You will only take home 33 percent in new pension scheme from July

Dar es Salaam. Workers will now be paid 33 percent of their total savings in lump sum upon retiring, with the remaining 67 being reserved for monthly pension.

The new arrangement follows amendment of Section 25A of the Social Security Benefit Schemes Regulations announced by Prof Joyce Ndalichako, Minister of State in the Prime Minister’s Office (Labour, Youth, Employment and Persons with Disability.)

Come into effect

The new regulations, which will come into effect on July 1, this year, were gazetted last week. They outline the new formula by indicating that the annual accrual factor will be 2.07 percent, and the commutation factor will be 12.5 per-cent.

It means that the full pension benefits, under the respective scheme laws, shall be calculated by 1/580 multiplied by the number of months served and multiplied by the annual pensionable emoluments.

Also, the monthly pension will have 1/580 times the number of months served multiplied by the annual pensionable emoluments times 67 percent and multiplied by 1/12.

Members employed to perform specific tasks, including those working in mining, construction, manufacturing, agriculture, and any other sector or area as may be specified, will qualify for special lump sum upon completion of their tasks.

Special lump sum will also be paid to those who joined the scheme after the age of 45 upon cessation of employment. Others are foreigners employed in mainland Tanzania, and who leave the country upon cessation of their employment.

Cessation of employment

Other members eligible for special lump sum are those who, upon cessation of employment, emigrate, and have no intention of returning, and that the countries to which they emigrate have no bilateral agreement that allows portability of benefits.

However, part of the regulations reads, “…a member shall not be paid a special lump sum under this regulation unless such member has applied to the Director General of the respective Scheme by submitting a letter of cessation of employment or completion of specific task duly signed by the employer.”

Along with the letter, the said member will also have to submit a declaration in a form prescribed by the respective scheme that he has not secured another employment.

In 2018, President John Magufuli directed that pension funds revert to the old pension payment formula under which pensioners were paid 50 percent of their total savings instead of the 25 percent stipulated in highly controversial proposals.

Public pension schemes

The proposed regulations were followed by the merger of five public pension schemes into one – the Public Service Social Security Fund (PSSSF), which is now one of two social security funds together with the National Social Security Fund.

The new regulations attracted the wrath of civil servants when it became apparent that they would lose up to three times of the amount that was paid in the past.

Some parliamentarians joined the workers by accusing the government of “sneaking” in the regulations.