- Establishment of the Public Service Social Security Fund.
- Repeal of PSPF, PPF, GEPF and LAPF Pension Schemes.
- Transfer of employees in the public sector from the repealed schemes to the Public Service Social Security Scheme.
- National Social Security Fund (NSSF) remains particularly for services to the employees in the private sector.
On 17th November 2017 the Government of the United Republic of Tanzania tabled to the Parliament legislative proposals for the enactment of the Public Service Social Security Fund Act, 2017 (‘the Bill’). The Bill aims at repealing the Public Service Retirement Benefits Act, Cap. 371, the LAPF Pensions Fund Act, Cap. 407, the PPF Pensions Fund Act, Cap. 372 and the GEPF Retirement Benefits Fund Act, Cap. 51. The Bill also provides for amendments to the National Social Security Fund Act, Cap. 50 with a view of providing provisions of social security benefits to employees in the private sector.
The Bill has raised anxiety among employees in both public and private sector. Employees are curious to know their fate amidst the proposed merger of existing social security schemes and enactment of new scheme under the Bill. Existing pensioners have also been uncertain of their fate following the proposed legislative changes enshrined in the Bill. Furthermore, members who had opted for voluntary schemes in existing social security schemes are worried and uncertain of their fate. The research team at Breakthrough Attorneys has carefully read the Bill and would like to highlight matters of significance contained in the Bill for general public understanding and awareness.
- Establishment of the Public Service Social Security Scheme
Section 4 of the Bill establishes the Public Service Social Security Scheme. This comprises of employees in the public sector employed after commencement of the Scheme. It also comprises of all employees in the public sector who are members of the former schemes together with those in the National Social Security Fund. Former schemes are defined under Section 3 of the Bill to refer to Public Service Pension Scheme, LAPF Pension Scheme, GEPF Retirement Pension Benefit Scheme and PPF Pensions Scheme. On the other hand, all employees in the public sector who are now members of the National Social Security Fund (NSSF) will be transferred to the Public Service Social Security Scheme.
A: Private Sector; Expected Impact
Our review of the proposed Bill, reveals that it is projected to impact the private sector a little bit less than how it is geared to affect the public sector and membership statuses of public service employees.
- Existing Private Sector Employees In NSSF
Employees in the private sector who are registered with NSSF need not to worry since they will not be affected in any way by the proposed changes under the Bill. This is because they will continue to be members of NSSF. They will not be transferred to the Public Service Social Security Fund. This is in accordance with Section 5 of the Bill which confines membership to the Fund to employees in the public sector only while NSSF is left solely for employees in the private sector.
- Private Sector Employees in Other Funds
Employees who are in private sector and are members of other funds will move and open memberships with NSSF. This is provided for under Section 80 (1) (b) of the Bill. The transfer of employees in the private sector belonging to other funds will go alongside with the transfer of private employers belonging to this category.
B: Public Sector; Expected Impact
As stated earlier, the Bill shall have great impact to employees in the public sector. This is because all employees in the public sector belonging to the repealed pension funds will be compulsorily transferred to the Fund. Similarly, employees in the public sector who are members of NSSF will also be transferred to the Fund. This position is viewed from the membership of the Fund which is provided for under Section 5 of the Bill together with Section 80 (1) (a) & (b) of the Bill.
- Establishment of the Public Service Social Security Fund
The Public Service Social Security Fund (‘the Fund’) is established under Section 6 of the Bill. The Fund constitutes, among others, members’ contributions, funds transferred from former Funds, funds transferred from the NSSF by members transferred to the Fund, assets from the former Funds and monies from investments made by the Fund.
The Fund has an obligation of ensuring that every employee in the public service receives his retirement benefits as and when due. The Fund also establishes uniform set of rules, regulations and standards for the administration and payments of retirement pensions for employees in the public sector.
- Contributions to the Fund
The contribution payable by the employer to the Fund shall be 20% of the employee’s monthly salary whereby 5% will be deducted from the employee’s salary and 15% will be contributed by the employer. The stipulated rate of contribution may change by order of the Minister responsible for Finance published in the Gazette.
- Benefits of the members to the Scheme
Section 29 of the Bill provides for the following benefits, namely: retirement pension benefit, survivors’ benefit, invalidity benefit, maternity benefit, unemployment benefit, sickness benefit, death grant and funeral grant.
The above benefits are granted subject to fulfilment of the conditions laid down under Section 26 of the Bill. Such conditions include, among others, attainment of the compulsory retirement age of 60 years, attainment of the voluntary retirement age of 55 years, medical invalidity and termination of employment for public interest.
Section 43 of the Bill proposes that the employer should notify the Fund 6 months prior to the retirement of the employee. The Fund shall pay the employee his retirement benefits within 60 days from the date of retirement. If the Fund fails to pay the employee within the stipulated period of 60 days for reasons not caused by the employee, the Fund shall pay a penalty of 5% per annum on top of the entitled retirement package to the employee. This provision appears to be a solution to delays in payment of pensions which have been complained of by retired employees for a long time.
- Summary proceedings for recovery of contributions
With a view of enhancing timely remittance of contributions by employers to the Fund, the Bill proposes penalty for delayed payment of contribution at the rate of one and half percentum of the amount due by the employer. The Fund is empowered to institute summary proceedings against the employer in accordance with the provisions of Order XXXV of the Civil Procedure Code, [CAP 33 R.E. 2002]. In this case, the defendant has no automatic right to file a defence. The defendant has to obtain leave to file a defence whereby the same is granted on condition of payment as security for costs the overdue contributions to the Fund. The period of limitation for institution of the claim for recovery of statutory contributions to the Fund is 12 years from the date when such contributions became due.
- Transfer of membership and contributions
The Bill provides that a member who has changed employment from public service to any employer in the private sector his membership shall be transferred to the National Social Security Fund. All employees in the public sector who are members of the National Social Security Fund shall be transferred to the Fund.
It is important to note that while the Bill proposes transfer of membership it restricts transfer of contributions of members. Instead, the Bill proposes that contributions shall be totalized in accordance with the totalization guidelines by the Social Security Regulatory Authority.
- Transfer of Voluntary Schemes
The Bill proposes that all voluntary schemes and their respective members and beneficiaries which were administered by the former schemes shall be transferred to the Fund and their respective trust deeds shall be deemed to have been entered by the Board of Trustees of the Fund.
- Transitional Period
There shall be a transitional period of not more than six months from the date of commencement of the Act. During the transitional period, winding up of the affairs and business of the former schemes shall be made with a view of ensuring all assets and liabilities are transferred and vested in the Fund. The period of six months may be extended by the Minister of Finance as need may be.
The proposed legislative changes by the Bill will bring in a new wind of change to the social security schemes in Tanzania. The Bill will lead into a demise of GEPF, PPF, LAPF and PSPF. In lieu thereof there will be the Public Service Social Security Fund which will service the public sector employees and the National Social Security Fund will remain to cater for private employees. The Government of the United Republic of Tanzania hails the proposed changes as an important step towards merger and consolidation of social security schemes which will ultimately lead to stability of the economy and of the general public as well. Our research team at Breakthrough Attorneys will keep a close follow up on these changes and will update the general public accordingly.
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Breakthrough Attorneys, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.