BabuK
JF-Expert Member
- Jul 30, 2008
- 1,845
- 329
The Social Security Regulatory Authority (SSRA) has finally launched guidelines which all pension funds will have to follow when planning investments in any project in a bid to protect members interests.
Speaking at the launch of the guidelines in Dar es Salaam yesterday, the SSRA Director General, Irene Isaka, said lack of social security guidelines in this area has been one of the key challenges for the funds, and a source of complaints from members on the type of investments and benefits to them.
The new guidelines follow a portfolio review of investments of social security funds by a consultant commissioned by the Bank of Tanzania (BoT) in collaboration with SSRA.
Isaka said the study brought out number of issues that already the authority has started working on to improve governance and investment returns.
She pointed out that because of lack of uniform guidelines some funds earnings have been lower than others with the level of internal rate of return inadequate to meet the level of benefits they had promised.
She said critical areas that the guidelines address are investment policy, benchmarks, targeted returns, governance structure in decision making process and sanctions for non compliance.
The benchmarks in the guidelines include allowing the funds to invest up to 70 per cent in government instruments such as treasury bills and bonds, while direct loans to the government are now limited to 10 percent.
She said the funds can invest up to 40 percent of its funds in commercial papers, promissory notes and corporate bonds of which unlisted debt is 10 percent.
The funds can also invest up to 30 per cent of its portfolio in real estate, of which non-earning income property is allowed a maximum of 5 percent.
Ordinary and preference shares are allowed to a maximum of 15 percent of which private equity is 5 percent. The guidelines have also allowed investment of a maximum of 25 of the funds in infrastructure, stressing that such undertakings be based on viability of the project and not a guarantee from the government.
Isaka said fund deposits in licensed banks and financial institutions will now be limited to a maximum of 35 percent, mainly to accommodate funds such as the National Health Insurance Fund (NHIF) that offer short term benefits and for treasury management of the other social security funds.
Under the guidelines collective investments have been given a maximum of 30 percent while loans to cooperative societies are limited to 10 percent.
She urged board of trustees of every scheme to ensure that real return on investments are positive and any investment from treasury instruments shall have return above risk free rate. She stressed that any investment yielding lower than risk free should seek prior approval.
However, the SSRA boss noted that the main challenge facing the pension funds is inflation. Much as we strive to increase returns on investments, real return remains a big challenge. Given that the inflation rate in March this year remained at 19 percent, real return remains negative, she said.
She said the situation had multiplier effects, noting that apart from realising negative returns on investments, it eroded the value of pension to members.
I would like to assure our members that we are working hard to ensure that their interest is protected, she added.
The pension funds under SSRA are the National Social Security Fund (NSSF), Parastatal Pensions Fund (PPF), Government Employee Provident Fund (GEPF), Local Authorities Provident Fund (LAPF), National Health Insurance Fund (NHIF) and Public Service Pension Fund (PSPF).
SOURCE: THE GUARDIAN
Speaking at the launch of the guidelines in Dar es Salaam yesterday, the SSRA Director General, Irene Isaka, said lack of social security guidelines in this area has been one of the key challenges for the funds, and a source of complaints from members on the type of investments and benefits to them.
The new guidelines follow a portfolio review of investments of social security funds by a consultant commissioned by the Bank of Tanzania (BoT) in collaboration with SSRA.
Isaka said the study brought out number of issues that already the authority has started working on to improve governance and investment returns.
She pointed out that because of lack of uniform guidelines some funds earnings have been lower than others with the level of internal rate of return inadequate to meet the level of benefits they had promised.
She said critical areas that the guidelines address are investment policy, benchmarks, targeted returns, governance structure in decision making process and sanctions for non compliance.
The benchmarks in the guidelines include allowing the funds to invest up to 70 per cent in government instruments such as treasury bills and bonds, while direct loans to the government are now limited to 10 percent.
She said the funds can invest up to 40 percent of its funds in commercial papers, promissory notes and corporate bonds of which unlisted debt is 10 percent.
The funds can also invest up to 30 per cent of its portfolio in real estate, of which non-earning income property is allowed a maximum of 5 percent.
Ordinary and preference shares are allowed to a maximum of 15 percent of which private equity is 5 percent. The guidelines have also allowed investment of a maximum of 25 of the funds in infrastructure, stressing that such undertakings be based on viability of the project and not a guarantee from the government.
Isaka said fund deposits in licensed banks and financial institutions will now be limited to a maximum of 35 percent, mainly to accommodate funds such as the National Health Insurance Fund (NHIF) that offer short term benefits and for treasury management of the other social security funds.
Under the guidelines collective investments have been given a maximum of 30 percent while loans to cooperative societies are limited to 10 percent.
She urged board of trustees of every scheme to ensure that real return on investments are positive and any investment from treasury instruments shall have return above risk free rate. She stressed that any investment yielding lower than risk free should seek prior approval.
However, the SSRA boss noted that the main challenge facing the pension funds is inflation. Much as we strive to increase returns on investments, real return remains a big challenge. Given that the inflation rate in March this year remained at 19 percent, real return remains negative, she said.
She said the situation had multiplier effects, noting that apart from realising negative returns on investments, it eroded the value of pension to members.
I would like to assure our members that we are working hard to ensure that their interest is protected, she added.
The pension funds under SSRA are the National Social Security Fund (NSSF), Parastatal Pensions Fund (PPF), Government Employee Provident Fund (GEPF), Local Authorities Provident Fund (LAPF), National Health Insurance Fund (NHIF) and Public Service Pension Fund (PSPF).
SOURCE: THE GUARDIAN
