Tanzania: New Pension Formula Brings Equity, Says Govt

A FLAT rate of 33 per cent pension formula of workers’ total savings in lump sum payment upon retiring brings equity among pensioners from the private and public sector, the government has said.

The new formula which will come into effect from July 1st this year, will see the retired workers pocketing a lump sum of 33 per cent of their total contributions and the remaining 67 being reserved for monthly pension payment.

Minister of State in the Prime Minister’s Office (Labour, Youths and People with Disability) Prof Joyce Ndalichako said in the National Assembly on Friday that the new rates apply to both private and public sectors.

She said under the previous arrangement, some of the pensioners were receiving higher lump sums than what they contributed, while others were receiving less compared to their contributions.

“Some of the effects that were brought by the previous arrangements of the 50 per cent lump sum, there were some contributors pocketed 129m/- after contributing 36m/- in 467 months,” she said.

“But there are others whose contributions were amounting to 86m/- in 350 months but ended up getting a lump sum of 54m/- under the arrangement of 25 per cent pension formula,” added the minister.

She said this caused inequality among pensioners and that the just introduced flat rate aims at ending the differences.

“This rate has put all pensioners in one arrangement that is guided by the Employment and Labour Law of Tanzania,” explained the minister, saying the new formula enables the pension funds to operate equally.

According to her, with the new formula, retirees who contributed 86m/- will be able to get a lump sum of 71m/- while their monthly pension will be 1.84m/-.

She said the decision to come up with the new rate was reached by the committee whose members among others are from the government, Association of Tanzania Employers (ATE) and Trade Union Council of Tanzania (TUCTA).

The increment was among the earmarked changes in the social security funds new regulations, which will come into effect on July 1st this year and is an increase from the previous 25 per cent.

The new arrangement also allows amendment of Section 25A of the Social Security Benefit Schemes Regulations recently announced by the government.

Following outcries from different parties in 2018, the government constituted a team of experts to review the old regulation and come up with proposals on how to amicably improve pension services and ensure survival of the funds.

The committee was guided by a number of issues, mainly being to ensure new regulations provide better pension benefits to retirees and to ensure the pension funds remain sustainable and of benefit to all members.

Speaking recently in Dodoma, Permanent Secretary of the ministry, Prof Jamal Katundu underscored the need for workers to embrace the changes as it is a win-win situation for them regardless of the social security fund one was registered with.

He added that prior to the new regulations, during their retirement workers’ percentage lump sums ranged between 23, 35 and 50 of the total savings depending on the social security fund.

With the new arrangement, they will all be paid a flat rate of 33 per cent, while the monthly pension has gone up from 50 to 67 per cent for pensioners of the then PSPF and LAPF, while thirdly the move has strengthened PSSSF and NSSF, making them more sustainable

Source:

Leave a Reply

Your email address will not be published. Required fields are marked *