9 March 2014

Tanzania: PSPF Sets Effective Goals to Operate Profitably

THE Public Service Pensions Fund (PSPF) held its annual stakeholders' meeting in Dar es Salaam late last month, where various issues related to improving the Fund were discussed.

Staff Writer DEOGRATIAS MUSHI recently interviewed the Fund's Director General Mr ADAM MAYINGU on activities related making the PSPF achieve its intended goals. Excerpts...

Question: Can you give us a short perspective of PSPF?

Answer: The Public Service Pensions Fund (PSPF) is a social security scheme established by Public Service Retirement Benefits Act No. 2 of 1999. The main purpose is to collect 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.

Membership to the Fund is open to any person who has been employed in the formal and informal sectors. 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.

Q: How does PSPF scheme operate?

A: The Fund is operating 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.

PSPF vision is aimed at providing choice of social security services in the country. The mission is to provide competitive Social Security Services to members, using dedicated staff and appropriate technology.

PSPF has some core values which are aimed at providing services to its members and the general public while observing accountability, responsibility, responsiveness, integrity, diligence, transparency and courtesy to all.

Q: What is the status of your operations currently?

A: Assets for the Public Service Pensions Fund (PSPF) have grown from 1.09trillion/- in 2012 to 1.25trillion/- last year, making the Fund well placed in providing returns in the future. Last year we registered a surplus of 164.89bn/- compared to 161.8bn/- recorded in 2012.

Our investment performance is promising, because we have achieved returns of 204.69bn/-, and this represents an increase of 129 per cent from 89.4bn/- in 2012. Q: How did you operate financially last year? A: The financial year 2012/13 was operationally good.

We managed to record a total of 367,402 members. Out of this number, 320,860 were classified as contributing members. In 2012, contributing members stood at 309,767 showing an increase of 4 per cent.

The number of pensioners has also grown from 36, 535 in 2012, to 46,542 last year, showing an increase of 27 per cent. We are happy because the increase in contributing members and the increase in salaries during the year had a corresponding rise in contribution income collected.

The contribution of 516.5bn/- was collected for the year 2013. This amount is 16.3 per cent higher than contributions collected in the year 2012 which was 444.1bn/-.

Q: What challenges does PSPF face?

A: Delay by the government to pay unremitted contributions for the period before July 1, 1999 is our main challenge and concern.

Other challenges include delays in collecting matured investments, an aging and impact of HIV/Aids in relation to the increasing number of widows/ widowers in pension payroll. Other problems include significant increase in members' salaries few months before retirement dates, getting information or updates of retirees for the assurance of their existence.

All these challenges have been addressed in corporate plan (2012/13 to 2016/17).

Q: Any plans to increase more members?

A: Yes, we are positioning ourselves to take advantage of opportunities that will arise in financial year 2013/14 by increasing membership through voluntary registration.

We are trying as much as we can to get closer to members through opening regional offices in new regions and investing in safe and high yielding investment opportunities.

Q: Could you say something about members' loans?

A: Following previous experiences, PSPF has noted that a number of public servants do not have houses after their retirement. In order to assist its members to address housing problem, the fund has introduced a housing loan facility for its members who have at least five years to compulsory retirement date.

In the financial year 2012/13, the fund paid a total of 85.12 billion to 1,596 members.

Q: What are your major investment activities?

A: PSPF revised its investment policy and procedures in line with Social Security Regulatory Authority (SSRA) directives on October 2012. The fund investments are guided by the Fund's investment policies which are based on safety, return, liquidity, economic and social security, diversification and prudence.

These principles provide guidance in developing the Fund portfolio mix and formulating strategies to achieve investment primary objective of providing high rate of return, consistent with prevailing market condition, high quality of investments and moderate level of risk.

Our major consideration in investment decision is certainly in recovery and matches with safety principle of investments. To adhere to the principles of liquidity, part of investments is in short terms assets which include fixed deposits and treasury bills.

Investments of this nature focus on strengthening the Fund's ability to meet its day to day obligations like payment of benefits and administrative costs. Long term obligations are matched with long term assets where the fund invests in real estate, long term commercial loans and securities.

Q: Is membership of the fund open to any person?

A: Oh yes, our doors are open to all people who are employed in the formal and informal sectors. Previously and under the rule of the Public Service Retirement Benefits Act No. 2 of 1999, the fund was established to manage a defined benefit scheme in which membership was limited to pensionable employees of the central government and its executive agencies, including teachers, police and prison officers plus other holders of constitution offices.

With the enactment of the Social Security (Regulatory Authority) Act No. 8 of 2008 and subsequent amendments made to the Public Service retirement Benefits Act No. 2 of 1999, in June 2012. The Act gives employees in both public and private sector freedom to choose a pension scheme to which they would make pension contributions.

Q: How good is PSPF remuneration policy?

A: We have in place processes and procedures for determining remuneration paid to its key management personnel and other employees. Management normally prepares a proposal for emoluments payable to management and employees.

This is done after having conducted market survey to ensure that market-related trends are followed in terms of changes and in employees' benefits. Management, at the same time, takes into account the intrinsic value of individual contributions into Fund's performance. The proposal is then forwarded to Board for consideration and approval.

Q: Please comment on members and stakeholders' relations.

A: We normally issue various member guides that help them understand Fund's service and requirements with respect to registration, benefits offered and qualifying conditions for various benefits. PSPF has a Client Service charter that enable members and other stakeholders to know fund's promises, and their rights as well as obligations in connection with the services and benefits offered by the Fund.

The Fund holds one meeting annually with members and stakeholders to discuss matters relating to governance and performance. The meetings form important forum to obtain feedback from members and stakeholders which helps to improve performance and good governance.

It also helps to build and maintain good relations, and maintain an effective communication network with members and other stakeholders of the Fund who include employers, employees, suppliers, service providers, consultants, contractors and regulatory authorities.

Q: Who is responsible for making sure that PSPF realises its goals?

A: For sure, the Board plays key role in guarding principle activities of the Fund. Our appreciation goes to participating employers, members, and pensioners for their interest and support. The Fund is well placed in all aspects to meet challenges and to seize new opportunities.

We are implementing the corporate plan that intends to increase number of contributing members and timely collection of contributions, prudent investments and sound financial management. With determined spirit I am optimistic that we shall achieve our goals.

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