The Local Government Provident Fund (LAPF)

Introduction,

The LAPF Pensions Fund (LAPF) was established by the LAPF Act No 9 of 2006 which repealed the LAPF Provident Fund Act No 6 of 2000 LAPF Act. The difference between the former LAPF Provident Fund (LAPF) and The LAPF Pensions Fund (LAPF) is the way benefits are determined, while in the former provident scheme the fund was mandated to define contributions (DC) plan. 

The plans which bases it calculation on the contribution level of insured parson in investment portfolio.  The fund began operating in 1944, and ceased doing so between 1972 and 1986, when it restarted as a result of the Government's decentralization policy. LAPF was a provident fund until July 2005 when it was converted into a defined benefit pension scheme which offers retirement benefits similar to those of the Public Service Pension Fund (PSPF) according to (Hoogeveen, J. 2004).

Definition of key terms,

The Local Authorities Provident Fund, (LAPF) is the formal institution offering social security coverage to employees of the Local Government. (http://www.ppftz.org/home/ACT_25_AMEND.pdf).

Social security, may also refer to the action programs of government intended to promote the welfare of the population through assistance measures guaranteeing access to sufficient resources for food and shelter and to promote health and well-being for the population at large and potentially vulnerable segments such as children, the elderly, the sick and the unemployed (Robert H, N. 2001)

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.

Generally Local Authorities Provident Fund (LAPF) this means Local Authority Pension Fund, is the social institution established under LAPF Act number 9 of 2006.

The year of establishment of local government provident fund (LAPF)

The LAPF Pensions Fund (LAPF) was established by the LAPF Act No 9 of 2006 which repelled the LAPF Provident Fund Act No 6 of 2000.

Vision and mission of local government provident fund (LAPF)

Vision; Local Authority Pension Fund envisions to becoming the most preferred Pension Fund.

Mission; Local Authority Pension Fund is dedicated to be a dynamic provider of Social Security Benefits through the utilization of competent and motivated staffs.

Core values of local government provident fund (LAPF)

Ø Member focus

Ø Professional ethics

Ø Integrity

Ø Innovativeness

Ø Transparency

Ø Accountability

Ø Teamwork

Ø Excellence

Ø Social responsibility

Ø Respect for human being

Objectives and function of local government provident fund (LAPF)

Ø The overall objective is to ensure compliance, maximize returns on investments while ensuring that all risks associated with such investments are being minimized.

Ø The main objectives for LAPF to establish this product is for its members to engage in income generating activities and thereby join the government's efforts in improving lives and poverty alleviation,

Functions,

Ø To provide a scheme for  payment  of benefit  to insured persons payable under the act

Ø To work towards a gradual  and continuous improvement of benefits payable under the act

Ø To register employers and employees who by law are required to contribute to the fund and collect contributions from them

Ø To safeguard members contributions and other resources of the fund through keeping and maintaining up to date accounts and records

Ø To invest member’s funds and high yield investment and to formulate, offer and administer  retirement and other benefits packages which are attractive to persons and institutions who are and may become depositor or contributing employers

Organization structure of local government provident fund (LAPF)

The current organization structure of the Fund comprises of four Directorates headed by Directors as follows:

•        Directorate of Member services (DMS)

•        Directorate of Finance (DF)

•        Directorate of Planning and Investments (DPI)

•        Directorate of Human Resources and administration (DHRA)

•        Directorate of Information and Communication Technology (DICT)

The Structure also has four specified units that reports directly to the Director General. The Units are:

•        Internal Audit headed by a Director

•        Legal Services Unit headed by Chief Legal Counsel

•        Procurement Management Unit

•        Public Relations Unit headed by a Manager

Targeted group of Local Authority Pension Fund (LAPF)

·        Survivors pension groups

·        Invalidity groups

·        Retirement groups

·        Survivor’s groups

·        Invalidity groups

·        Withdrawal groups

·        Funeral groups

·        Pensioners’ groups

Entry conditions (membership criteria) of (LAPF)

The entry conditions of LAPF members should meet the following criteria;

·        Government workers

·        Private institution workers

·        Businessmen

·        Farmers

Member’s modalities of contribution of Local Authority Pension Fund (LAPF) 

PSPF and LAPF are responsible for registration of all members who contribute to their respective Funds. Once registered members’ information is stored on the Funds’ data bank and can be used by the Fund to process terminal benefits of their members. This section also presents findings regarding the level of registration of Funds’ members done by PSPF and LAPF.

Member’s contributions to LAPF is payable by both employer and the employee whereby the employer contribution is 15% and the employee is 5 percent of his/her monthly basic salary. However, this rate is subject to change basing on the Actuarial valuation of the Fund.

Duration of being pensionable by LAPF   

Over the past several years, LAPF’s effort to process final retirement benefits for its members has not been satisfactory. The finalization process at the LAPF head office, which is designed to ensure that retirees receive all benefits that are due, takes about one week to more than 35 months to complete. The LAPF has had difficulties meeting its own benchmark of finalizing benefits within fourteen days after the date of receiving the claims from the employers. Further analysis shows that at LAPF head office, the average processing time is slightly less than 7 months. Only 25% of the claims are finalized within a month; half of the claims are cleared within 4 months and about 25% of the claims are processed for about 11 months.

Types of benefits and its time of offers of LAPF

Survivors pension and invalidity; These services were providing to a member who dies while in the service, the board shall grant to legal representative an amount not exceeding either his annual pensionable. The benefit is payable to dependents of the deceased member. Dependents include Spouse, children and parents of deceased officer. The survivors pension is payable without prejudice to the relevant laws of inheritance.

The fund began operating in 1944, and ceased doing so between 1972 and 1986, when it restarted as a result of the Government's decentralization policy. LAPF was a provident fund until July 2005 when it was converted into a defined-benefit pension scheme which offers retirement benefits similar to those of the Public Service Pension Fund (PSPF). LAPF covers local authority employees but is seeking ways of extending its coverage.

Retirement benefits old age benefit is paid to LAPF members to guarantee them income replacement on retirement and the qualifying conditions attainment of pensionable age of 55(voluntary retirement) to 60(statutory retirement) years.

Survivor’s benefits are payable to defendants of a deceased LAPF member. The benefit is intended to compensate for the loss of economic support previously provided by LAPF member who has died. Survivors’ benefits are normally paid to the deceased’s widow/ widower, children or parents. “Dependant” is defined in the Act as widower/widow(s), any child under the age of 21 or up to the age of 25 in case of a disabled child(s). And where there is no dependent, spouse or child - parents of the deceased. Where contribution credits are less than 180 months, only survivors gratuity is payable. Otherwise the survivors will qualify for monthly pension.

Invalidity benefits the aim of invalidity pension is to guarantee income security to the affected LAPF member who has permanently lost his earning capacity, resulting from physical or mental condition due to an occupational or general disease, (Section 30 (1) of LAPF Act 9 of 2006).

Withdrawal Benefits this is a lump sum payment equal to members and employers’ contributions plus accrued interest payable to a member who has resigned from employment, has been retrenched, dismissed or terminated on medical grounds, abolition of office, or any other cause.

Funeral benefits funeral Grant is a short term benefit provided in the LAPF Act and introduced by Ministerial order No. 262 of July 2010 to help meet certain funeral costs if a member dies.

Pensioners LAPF pension is payable every month in advance. Currently the Fund has a total of 3789 Pensioners as at 31st May 2011.

Coverage and success of LAPF

The coverage area of LAPF is found into four region which are Dar es salaam, Mwanza, Iringa and Dodoma where it is the headquarter of the LAPF, the main intention and its vision is to cover all regions in Tanzania, to make sure that all Tanzanians got the services provided by the fund. 

LAPF has succeeded:

To provide a scheme for payment of benefits to insured persons payable under the Act,

  

To work towards a gradual and continuous improvement of benefits payable under the Act, 

To register employers and employees who by law are required to contribute to the Fund and collect contributions from them,

To safeguard members' contributions and other resources of the, Fund through keeping and maintaining up to date accounts and records,

Advantages, challenges and ways forward of LAPF

Advantages;

To provide a scheme for payment of benefits to insured persons payable under the Act,

 To work towards a gradual and continuous improvement of benefits payable under the Act,

To register employers and employees who by law are required to contribute to the Fund and collect contributions from them,

To safeguard members' contributions and other resources of the, Fund through keeping and maintaining up to date accounts and records,

To invest members' funds in secure and high yielding investments; and to formulate, offer and administer retirement and other benefits packages which are attractive to persons and institutions who are and may become depositors or contributing employers

Challenges;

Weakening of Informal Social Protection System; Socio-economic developments taking place in Tanzania have resulted into a slow but steady disintegration of the kinship or family-based on social support systems on which the majority of Tanzanians have depended for protection against contingencies. Economic hardships have made it difficult for individuals, families and/or kin members to provide assistance to each other in time of crisis and need.

Inadequate Growth of the Formal Occupation; Public sector reforms have resulted into retrenchment of workers, freezing employment in the public sector and privatization of public enterprises. These have led to increased unemployment, which in turn has forced more people to resort to employment in the urban informal sector where earnings are often inadequate and/or uncertain. There is however a limited growth in employment in the private sector.

Reduced Access to Social Services; despite the deliberate measures by the government to improve provision of social services to the public, considerable part of the population has either limited or no access to services. In some instances, cost sharing in the provision of social services has reduced the capacity of the people to access the services.

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.

low number of members; this because there are few people who being aware about the importance of LAPF as well as miss-management of work cause poor performance and efficiency of work, miss uses of fund is another challenge which face the inefficiency of Local Authority Pension Fund.

Ways forward;

Review of the processing of terminal benefits of retirees’ workflow, The Pension Funds should ensure that the processing of terminal benefits of retirees’ workflow is reviewed in order to reduce the bureaucracy. The Pension Funds should prepare a flow chart to identify areas of unnecessary requirements that can be discarded in order to avoid bureaucracy. 

Improve communication among the key stakeholders. The Pension Funds should improve communication between Employers, Retirees and Pension Funds (PSPF and LAPF) respectively. 

Conduct training on pension matters. The Pension Funds should ensure that regular training of officials dealing with pension matters is conducted on how to process terminal benefit payments without unnecessary delays. 

Manage staff resources appropriately and reduce the waiting time. The Pension Funds should better manage staff resources with a view of reducing time taken to process retiree’s terminal benefits; 

Conclusion,

generally Local Authorities pension Fund (LAPF) exist for the purpose of consolidating and giving more power to safeguard members' contributions and other resources of the, Fund through keeping and maintaining up to date accounts and records. In modern nations, Local Authorities Pension Fund usually has some of the same kind of powers as national governments do. For instance, they have some power to raise taxes, though these may be limited by central legislation.

References

Hoogeveen, J. (2004). Measuring Welfare for Small but Vulnerable Groups - Poverty  and Disability in Uganda.

Robert H, N. (2001), "Economics as religion from Samuelson to Chicago and beyond". Penn State Press. p.103. ISBN 0-271-02095-4

Taal, H. (1993). Decentralization and Community Participation for Improving Access to Basic Services: An Empirical Approach. Florence, United Nations Children's Fund.

 http://esa.un.org/unsd/sna1993/introduction.asp

http://www.lapftz.org/LAPF2006.pdf.

http://esa.un.org/unsd/sna1993/introduction.asp

http://www.ppftz.org/home/ACT_25_AMEND.pdf

Written by Ausi R. Chiwambo (June, 2014)

Tefilo Kisanji University

chiwambo@hotmail.com

     0753110740