Magufuli orders a revert to old pension formula amid pressure from workers
What you need to know:
- President John Magufuli says retirees to continue to be paid using the old method which guaranteed better earnings
- Issues five year transition period during which pension schemes management and workers will agree to a win-win formula.
Dar es Salaam. President John Magufuli has suspended payment of pension using a new formula that has lately received stiff opposition from workers, especially in the public service.
President Magufuli directed that all pension funds, except NSSF revert to the old payment formula, at least in the next five years as an agreeable payment is arrived at between the funds and workers.
The new pension regulations that started working in 2014 provides that workers should receive 25 per cent in lump sum payment and the remaining 75 per cent would be paid in a monthly basis spread over 13 years.
The new regulations prompted an outcry, especially from public servants who used to receive 50 per cent in the first lump sum and 50 per cent on a monthly basis spread over 12 years.
President Magufuli who met pension funds managers and workers’ union officials at State House today, Friday, December 28, 2018, announced that the pension payments revert to the old formula with immediate effect.
Present were representatives from Trade Union Congress of Tanzania (Tucta), sectorial union leaders, regulators, employers’ association and officials from the labour ministry led by Minister Jenister Mhagama.
Speaking during the meeting, Dr Magufuli said public servants under the newly merged Public Service Social Security Fund (PSSSF) will continue receiving the old pension payment until 2023 when the new formula will be enacted.
“The government will be required to pay pension to 58,000 beneficiaries during that period something that we will manage,” said Dr Magufuli, drawing applause from those present.
But employees in the private sector will continue to earn using the same formula pegged at 25 per cent lump sum and 75 per cent monthly pension over 13 years.
“During the transition period, the government, regulator and the private sector should collaborate in enacting the best formula that will benefit Tanzanian pensioners because retirement is not a sin,” he said.
According to Dr Magufuli, pensioner should be involved in the making of major decisions that affect their lives either as workers or retirees. He warned fund managers against investing in projects that did not yield returns and instead burdened savers.
