Social security funds: denying members to withdraw their benefits once out of formal employment contracts
July 24, 2012 § 1 Comment
Social Security Regulatory Authority (SSRA) has recently been formed in Tanzania to regulate functions and conducts of social security fund schemes in Tanzania. As a result a law was passed in April 2012 to review the conduct of the funds including restricting early withdraw of members money until when they reach their voluntary or compulsory retirement ages, i.e. 55yrs and 65yrs. Currently there are debates among the would be pensioners most of them not happy with this new law.
The following are my views:
I think the law did not consider the nature of employment in private organizations. There is no permanent employment in a similar arrangements like in government or public sector where people are permanently employment to their retirement age. In private organizations most of the contract are short term 1 – 5 years. We need to inquire more to understand and explore legal ways if any for people to withdraw their reserves once their contract expires. Otherwise it seems the law has been purposely formulated to protect those who keep the funds rather than the workers. It makes little sense for someone who works for, say 2 years, doesn’t secure another formal employment thereafter yet make them suffer for the rest of their lifetime until they reach 55.
The most discouraging thing is that government officials and politicians do have access to these funds even without being members of such schemes at the first place. Some of the social funds have invested members’ money in questionable projects mostly influenced by political leaders rather than factors which would financially benefit the funds and consequently the members. There is no clear trade off benefits for workers to say yes we can forgo withdrawing money now for such and such benefits in shorter, medium and longer terms. This isn’t clear at all. It is said that SSRA will come up with a way workers can use their reserve as collateral to the commercial banks for loans. The question is, why didn’t that come in the same framework of the new law?
Let us be realistic, on average how much money does the member have in these social security funds? Will the amount suffice for example to get a loan from the bank to construct a decent residential house? Banks give loans to make profit through interest, what business plan will the early retired employee give to the bank to justify giving him/her money? Interesting to understand how SSRA will broker this deal!
How much (in %age) interest will members’ fund get at the 55th year or 65th year? What benefit do members get out of the gigantic investments made by their respective funds? How does the law protect the members from their funds being misused or invested in white elephant projects? How does the law prevent interference from politicians? The stake of these funds belong to the members/workers, how does the law make the CEOs of these schemes accountable to the holders of these funds?