PSPF value hits Sh1.25tn in 2013

Dar es Salaam. The value of the Public Service Pension Fund (PSPF) has increased from Sh30.6 billion in 2002 to Sh1.25 trillion by June 2013, an achievement attributed to increased member contributions and various investments.

Up to February this year, the PSPF had 310,806 members in the PSPF main scheme and 47,806 in the PSPF Supplementary Scheme (PSS), a scheme that allows people in both the formal and informal sectors to save for their retirement benefits.

According to PSPF director general Adam Mayingu, the PSPF, which was previously established to manage a defined benefit scheme in which membership was limited to central government and executive agency employees is now open to all people working in the formal and informal sectors.

This follows 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 that extends membership of the scheme to include employees of the formal and informal sectors, who are not registered under any other scheme.

The PSS has currently attracted 47,806 members, who have to voluntarily contribute a minimum amount of Sh10,000 per month and earn a six per cent interest of their savings at the end of the year.

Mr Mayingu said the value of the PSPF had grown from Sh30.6 billion by 2000 to Sh1.25 trillion by June 2013.

He was speaking in Dar es Salaam at a seminar prepared by the PSPF for journalists on how the community could benefit by taking part in pension schemes.

PSPF has been involved in creating other sources of funds by identifying critical investment projects to ensure there are sufficient resources to meet pension liabilities and optimise returns. “Since 2000 PSPF investments have increased from Sh30.2 million to Sh1.06 trillion by June 2013,” said Mr Gabriel Silayo, PSPF director of planning and investments.

Mr Silayo said some projects that had been implementing included the construction of the University of Dodoma, the Nelson Mandela African Institute of Science and Technology and selling of 666 settlement houses.

“We have also invested in government treasury bonds and treasury bills, corporate bonds, bank assets and buying shares in some companies. This is in a bid to meet short-term financial obligations like monthly pensions and short-term benefits,” said Mr Silayo.

On the other hand, he noted that members’ contributions to the PSPF had grown from Sh34.80 billion in 2000/2001 to Sh516.54 billion in 2012/2013, a situation that had prompted timely payment of its members. Since 2004 to December 2013, PSPF has paid Sh2.83 trillion retirement benefits to its members.

“We have started issuing mortgage loans to members who are left with only five years to retire to help them secure permanent settlements. From this arrangement a total of Sh112.3 billion has been issued to 4,228 members by February this year,” said Mr Mayingu.

To simplify the process of applying for loans, Mr Mayingu said the PSPF had been acting as a guarantor to members who applied for them from banks and other financial institutions.

Currently membership to the PSPF is open to any person, who has been employed in the formal and informal sectors. Previously, PSPF was established to manage a defined benefit scheme in which membership was limited to central government employees and employees of executive agencies established under the Act of Parliament and confirmed in the pensionable office.

For her part, Mwajaa Sembe, PSS scheme manager said one of the greatest problems facing pension systems in Tanzania was a low level of coverage as influenced by high level of informal workers, low income and high poverty levels that had become an obstacle for individuals wishing to save money.

With current pension reforms, Ms Sembe noted, workers in the formal and informal sectors were welcome to use both main and supplementary schemes to save for their future benefits. “It is advisable that people should start contributing to a pension scheme as soon as they start working. With PSS scheme, however, agreed upon deposits are methods of unlimited savings that can be withdrawn at any time especially after 12 months,” said Ms Sembe.

This comes at a time when the majority of the working-age population in the country is not covered by pension schemes that are capable of providing them with adequate retirement income, thus subjecting them to poverty in old age.

Though voluntary pension savings aim at improving future pension amounts, the big challenge has remained that most of them are still unaware of the scheme due to lack of adequate information.