per month still majority of them are not in membership of any formal social security schemes.

Extending centralization efforts

The deed for quality service through on time delivery will be more archived if the fund will foster the effort to wards establishing its offices in all regions and even district of the country. This will increase the capacity of costumer care, reducing long travel of its member, as well as monitoring its objectives, plan and investment. For example the current dependence on zonal offices not only reduces the capacity of recruiting new members but brings unnecessary time wastage and expenses when a member makes follow up for claims.

Improving mass education strategy

Still majority of the people do not real understand the importance of joining various social security schemes. The fund should take this opportunity to increase the chances for people to join the fund. For example, this can be archived through public meetings, intensive advertisement as well as workshops to groups like school levers and graduates from various institutions.

Looking for alternative and free risk investments

By knowing that better benefit will be provided to its members the need for investment in profitable economic sector is inevitable. There despite depending much on housing sector, the fund have to open the eyes to other sector of economic investment through various research which will give accurate information on where to invest, at which expenses and risk management. This will help to reduce the risk factors which may arise due to dependence on single sector such as housing, but also avoids some investments which depends much on importation through concentrating on local resources may help to overcome currency uncertainty.

1.9 Conclusion

Generally the need for formal social security in modern society is something that should not be as option to a person. Today the traditional system of social protection may not be accurate compared to the formal social security system, as people tends to be mobile and lose social ties to close related groups. Social security is very crucial not only at old age when a person loses ability to work but in time of emergence like disease and disability. 

Both the private and public sector have the role to play to ensure the economy opens the opportunity for employment to majority, either through being employed or self employment so as majority can join formal social security scheme. to where this social security scheme is limited such as rural areas, traditional system of protection should be reformed and improved in a such way that it can resemble to the formal ones depending on the nature of the people and environment. Further more, the need to ensure effective regulation of this schemes in very important to ensure that the needs of its members are met.

REFERENCES

America Department of Social Protection (1994). Social Protection Review. New York:

            U.S.A Federal Government

Government report: (URT, 1978). Parastatal Pensions Act, No. 14 of 1978. Dar es Salaam.

            Ministry of Finance

Government report: (URT, 2002). Parastatal Pensions Act, No. 14 of 2002. Dar es Salaam.

           Ministry of Finance

International Labour Organization (ILO, 1984). Introduction to Social Security. Geneva.

          International Labour Organization

Msalang H.K.M (1994). Orign of Social Security in Developing Countries (A Case Study of

       Africa. Nairobi: East Africa Publisher

Internet source: Retrieved on 24, April, 2014 from http://esa.un.org/unsd/sna/introduction.asp

Written by Ausi  R. Chiwambo (June, 2014)

Tefilo Kisanji University

chiwambo@hotmail.com

0753110740