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90,000 Pensioners to Lose Their Benefits

The Times of Zambia (Ndola) 

Zambia

July 20, 2004






The Public Service Pensions Fund (PSPF) is insolvent after incurring a deficit of K1 trillion, throwing over 90,000 pensioners in a lurch as the fund has no money to settle their benefits from next year onwards. 

The situation is further worsened by revelations that over K20 billion released by the Ministry of Finance through the Public Service Management Division (PSMD) to the pension fund cannot be accounted for. 

This came to light when PSPF secretary and chief executive Thomas Phiri and PSMD Permanent Secretary Ignatius Kashoka appeared separately before the Public Accounts Committee at Parliament yesterday. 

Mr Phiri said the fund had a huge deficit of K3 trillion because of excessive borrowing by Government when the pensions division was still under the Ministry of Finance prior to 1999. 

He said Government borrowed US$182 million under unfair terms where the grace and repayment period were too generous and interest rates too low such that only K1 billion had been repaid so far. Worse still, there was no provision in the agreement to review the loan terms. 

The fund has been further hit by a new policy under the new Public Service Pensions Act which directs all new civil servants to subscribe to the National Pensions Authority (NAPSA), robbing the pension fund of fresh capital injection. 

He said it was projected that PSPF would be unable to sustain meagre monthly pension in the next two years and there was no guarantee that the current 89,000 serving members would receive their pension benefits when they were due. 

Mr Phiri said from next year it would be impossible to honour any pension contributions. 

"The current Act does not provide for the review of pension benefits and the fund has no capacity to effect an upward review in tandem with inflation due to the K1 trillion actuarial deficit as stated in the actuarial report of December 2000," he said. 

Mr Phiri appeared before the committee chaired by Bangweulu MP Joseph Kasongo (Independent) in connection with the auditor general's report reviewing the fund's operations from 1997 to 2002. 

He said some of the affected pensioners included permanent secretaries who were recently retired in national interest following disciplinary action by the executive. 

Mr Phiri criticised the practice of retiring permanent secretaries in national interest saying it would cost the Government more money than when the affected officers were allowed to retire normally upon attaining 55 years. 

Currently, the Fund owes retirees K17 billion but is itself owed K307 billion by Government in unremitted pension contributions. 

He said the Fund was undergoing a complete overhaul and had set out in its 2004-2008 strategic plan a debt swap with Government using assets and equity in Zambia National Commercial Bank (ZNCB), Zambia Telecommunications Company (ZAMTEL), BOC Gases and Indo Zambia Bank. 

Mr Phiri said the valuation of assets was still being carried out and it was unclear when the exercise would end but Mr Kasongo cautioned him over the seemingly casual approach, reminding him that he too was a potential pensioner who could lose his job anytime. 

Asked about the missing K20 billion, Mr Phiri maintained that the Fund only received K66.6 billion from the PSMD as indicated in the auditor general's report but was quick to state that previously record keeping was very poor. 

Earlier, Mr Kashoka said the division released a total of K87.2 billion to the Fundcontrary to the claims by the Fund that only K66.6 billion was received in the auditor general's report. 

He said the Fund should explain what happened to the difference of K20 billion because he had documentary evidence which he submitted to the committee to show that the money was handed over to PSPF. 

He equally condemned the policy to restrict new entrants in the civil service to NAPSA and suggested that the measure be reviewed to make NAPSA membership optional. 


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