Tanzanian government has come up with a Public Service Social Security Bill following advice from the International Labour Organization (ILO) to merge the pension funds into one or two entities to reduce the costs of pension benefits and operating costs.
The argument was that having many of them reduces their ability to offer quality services, therefore this move was made in a bid to reduce the costs of pension benefits and operating costs.
The bill was tabled by Jenista Mhagama, the Minister responsible for Policy, Parliamentary Affairs, Labour, Employment, Youth and the Disabled.
The bill proposed the merging of the country`s pension funds and transfer of membership of the employees in the public service from former schemes which would be repealed and replaced by Public Service Social Security Fund (PSSSF). It also called the transfer of all private sector employees, self-employed, employees in International organizations to National Social Security Fund (NSSF). Funds that were targeted in the merger were Parastatal Pensions Fund (PPF), Public Service Pension Fund (PSPF), Local Authorities Pension Fund (LAPF), Workers` Compensation Fund (WCF) and Government Employees Provident Fund (GEPF). The bill came in to replace the Social Security Regulatory Act of 2008 that liberalized the social security arena creating liberty for employees to choose which scheme they preferred.
The merger of the pension funds raised concerns over the continued existence of the Social Security Regulatory Authority (SSRA), a body that is responsible for monitoring the activities of the funds. An opposition legislator, Hon. Esther Bulaya queried the regulator`s future role after the merger suggesting its disbanding citing additional costs for the newly formed pension funds because they would be required to pay billions in annual contributions to run SSRA, and yet the bill suggested that an eight-member board would be put in place to monitor the activities of the enacted pension funds.
The assented PSSF Act that came into effect on August 1st, 2018 however uprooted a great deal of misery among majority civil servants with a provision that proposed reduction in retirement benefits from 50 per cent to 25 per cent whereby the new formula subjected retirees to receive 25 per cent of their savings in lump sum while the remaining 75 per cent would be paid in instalments. It was agreed upon during the Labor, Economic and Social Council (LESCO) meeting that was attended by representatives from Trade Union Congress of Tanzania (TUCTA), Association of Tanzania Employers (ATE) and SSRA and experts from the Prime Minister`s office (Policy, Parliamentary Affairs, Labour, Employment, Youth and Disabled), where SSRA and ATE voted for the new 25 per cent formula dropping the proposal for 50 per cent backed by TUCTA.
Trade unions were quick to show their concerns over the new formula terming it as exploitative to the workers claiming it was psychologically affecting them and urged the government to stick with the existing law, explaining that terminal benefits were their rights and it was unwise to review how to pay them. TUCTA was at the front line in condemning the new pension formula and sought an audience with Hon. Jenista Mhagama to discuss their recommendation on the new pension computation formula by suggesting an increase to at least 40 per cent. TUCTA was of the view that retirees be paid based using a 1/540 : 15.5 computation formula which would guarantee them payment of lump sum pension amounting to half their total savings.
Esther Bulaya, legislator for Bunda Urban and Shadow Minister of State in the Prime Minister`s office responsible for Policy, Parliamentary Affairs, Labor, Employment, Youth and Disabled reported putting final touches to a private motion for tabling in the National Assembly challenging the widely disputed system of computing retirement benefits, and stated further that she wanted the House to intervene by suspending the regulations of the Public Service Social Security Act, 2018.
Public objections were carried onto social media where majority citizens ranted of how ministers and their deputies alongside legislators, who endorsed the changes, were conspicuously spared by the contested changes. These changes only affected the President, Vice President, Prime Minister, Ministers and all MPs receive their gratuity in full at the end of each five year-term served.
SSRA Director General, Irene Isaka also dismissed widely circulating suggestions that the disputed formula was devised purposely to save the country`s social security schemes that were on the verge of bankruptcy following a borrowing spree by the government and consequent investment in non-viable projects.
Amid all this commotion, President John Joseph Magufuli stepped in and called for an urgent meeting with all the trade unions and top executives from PSSSF and NSSF to discuss the new disputed formula. At the meeting, the president ordered the rest of the pension funds to revert to the old formula until 2023 when possibly an agreeable payment formula will have been arrived at between the workers and the funds, however NSSF was excluded from this. The President further revoked the appointment of Dr. Irene Isaka as SSRA director, no clear reasons given, but it was stated she would be assigned other duties.
Tanzania has the best pension system in the East African region bearing in mind that the pension system is contributory whereby the employee makes a 15 per cent monthly contribution unlike other countries like Uganda whose pension system is non-contributory.