PUBLIC SERVICE PENSION FUND (PSPF)
INTRODUCTION
The
Public Service Pensions Fund (PSPF) is a public organization that was
established in 1993 for the management and administration of pensions for
government (public sector) employees. The Public Service Pensions Fund is a
social security scheme established by Public Service Retirement Benefits Act
No. 2 of 1999 in order to replace the pension ordinance of 1954. The major
changes made in this Act include the establishment of a Contributory Public
Service Pension Fund (PSPF) in which all civil servants will be required to
compulsory contribute 5% of their monthly salaries while the Government as
employer will contribute 15% (URT, 2004).
Previously,
the fund used to operate under Defined Benefits Scheme only where by membership
to the scheme was limited to the Central Government employees and employees of executive
agencies whose
terms of employment are permanent and pensionable. However, amendments made in
the Act No. 2, 1999 in June 2012 extended membership of the scheme to include
employees of formal and informal sectors (PSPF, 2014).
The
main purpose is to provide for collection of contributions and payment of
terminal benefits to members. The Fund is operated under two different schemes
known as PSPF Main Scheme and PSPF Supplementary Scheme of which membership is
voluntary (PSPF, 2014). The management
of the fund is under the boad of trustees and the day to day activities are
under the director general who is assisted by directors.
The Scheme
The
Fund is operating in two schemes; the main scheme and the supplementary scheme
and each one has its own terms. The former is a defined benefit social security
scheme operating on social insurance principles while the latter is a defined
contribution scheme. Now, PSPF can register members from both Government and
Private offices who are not registered under any other scheme. PSPF
Supplementary scheme extends social security coverage to informal sector as
well as to members of any mandatory scheme who may voluntarily choose to make
additional savings in Social Security within the Fund (PSPF, 2014).
Vision
Our
Vision is to be the provider of choice of social security services in the
country
Mission
Our
Mission is to provide competitive Social Security Services to our members using
dedicated staff and appropriate technology.
Cole Values
The
Fund will provide services to its members and the general public while
observing the following:
Ø Accountability
Ø Responsibility
Ø Responsiveness
Ø Integrity
(Honest)
Ø Diligence
Ø Transparency
Ø Courtesy
to all
Objective and Functions
PSPF
aspires to achieve the following objectives:
Ø To
ensure sustainable growth of the Fund
Ø To
have efficient and effective service delivery system
Ø To promote Funds corporate image; and
Ø Maintaining
highly qualified and motivated staff.
TARGET
GROUP
PSPF can register members from both
Government and Private offices who are not registered under any other scheme.
PSPF Supplementary scheme extends social security coverage to informal sector
as well as to members of any mandatory scheme who may voluntarily choose to
make additional savings in Social Security within the Fund (PSPF, 2014).
ENTRY
CONDITIONS (MEMBERSHIP CRITERIA)
The members of PSPF are Defined
Benefits Scheme to
the Central Government employees and informal sectors or both formal and
informal sectors employees. The Fund
conducts registration of members all over the country; in the registration exercise
the Fund collects all necessary documents including employment letters, salary slips,
and passport size photographs. The documents collected during registration
exercise are important for the processing of benefits. Furthermore, the Fund
gets an opportunity to meet and educate its members on various activities as
well as obtaining necessary information to update members’ records during the
registration exercise
MEMBER MODALITIES OF CONTRIBUTION
Membership
PSPF report (2013) show for the past
eight years membership of the Fund has increased from the total number of
193,000 members in 2006 (Dau, 2006), 256,774 members at 1st July
2008 to 309,767 members on 30th June 2012, an increase of 52,993 members over
the period Membership trend. It is fully administered in-house and financed
through employer and employee contributions of 15% and 5% of monthly salary
respectively (http://www.pspf.co.sz). The Fund's gross reserves have seen
significant growth over the years, reaching a level of about E 13.6 billion by
March 2013 with a large proportion of income accruing from a diversified
investment portfolio both in local and external markets. The funding level is
currently at 84.4%. Generally Contribution income has increased by 13% in year
2011/12, and the increase in contribution is due to increase in membership as
well as members’ salaries as chart below shows;
DURATION OF BEING PENSIONABLE
A
member who has contributed to the Fund for a period of 180 months or 15 years
will be paid both pension and gratuity while a member who has contributed to
the Fund for a period less than 180 months or 15 years will be paid gratuity
only.
TYPES OF BENEFITS AND TIME OF
OFFERING
(a) Old Age Benefit
The
main purpose of old age pension payment is to provide a replacement of income
to persons who have permanently lost income because of old age. It calculated
that, the Amount payable equals 1/540 x complete number of months of services x
last annual salary. Pension benefit is based on years of service and annual
pensionable emoluments. The annual compensation is based upon the highest
pensionable emolument enjoyed by the member within twelve months preceding his retirement.
Public Service Retirement Benefit Act provides for commutation of 50% of the
member’s pension entitlement at a commutation factor of 15.5. The qualifying
conditions are that the member must be employed on permanent and pensionable
terms and must have contributed to the Fund. A member who has contributed to
the Fund for a period of 180 months or 15 years will be paid both pension and gratuity
while a member who has contributed to the Fund for a period less than 180
months or 15 years will be paid gratuity only.
(b) Death Gratuity
Where
a member dies while in the service, the Board shall grant to legal
representative a gratuity of an amount not exceeding either his annual
pensionable emoluments, or commuted pension Gratuity whichever is greater. It
is calculated as Amount payable equals 1/540 x complete number of months of
services x last annual salary x 5 (payable once). A gratuity of an amount not
exceeding either his annual pensionable emoluments or Commuted Pension Gratuity
whichever is greater is paid to dependants of the deceased member. Dependants
of a deceased member who has contributed to the Fund for a period of 180 months
or 15 years will be paid both pension and gratuity while a member who has
contributed to the Fund for a period less than 180 months or 15 years will be
paid gratuity only. Dependants are the widows, widowers, children of not more
than 21 years of age or children who are full age but incapable of working due
to specific diseases or mental disablement.
(c) Invalidity Benefit
An
invalidity benefit payment is made to a member as a result of loss of earning
capacity due to inability to work. The assessment of invalidity is undertaken
by an established Medical Board. This benefit is paid to any member who has been
proven to have physically or mentally disabled as to be employable. Pension
benefit is based on years of service and annual pensionable emoluments. The
annual compensation is based upon the highest pensionable emolument enjoyed by
the member within twelve months preceding his termination date. The benefit is
granted to a member after the Government Medical Board is satisfied that the
member is incapable of discharging the duties of his office by reason of
becoming invalid. A member who has contributed to the Fund for a period of 180
months or 15 years will be paid both pension and gratuity while a member who
has contributed to the Fund for a period less than 180 months or 15 years will
be paid gratuity only.
(d) Funeral Grant
This
funeral grant shall be paid to family members of the deceased member as
condolence. Where a member dies his dependants shall be entitled to a funeral
grant benefits at the rate of Tshs 200,000.
(e) Withdrawal Benefit
Marriage:
Payable to a female member who due to marriage proves to the satisfaction of
the Director General that she has permanently given up employment and will not
seek any gainful employment in the Public service;
Maternity:
Payable to a female member who proves to the satisfaction of the Director
General that in consequence of her giving birth to a child she has permanently
given up employment and will not seek any gainful employment in the public
service;
Emigration:
Payable to a member who proves to the satisfaction of the Director General that
he is emigrating or has emigrated and has no intention of returning to the
United Republic of Tanzania and has not been employed by employer who is liable
to make contributions in respect of himself for at least six months.
OTHER SERVICES/ BENEFITS
Other
services offered include:
Members’ loans
Following
previous experience, PSPF has noted that a number of public servants do not have
houses to dwell after their retirement. In order to assist its members to
address housing problem, the Fund introduced a housing loan facility for its
members who have at least five (5) years to compulsory retirement date. For
example in the financial year 2011/12 the Fund issued a total of TZS 24.00
billion to 949 members.
•
Housing loan facility to members who have at most five years before statutory retirement
in which the Fund advances up to 50% of the member’s gratuity calculated at the
time of application.
•
PSPF Residential Houses which are open for sale to the public. At the moment, the
available houses are located in Morogoro, Tabora, Mtwara, Shinyanga and Dar es
Salaam. The Fund is aiming to build low cost houses in all regions in Tanzania.
•
PSPF members who have contributed to the Fund for not less than five years equivalent
to 60 months may benefit from mortgage facility as they are guaranteed by the
Fund to secure a housing loan at a rate of 12% from Azania Bank, Exim Bank and
CRDB. The loan is repaid on monthly basis for a period up to 25 years.
COVERAGE AND SUCCESS
Membership
to the Fund is open to any person who has been employed in the formal and
informal sector. Previously, the Fund was established to manage a defined
benefit scheme in which membership was limited to the Central Government
employees and employees of executive agencies established under the act of
parliament and confirmed in the pensionable office. However, amendments made in
the Act No. 2, 1999 in June 2012 and the Social Security Regulatory Authority
(SSRA) established under Act No. 8 of 2008 extended membership of the scheme to
include employees of formal and informal sector who are not registered under
any other scheme. The aim for amendments is to extend social security services
to everyone (PSPF, 2014). PSPF has achieved to increase number of members from 193,000
in 2006 to 309,767 members on 30th June 2012.
ADVANTAGES
OF PSPF
Provision of loans benefit to its
members including housing with low interest rate,
Following previous experience, PSPF has noted that a number of public servants
do not have houses to dwell after their retirement. In order to assist its
members to address housing problem, the Fund introduced a housing loan facility
for its members who have at least five (5) years to compulsory retirement date.
For example in the financial year 2011/12 the Fund issued a total of TZS 24.00
billion to 949 members. Also PSPF members who have contributed to the Fund for
not less than five years equivalent to 60 months may benefit from mortgage
facility as they are guaranteed by the Fund to secure a housing loan at a rate
of 12% from Azania Bank, Exim Bank and CRDB. The loan is repaid on monthly
basis for a period up to 25 years.
Provision of Funeral grant to its
members, This funeral grants being paid to family members such
as children, wife or husband and parents of the deceased member as condolence where
a member dies his dependents shall be entitled to a funeral grant benefits at
the rate of Tshs 200,000.
Enrolment of both private and
public sector, PSPF has advantages to its members
whereby both private and public sectors being enrolled and they benefit from
those benefit provided by PSPF without bias.
Provision education and information
to its members, The fund gets an opportunity to meet and
educate its members on various activities as well as obtaining necessary
information to update members’ records during the registration exercise. PSPF
plays an important role to its members through providing education to its
members and given information about their contribution.
The fund provide both main scheme
benefits and supplementary benefit such as Old Age
Benefit, Death Gratuity, Invalidity Benefit, Withdrawal Benefit at a time,
whereby supplementary benefit including Education benefit, entrepreneurial
support benefit and retirement benefit.
CHALLENGES FACING PSPF
Competition from other social
security schemes, PSPF facing greater challenges from
other social security fund whereby the numbers of workers and entrepreneurs
needs to join these social security schemes are few in number compared with
number of social security schemes as a result become challenge to PSPF. The
number of social security schemes recognized in Tanzania includes National Social Security Fund (NSSF),
Public Service Pension Fund (PSPF), Governmental Employees Provident Fund
(GEPF), Local Authorities Pensions Fund (LAPF), Parastatal Pension Fund (PPF),
National Health Insurance Fund (NHIF), and Zanzibar Social Security Fund (ZSSF)
which is high number than demand of the people. Among of these schemes which
challenging PSPF is NSSF which provide quality services to its members compared
to others social security schemes as a result become greater challenges to PSPF.
Depending from Members
contribution, PSPF at large extent depends more from
monthly member’s contribution than depending on other sources as a result
become challenges to them when they want to provide housing loans and other
benefits such as Old Age Benefit, Death Gratuity, Invalidity Benefit, Funeral
Grant and Withdrawal Benefit at a time. Also PSPF get challenges in terms of
contribution especially when the number of members wants to have permanent
retirement which results to reduce the number of contributors hence capital
invested decrease.
Shortage of members,
Even though PSPF achieved to have the total number of 193,000 in 2006 to 309,767
members on 30th June 2012 but the number of members are few compared with the
goals of social security as a result PSPF loose a large amount of money from
other members. Shortage of members is caused by presence of little number of
workers employed in government sector and private sector, and low level of
people on the importance of social security schemes including PSPF.
Low advertisement,
for any business or social security schemes to have achievement in this age of contemporary
society should invest on advertisement so as to get large number who will join
direct in PSPF. But PSPF have facing a problem of advertisements whereby the
number of advertisement is low compared to expectation as a result people fill
PSPF designed for public servant only hence number of members become low.
The foreign exchange risk
management (or currency risk) is the risk arising from changes
in the value of foreign currencies. PSPF capital being exchange in terms of
Dollars which have negative impact during exchange specifically when the value
of Dollars decline or the decline of Tanzania shilling value.
Delay of benefits provision to its
members, Due to bureaucratic procedures and poor data record
of members it cause delay of benefit provision whereby it takes more than 3
months. For example Death Gratuity it takes more than 1 year.
WAYS FORWARD TO IMPROVE PSPF
PSPF should increase advertisement
so as to attract new members to join, In order to achieve
the goals of PSPF with their vision “to be the provider of choice of social security
services in the country”, they should invest of advertisement with expectation
that, on the future time they will have many members compared to know days.
Also this will help them to be famous in term of better provision of services
including housing loans to its members.
PSPF should reduce the years for a
member to get loans from 5 years to 2 years, In order to
challenge and compete with other social security schemes, PSPF should reduce
the years for a member to be employed from 5 to two years as financial
institution do. Through this technique, many workers and new members both
private sector and public sector will be attracted to join PSPF as a result
capital and contribution will be high.
PSPF should increase external
investment, In order for PSPF to achieve its
desired goals, should open new investment rather than depending on members
contribution. Kind of investment important to invest is like provision of loans
to large companies, construction of companies and university building, and
small entrepreneurs. These loans will help PSPF to expand their capital
invested through interest as a result PSPF will achieve its desired goals.
CONCLUSION
Despite
of its challenges; PSPF is best social
scheme fund that benefiting both public servants and private members who have
not registered under any other scheme including provision of housing loans at
very low interest rate which is about
12% and being refunded within 25 years. However, PSPF should extend more emphases
on external investments with fully participation of its members in order to
achieve the goals of PSPF. Finally PSPF should ensure proper data record of its
members to avoid delaying of benefits provision.
REFERENCES
Dau,
R. K. (2006), International Social
Security Association Meeting of Directors of Social
Security Organizations in
English-Speaking Africa, Dar es Salaam, NSSF Publisher
ILO,
(2008), Tanzania Mainland Social Protection Expenditure and Performance Review
and
Social Budget, ILO Publisher.
PSPF,
(2013), Annual Report for the year ended 30th june 2012, Dar es Salaam, PSPS
Publisher
URT,
(2004), “Medium Term Strategic Plan 2004 – 2009, Dar es Salaam, Government
Printer
Retrieved
on 22-04-2014 from: http://www.pspf.co.sz
Retrieved
on 22-04-2014 from: http://www.zoomtanzania.com/Public-Service-Pension-Fund-PSPF
Written by Ausi R. Chiwambo (June, 2014)
Tefilo Kisanji University
chiwambo@hotmail.com
0753110740
