SSRA explains new pension pay formula

Monday November 26 2018

 

By Frank Kimboy @frankkimboy fkimboy@tz.nationmedia.com

Dar es Salaam. The government’s decision to amend the legislation on social security resulted in changes to the payment formula for retirement benefits, the Social Security Regulatory Authority (SSRA) said yesterday. The authority issued a statement in the wake of a public outcry after the Bunda Urban MP Ester Bulaya (Chadema) revealed that the government had drastically changed the formula that was hitherto used to calculate pension fund payments. Under the new formula, pensioners will henceforth receive 25 per cent of their savings in lump sum, while the remaining 75 per cent will be paid in monthly instalments.

Under the old arrangements, members of the Government Employees Pension Fund (GEPF), the Local Authority Pension Fund and the Public Services Pension Fund (PSPF) were receiving 50 per cent of their retirement benefits in a lump sum, with the remaining 50 per cent in monthly packages.

However, SSRA director general Irene Isaka revealed that some of the pension funds – including NSSF and PPF – started applying the controversial formula in 2014.

According to Ms Isaka, the new formula aims at harmonizing the formulae used by the pension funds into a single formula.

“Recently, there has been a public outcry that the new legislation introduced a new formula for calculating the benefits of retirees. This isn’t true, because NSSF and PPF started to use the formula in 2014,” Ms Isaka said in the statement.

“If you read the Public Service Social Security (Benefits) Regulations, you’d see that the intention was to harmonise the provision of retirement benefits by the two social security schemes,” she insisted. Arguing that “it was not right for members of some of the pension funds – who constitute only 20 per cent – to receive a lump sum of 50 per cent of their savings while others receive only 25 per cent,” Ms Isaka said “PSPF and LAPF retirees received nearly three times more than their fellows who were NSSF and PPF members. This wasn’t fair!”

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She added: “It isn’t fair either for employees and employer to contribute 10 per cent each, while government employees contribute only 5 per cent, while the employer, the government, contributes 15 per cent to their employees’ monthly savings. This is against the solidarity principle!”

In any case, she allayed employees’ fears by assuring them that the 25-per cent formula, which has been in place for four years, had proved successful for NSSF and PPF.

In a related development, Ms Isaka revealed that some retired PSPF members who acquired mortgage loans have been complaining that they are not be able to repay their loans following the decision.

In the event, Ms Isaka said the government will come up with special arrangements which should enable them to settle their debts accordingly.

She also clarified that the social security funds will pay their pensioners their benefits until their death. She said this after claims from different quarters that the pensioners would be entitled to receive their benefits for only 12.5 years following retirement.