138
THE COMPETITIVENESS OF SOCIAL SECURITY SCHEMES IN TANZANIA MAINLAND
KITANDU PAULO UGULA
A DISSERTATION SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR DEGREE OF MASTER OF HUMAN RESOURCES MANAGEMENT OF THE OPEN UNIVERSITY OF TANZANIA
2013CERTIFICATION
The undersigned certify that has read and hereby recommends and approve for acceptance by the Open University of Tanzania a dissertation paper titled: The Competitiveness of Social Security Schemes in Tanzania Mainland, in partial fulfillment for the Master of Human Resources Management degree of the Open University of Tanzania.
………………………………………………
Dr. Jacqueline L. Bundala
(Supervisor)
……………………………………….
Date
COPYRIGHT
No part of this dissertation work may be reproduced, stored in any retrieval system, or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without prior written permission of the author or Open University of Tanzania in that behalf.
DECLARATION
I, Kitandu Paulo Ugula, do declare that this dissertation has been written by me. Unless otherwise mentioned, I personally collected and analysed all used research materials. I also declare that this dissertation, which has been supervised by Dr J. L. Bundala, has never been presented for any academic or non-academic award anywhere before this submission.
……………………….………….
Signature
……………………………….
Date
DEDICATION
This dissertation work is dedicated to my family.
ACKNOWLEDGEMENTS
The writing of this dissertation, and indeed successful attendance to this masters degree programme, has been made possible through generous support, materially or otherwise, from a number of individuals. I take this opportunity to acknowledge such assistance and inspiration.
Special thanks go to my supervisor, Dr. Jacqueline L. Bundala, for her professional guidance, encouragement and understanding throughout the entire process of producing this dissertation. I wish to recognise the contributions from other members of staff at the Faculty of business Management of the Open University of Tanzania, during the whole this master’s programme, and especially Mr Kalanje and Dr Chacha Matoka, who ensured that most of the guidance I requested from them was given to me. I also appreciate for the fruitful discussions I shared with Dr Richard K. A. Towett on issues relating to research writing. The discussions equipped me very well on research methodology issues.
I would like to thank various people who have helped me in gathering relevant data and information to enable me write this dissertation. These people include my fellow employees at the Fair Competition Commission, as they belong to different social security schemes and has given me very useful information. I thank the staffs of the social security schemes I visited and all members of those schemes I was lack to have chances of talking with them.
Lastly, I express my heartfelt thanks to my beloved mother Elida Materu Ugula, my wife Elizabeth Godfrey Ugula, my children and all family members for their throughout encouragement of my academic career. Of the most important I thank the Almighty God for keeping me in good health and thus I was capable to write this dissertation work.
ABSTRACT
For the purpose of enhancing the government’s core objective of social protection, Tanzania prepared a Social Security Policy in the year 2003. Adhering to the Policy in the year 2008, the Government of Tanzania enacted the Social Security (Regulatory Authority) Act. Among others the Act provides that every employer in the formal sector shall be required to register his employees with any of the mandatory schemes, provided that it shall be the right of the employee to choose a mandatory scheme under which the employee shall be registered. This provision provides some flexibility to employees to choose the scheme suiting them thus creating a ground of competition among the schemes. This study has established that beside the availability of the Social Security Policy, the establishment of the Social Security Regulatory Authority and the existence of the social security laws, the Tanzanian social security schemes are competitive to each other though there are factors which are attached to each social security scheme to be distinguished to the other. The study has established that factors like the legal framework governing the social security schemes, their operations, the ways these social security schemes promote and protect the interests of their members and their sensitisation activities play major roles in their competitiveness.
TABLE OF CONTENT
CERTIFICATION ii
COPYRIGHT iii
DECLARATION iv
DEDICATION v
ACKNOWLEDGEMENTS vi
ABSTRACT viii
LIST OF TABLES………………...……………………………………………….xv
LIST OF ABREVIATIONS xvii
CHAPTER ONE 1
1.0 INTRODUCTION 1
1.1 Background 1
1.1.1 Social Security Progress at International Context 3
1.1.1.2 United States of America 6
1.1.1.3 Kenya 10
1.1.1.3.1 Kenyan Retirement Benefits Legislation 10
1.1.1.3.2 The National Hospital Insurance Fund Act 11
1.1.1.3.3 The National Social Security Fund Act 12
1.1.1.3.4 The Pensions Act 13
1.1.2 Tanzanian Context on Social Security Progress 14
1.1.2.1 The Recognition of Social Security 14
1.1.2.2 The Social Regulatory Authority 18
1.1.1.3 The Tanzanian Social Security Schemes 19
1.2 Statement of the Research Problem 22
1.3 Research Objectives 23
1.3.1 Main objective of the Study 23
1.3.2 Specific Objectives 23
1.4 Research Questions 24
1.5 The Significance of the Study 24
CHAPTER TWO 26
2.0 LITERATURE REVIEW 26
CHAPTER THREE 32
3.0 MATERIALS AND METHODS 32
3.1 Research Design 32
3.2 Area of the Study 32
3.3 Sample Size of the Study 32
3.4 Tools and Techniques of Data Collection 33
3.5 Data Analysis and Interpretation 33
3.6 Data Reliability and Data Validity 34
CHAPTER FOUR 36
4.0 FINDINGS AND DISCUSSIONS 36
4.1 What is the Best Legal Framework Established for Governing Social Security Schemes in Tanzania? 36
4.1.1 Constitutionality of the Schemes 36
4.1.2 The Provisions of Law with Regard to Benefits Obtainable in the Schemes 43
4.1.3 Available Mechanisms and Remedies for Redressing Members 45
4.2 How do the Six Social Security Schemes Operate in Tanzania Mainland 48
4.2.1 Customer Care 49
4.2.2 Decentralisation 50
4.2.3 Processes and Procedures of Effecting Members’ Benefits 52
4.2.4 The use of New Information and Communication Technology 54
4.3 How do these schemes promote and protect the interests of their members 55
4.4 What are Social Security Schemes Doing to Sensitise People on the Functions of Social Security in Tanzania 60
4.5 Discussions of Findings Related to Each Scheme’ Competitiveness 62
4.5.1 The Social Security Schemes Current Profiles in a Nutshell 62
4.5.2 Public Service Pension Fund 64
4.5.2.1 The Legal Framework Governing the Scheme 64
4.5.2.2 Operations 66
4.5.2.3 Promotion and Protection of Members Interests 71
4.5.2.4 Sensitisation Activities 72
4.5.3 Parastatal Pension Fund 73
4.5.3.1 The legal framework Governing the Scheme 73
4.5.3.3 Promotion and Protection of Members Interests 79
4.5.3.4 Sensitisation Activities 81
4.5.4 National Social Security Fund 82
4.5.4.1 The legal framework Governing the Scheme 82
4.5.4.2 Operations 85
4.5.4.3 Promotion and Protection of Members Interests 89
4.5.4.4 Sensitisation Activities 91
4.5.5 Government Employees Pension Fund 92
4.5.5.1 The legal Framework Governing the Scheme 92
4.5.5.2 Operations 95
4.5.5.4 Sensitisation Activities 100
4.5.6 Local Authorities Pensions Fund 101
4.5.6.1 The Legal Framework Governing the Scheme 101
4.5.6.2 Operations 103
4.5.6.3 Promotion and Protection of Members Interests 106
4.5.6.4 Sensitisation Activities 108
4.5.7 National Health Insurance Fund 108
4.5.7.1 The Legal Framework Governing the Scheme 108
4.5.7.2 Operations 111
4.5.7.3 Promotion and Protection of Members Interest 115
4.5.7.4 Sensitisation Activities 117
4.6 Discussion of Findings 117
4.6.1 The Best Legal Framework for Governing Social Security Schemes in Tanzania 117
4.6.2 The operation of the six schemes in Tanzania Mainland 118
4.6.3 Schemes’ Promotion and Protection of Members’ Interests 120
4.6.4 Sensitisation Activities by Social Security Schemes 121
CHAPTER FIVE 122
5.0 CONCLUSION AND RECOMMENDATIONS 122
5.1 Summary of Findings 122
5.1.1 What is the Best Legal Framework Established For Governing Social Security Schemes in Tanzania 122
5.1.2 How do the Six Social Security Schemes Operate in Tanzania Mainland? 123
5.1.3 How do These Schemes Promote and Protect the Interests of their Members 124
5.1.4 What are Social Security Schemes Doing to Sensitise their Beneficiaries on the Functions of Social Security in Tanzania 124
5.2 Implications of the Results 125
5.3 Conclusion 125
5.4 Recommendations 127
5.5 Limitation of the Study 128
5.6 Areas for Further Research 129
REFERENCES 130
APPENDICES 132
LIST OF TABLES
Table 3.1: Respondents Consulted by the Researcher 33
Table 4.3: Opinion of Employers with Regard to Constitutionality of Schemes 42
Table 4.4: Summary of Benefits Provided by Schemes 43
Table 4.5: Respondents Understanding of the Benefits Available in their Schemes 45
Table 4.6: Available Mechanisms and Remedies for Redressing Members 46
Table 4.7: Members Understanding on Appeal Mechanisms in their Schemes 47
Table 4.8: Opinion of Beneficiaries with Regard to Schemes Customer Care 50
Table 4.9: Opinions with Regard to Having Decentralised Offices 51
Table 4.10: Respondents Comments on Effectiveness of Social Security Schemes’ Procedures and Processes 52
Table 4.11: The Distribution of Beneficiaries Choice Regarding the Benefits 56
Table 4.12: Preferences of a Social Security by Employees Members of the Schemes 57
Table 4.13: Pensions Amount from the Existing Social Security Schemes (Retiring at the Salary of TZS 900,000/- Same Service Period) 58
Table 4.14: Awareness Regarding Social Security Schemes Investments by 59
Table 4.15: Scheme Members’ Awareness on Sensitation Activities 61
Table 4.16: Profile of Social Security Institutions in Tanzania Mainland 63
Table 4.17: PSPF Employees and Employers Opinion with Regard to the Scheme’s Constitutionality 65
Table 4.18: Opinion of PSPF Beneficiaries Regarding Customer Care 66
Table 4.20: PSPF Members’ Comments on Effectiveness of Procedures and Processes 69
Table 4.21: Awareness of PSPF Beneficiaries on their Fund’s Investments 72
Table 4.22: Members and Employers Opinion with Regard to PPF Constitutionality 75
Table 4.27: Members and Employers Opinion with Regard to NSSF Constitutionality 84
Table 4.23: Opinion of PPF Beneficiaries with Regard to Customer Care 76
Table 4.24: Opinions with Regard to PPF having Decentralised Offices 77
Table 4.25: PPF Members’ Comments on Effectiveness of Social Security schemes’ Procedures and Processes 78
Table 4.26: Awareness with Regard to PPF’s Investments by Beneficiaries 80
Table 4.28: Opinion of NSSF Beneficiaries with Regard to Customer Care 86
Table 4.29: NSSF members’ Comments on Effectiveness of Social Security Schemes’ Procedures and Processes 88
Table 4.30: Awareness Regarding to NSSF’s Investments by Beneficiaries 90
Table 4.31: Members and Employers Opinion with Regard to GEPF Constitutionality 94
Table 4.32: Opinion of GEPF Beneficiaries with Regard to Customer Care 95
Table 4.33: Opinions with Regard to GEPF having Decentralised Offices 96
Table 4.34: GEPF Members’ Comments on Effectiveness of Social security Schemes’ Procedures and Processes 98
Table 4.35: Awareness Regarding GEPF’s Investments by Beneficiaries 99
Table 4.36: Members and Employers Opinion with Regard to LAPF Constitutionality 102
Table 4.37: Opinion of LAPF Beneficiaries with Regard to Customer Care 104
Table 4.38: Opinions with Regard to LAPF Having Decentralised Offices 104
Table 4.39: LAPF Members’ Comments on Effectiveness of Scheme’s Procedures and Processes 105
Table 4.40: Awareness Regarding LAPF’s Investments by Beneficiaries 107
Table 4.41: Members and Employers Opinion with Regard to NHIF Constitutionality 110
Table 4.42: Opinion of NHIF Beneficiaries with Regard to Customer Care 112
Table 4.43: Opinions with Regard to NHIF having Decentralised Offices 113
Table 4.44: NHIF Members’ Comments on Effectiveness of Scheme’s Procedures and Processes 114
Table 4.45: Awareness with Regard to NHIF’s Investments by Beneficiaries 116
LIST OF ABREVIATIONS
AIME Average Indexed Monthly Earnings
Cap. Chapter
CSRS Civil Service Retirement System
DB Defined Benefit to
DC Defined Contribution
DI Disability Insurance
DWP Department of Work and Pensions
ESOP Employee Stock Ownership Plan
FERS Federal Employees Retirement System
FRA Full Retirement Age
GEPF Government Employees Provident Fund
HI Hospital Insurance
HMRC Her Majesty Revenue and Customs Office
ICT Information and Communication Technology
ILO International Labour Organisation
IRA Individual Retirement Accounts
KNHIF Kenya National Health Insurance Fund
KNSSF Kenya National Social Security Fund
LAN Local Network Area
LAPF Local Authorities Provident Fund
MMA Medicare Prescription Drug, Improvement, and Modernization
Act
NGO Non Governmental Organisations
NHIF National Health Insurance Fund
NHS National Health Services
NIS National Insurance Scheme
NSSF National Social Security Fund
OAS Old-Age and Survivor’s Insurance
OASDI Old Age, Survivor’s and Disability Insurance
PAIG Pay-As-You-Go
PIA Primary Insurance Amount
PPF Parastal Pension Fund
PSPF Public Service Pensions Fund
PSPS Public Service Pension Scheme
SSRA Social Security Regulatory Authority
SSRAA Social Security Regulatory Authority Act
SSI Supplemental Security Income
UNSSF Uganda National Social Security Fund
USA United States of America
US$ United States Dollar
URTC United Republic of Tanzania Constitution
138
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background
Historically, there were several precursors to social security program in Europe and elsewhere. Pensions for older people were promoted by Thomas Paine, the heralded political pamphleteer of the American Revolution, more than 200 years ago (Paine, 1795). In his 1795 Treatise on Agrarian Justice, Paine advocated for a 10 percent inheritance tax on all bequeathed property that would be used to provide every person of age of 50 years and older with a retirement income of 10 pounds, annually (Paine, 1795). This proposal went nowhere.
But, nearly a century later, in 1889, Germany’s Chancellor, Otto von Bismarck implemented a system making his country the first in the world to adopt a national old-age insurance program, offering government-sponsored annual retirement income at the age of 70 years (The policy was based on Bismarck’s principle that: “Those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.” England followed with its Old Age Pension Act of 1908, which also initiated yearly retirement incomes for those of age of 70 years and older (Brand, 2007).
America’s Social Security program took its lead from these and other European predecessors (34 countries had some type of social security system by 1935), but it also was built upon smaller pension programs already set up in this country (Liu, 2001). Along with limited military pensions for disabled civil war veterans (including their wives and dependents), most notable among these was the Pennsylvania Railroad Pension, begun in 1890, and widely considered the first modern pension system in the United States (Liu, 2001). The largest private employer in the nation at the time, the Pennsylvania Railroad created a benefit plan “equal to one percent of the average wage in the last ten years of employment times the number of years worked,” with a mandatory retirement age of 70 years. This pension system, like those followed it, was launched not only for altruistic reasons, but also to cultivate worker loyalty, lessen the likelihood of strikes and to decrease turnover of experienced employees (Liu, 2001).