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.
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
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