Transcript Role of Social Security Adequate Benefits--

Improving Adequacy of Benefits
The Role of Social Security
Presented during Regional Social Security Forum for Africa, Arusha -Tanzania, 05-07 December 2011
Irene Isaka
Director General- SSRA
Social Security
The ILO has traditionally defined social security as
a set of public measures that address three types
of contingencies:
1. The need of medical care,
2. The loss or substantial reduction of earnings
due to different lifecycle events, sickness,
maternity, employment injury, old age,
invalidity, death of breadwinner or
unemployment,
3. The cost associated with raising children
The Right to Social Security …
• Article 22 of the
Universal Declaration
of Human Rights
states: “Everyone, as a
member of society, has
the right to social
security”
• United Republic of
Tanzania Constitution
• Article 9, 11, and
general article 29
provides the basis
for the realisation of
Social Protection as
Human Right.
• At the ILO Conference last
June, “the ISSA expressed
its full support on social
protection floor initiative of
the ILO, which calls on
governments to provide
basic social protection
guarantees for the whole
population and at the same
time , to promote higher
levels of income security
and health protection
through contributory
coverage” by Errol Frank
Stoove’ – President ISSA -
Guiding principles
• Equality national and
non nationals men&
women
• Solidarity –individual
right to social security
protection for all human
beings
• Compulsory
affiliation(compulsory vs
voluntary coverage)
• General responsibility of
the state derived from
human nature of ss
&democratic
management-financing
through contributions
Solidarity
• Applies to financing
techniques irrespective
of the approach (full,
partial, pay-as-you go,
taxation or combination
of those).
• Collective financing is
indispensable to ensure
that the most vulnerable
categories enjoy real
access to social
protection they require
Policy framework for adequate
social security for all
• Universality – formal and informal sector
should be provided with an opportunity to
participate in social security schemes
• Progressiveness - provision of basic benefit
package should progressively be improved
as national resources allows
• Pluralism
• Outcome focus
Financing Mode;
Financing principles with institutional implications
Delivery
mechanisms
General
government
Public entity
Regulated
Private agent
Tier/pillar 1
Tier/pillar 2
Tier/pillar 3
High
General
tax
Vertical
Crosssubsidy
DECREASING
willingness to pay
INCREASING willingness to pay
Earmarked
tax
Mandatory
insurance
User fees
Private
insurance
Low
Low
High
Benefit Principle
Social security benefits may be
considered adequate if:
• they help to achieve expected social policy outcomes (e.g. meeting
the needs of people who have to cope with life’s essential risks)
listed in slide2
• the relationship between benefit levels and taxes and/or
contributions paid during a working life is considered to be “fair”
(social adequacy);
• they work in synergy with employment instruments and fiscal and
other economic policies, and do not result in unwanted economic
consequences (economic adequacy).
• Should be sustainable and robust enough to withstand shocks. It
Must offer beneficiaries security of adequacy even during periods of
economic and financial fluctuations
Adequacy of social security benefits is
linked to the quality of public services
Comprehensiveness & adequacy
• Collective “actuarial equivalence” of contributions
and benefit levels:
• minimum benefit replacement rate
• minimum rate of return in case of savings
schemes,
• must adequately reflect the overall level of
the contributions , such minimum levels
should be effectively guaranteed, preferably
by the State.
• Timely payments of benefits
Comprehensiveness & adequacy
• Sound financing: financing method that ensures
long-term financial sustainability,
• maintenance of adequate fiscal space for the entire
national social security systems
• Responsibility for governance: The Government as
the ultimate guarantor of social security rights
• contributors and beneficiaries participate in the
governance of schemes and programmes.
Multi-dimensional impact of social security benefits adequacy
Poverty
Reduction
Human
Capital
Economic
reform
Social
security
adequacy
Social
Cohesion
Economic
Resilience
Livelihood
Risk
Management
Benefits adequacy
•shares the benefits
of economic growth.
•Makes any economic
reform programme
more pro-poor.
•Increases the
likelihood of success
of the reforms.
•Improve nutrition
health, and education
outcomes.
•Protects people from
shocks and directly
supports well-being.
•Protects assets.
•Enables economy to
better with stand
shocks.
•Provide economic
automatic stabilizer.
•Strengthens bond
between state and
people.
Situation in Africa
• There are 55 countries in Africa with a combined population
• of over 1 billion people, with over 850 million living in sub-Saharan
Africa.
• In 2011, the global population reached 7 billion and will reach 10 billion
by 2083. Much of this future increase will occur in 58 high-fertility
countries, 39 of which are in Africa.
• Africa’s population represents 15 per cent of the world’s current
population; by 2050, it will represent 24 per cent.
• In 2011, 40 per cent of Africa’s population lives in urban areas, an
increase of over 110 per cent since 1990.
• The number of Africans aged 60 or older is estimated to be around 56
million, which equates to around 6 per cent of the total population.
• Approximately 50 per cent of Africa’s population is younger than age 20.
• In low-income African countries, social security coverage ranges from 5
to 10 per cent of the population.
• Source :ISSA policy Highlights 21
Situation in Africa
• Since mid -1990, many sub-Saharan African (SSA) countries have
experienced a marked acceleration in economic growth. Whereas
region-wide real GDP growth averaged some 2.25 percent between
1980 and 1995, since 1995 growth has averaged more than 5 percent
and a higher still 5.5 percent from 2000 to 2010
• Progress on poverty reduction, however, looks to have been much
limited. Region-wide estimates, which are available only through 2005,
show that the proportion of people living below the poverty line
(US$1.25 a day) declined only modestly from 59 percent in 1996 to 51
in 2005. And when one looks at the link between per capita growth
and poverty reduction in a sample of SSA countries that incudes more
recent data points, the relationship is a weak one.
• Source :IMF World Economic and Financial Survey Oct 2011
…Level of Resources dedicated to Social security show there is catching up to
do on mobilizing resources and financing..
Total public social protection in percentage of GDP - regional estimates
Weighted by population
Total
5.7
Sub-Saharan Africa
2.8
Asia and the Pacific
2.7
2.5
3.6
Middle East
1.7
5.3
Public social security expenditure
(excluding health)
5.3
Public health expenditure
7.6
Latin America and the…
CIS
8.4
2.2
7.1
9.8
10.2
3.1
9.9
North Africa
3.6
11.0
North America
2.5
9.0
Central and Eastern Europe
13.5
13.6
7.0
16.0
14.1
Western Europe
4.8
18.9
18.0
0
Luis Frota – Presentation; Nov 2011
5
10
7.1
15
Percentage of GDP
20
25.1
25
30
Efforts made in Africa
• Efforts made include;
• Initiatives made by NHIF/CHFS, NSSF on health insurance and
GEPF Voluntary saving Retirement scheme
• Rwanda on health and informal sector
• SNIIT informal in Ghana
• Gabon NSSF coverage on health(prevention of occupational
diseases)
• Mauritania and Mali –prevention measure in health care prov.
• Mauritius (Transition unemployment Benefits)
• Kenya social protection programs with as support from DFID
• Senegal – social protection initiative
• Morocco- National Sickness Insurance Agency(prevention
program on long-term illness)
Current situation in Tanzania
• Levels of contributions and benefits do not match across the
schemes
Sector
Scheme
Contribution
Benefit factor/formula
Civil Service/Government
employees
PSPF/LAPF
20% of
members salary
25%
Accrual rate 2.2% without floor/ceiling
GEPF – DC
Parastatal/private
PPF
20% of
members salary
Accrual rate 2.0% with floor/ceiling
Private/Parastatal
NSSF
20% of
members salary
Accrual rate 2% for the first 15 years and
1.5% for every additional 12 months with
floor and ceilings
Health Mandatory mainly
Civil Servant
NHIF
6% of the salary
All illness which are treated in the hospitals
registered and accredited by the Ministry
and the Fund
Health Voluntary
CHFs – district
funds
Flat amount
Limited within District administration.
Tanzania dedicates a limited
% of GDP to social assistance
4.00%
3.50%
3.50%
3.00%
2.50%
1.96%
2.00%
1.60%
1.50%
1.21%
1.00%
0.86%
0.43%
0.40%
0.50%
0.17%
0.00%
Botswana
South Africa
Kenya
Tanzania
Ethiopia
Malawi
Social protection programs (social assistance) % GDP
Uganda
Zambia
Main Issues and Challenges
• Narrow coverage The existing SSS cover less than a
million people out 41.89 million Tanzanians i.e., The
covered population represent 6.5% of the effective
labour force estimated at 20.94 million people
• Fragmented Legal and Regulatory framework
• sustainability of current mandatory social security
schemes
• Different benefits packages although CR = 20%
• Lack of indexation
• Limited areas of investments
• Limited Fiscal Space for Social Protection program.
• Low levels of awareness by members of the public on
social security issues
• Large informal sector – unpredictable incomes,
unorganized, informal saving mechanisms
CHALLENGES, LIMITED COVERAGE
Informal Sector
93.5% of Workforce
Formal Sector
6.5% of workforce
Private schemes
which are not
community based.
The coverage is
insignificant
The selfemployed in
agriculture and
elsewhere
account for
about 93.5%
Public-sector and other
formal-sector
employees account for
about 6.5% of total
employment
Public mandatory
social security/
protection
arrangements.
(Institutions are NSSF,
PPF, LAPF, PSPF,
GEPF, GPS (Treasury
department), NHIF and
Employment contract
incentives)
To address challenges SSRA
has taken following steps…
• Review of Legal and
regulatory framework
• Development of a
reform Program
• Comprehensive
Actuarial Valuation
• Comprehensive
Portfolio review
• Preparation of
regulations
Vision
“A sustainable social
security system that
contributes to economic
growth and prosperity
for all Tanzanians
100 %
Full
benefit
cov erage
Interm ediate
benefit
cov erage
Population coverage by groups
Non employed
Elderly
Non employed
Children
Non employed
Working
age
Informal
economy
Private
employees
B asic benefit
cov erage
Civil servant
public
employees
Benefit coverage
Improving adequacy & extending coverage in a contest of limited
resources In Practical terms SSRA is focusing extension of social
security system in two dimensions, so as Tanzania can realise
both benefit adequacy in amounts and coverage of needs, and on
population covered to the extent of full realisation of
international and national guaranteed rights
Long term Perspective
Reforms are divided into 3 phases;
3. Growth &
Prosperity
2. Stabilisation
1. Extension &
Harmonisation
Challenges facing BA ;
Partnership needed with other
stakeholders
Challenges Facing Benefit
Adequacy
• Funding
•
Assets / liabilities mismatch
•
Global Financial Crisis affected both adequacy &
affordability
Traditional investments-alternative investments shift
(Diversification)
Not only the funding but Adequacy
•
•
•
•
•
and focus on outcomes is an
Low coverage
essential part of delivering efficient/
effective Social security
DB-DC shift
Compliance issues, Long TAT
Disconnect between recent growth and poverty
outcomes in sub- Saharan Africa
General responsibilities
Social Security
Institutions
• Management and Product /
Service quality assurance
• Efficient IT Data Bases and
Information flow processes
• Fraud control and client
orientation; effective controls
• Internal performance based
HRD for appropriate incentives
• Ensure Density of contribution,
(compliance and Return on
Investment)
• Good
governance
&
adminstrative excellence
• Financial literacy & awareness
Partnership needed
Donors and development
partners
•
•
•
•
•
Promotion of international
labour standards
Knowledge sharing Ensuring
permanent knowledge generation
and sharing with all national
constituents
Technical Co-operation and
advice Diagnostic assessment of
national policies and higher level
social security policies
Financing SPF
Capacity building Reinforcement
of national capacity from the high
level managers to the
professionals in the key
administrative and managerial
areas and tripartite members of
governing bodies
General Responsibility of
the State:
• Effective competition,
• cost containment,
• investment in real
economy
• Financing
• Effective information
• Financing of and
maintenance of social
security rights
• Strengthen the value of tax
incentives for mid to low
income people; tax credits or
matching contributions
instead of tax deductions
• By Alejandro BONILLA-GARCIA
Policy Framework to Promote
Adequacy should focus on
• Extension of coverage (efforts made in Rwanda,
Ghana SNIIT informal, Kenya, TZS GEPF-VSRS,
NHIF &NSSF health insurance )
• Enhance collection of contributions (compliance)
the use of M-Money
• Risk management
• Fund management with Alternative investments
&Tax incentives to improve adequacy
• Good governance and administrative excellence
• Public awareness programs(TZ -SSW)
• Contribution rates linked to age….
Policy Questions
• What is the appropriate level of contribution
rate that matches with benefit adequacy?
• Are private pensions fulfilling their
complementary role in providing for adequate
benefits?
• How should one ensure right balance btn AB
and extension of coverage?
• How to increase effectiveness of SSI in
adequacy of benefits?
• For adequate benefits Should one maintain
quantitative investment limits or apply prudent
investor rule?
Prepared by Irene Isaka
ASANTE SANA
• Social Security Regulatory Authority
• New Bagamoyo Road
• P.O.Box 31846
• Dar-es-Salaam
• Tanzania
• Tel:+255 22 276 1683/4
• Web: www.ssra.go.tz