The Public Service Pensions Fund – PSPF has received K1.1 billion from the Ministry of finance to reduce outstanding arrears owed to pensioners and retirees.
Minister of Finance Dr. Bwalya Ngandu had late last month announced that government will release funding to reduce outstanding arrears owed to pensioners under the PSPF and retirees under the Ministry of Justice.
PSPF Chief Executive Office Patrick Bobo confirmed to the Zambian Business Times – ZBT that funds have been received and a total of 1,541 clients are expected to be cleared from this account or tranche of funds.
He added that K250 million will be allocated to 1,032 early retirement clients while another K250 million will be allocated to 509 statutory retirement clients bringing the total amount to K500 million for all 1,541 retirees and pensioners.
Bobo explained that early retirements are an obligation of government, therefore sends grants to meet lumpsum payments while statutory retirements are an obligation of the fund hence the contributions and investments returns are used to clear statutory retirements.
“So far this year K51 million was paid to retirees to clear lumpsum benefits before we received government funding. The fund pays about 60,000 pensioners and beneficiaries monthly annuity amounting to about K47 million per month using contributions and investment returns,” He added.
When asked on the remaining backlog after this tranche is cleared, Bobo disclose to ZBT that after all retirees are cleared, the fund’s backlog for early retirees is 554 amounting to K546 million while for statutory retirees is 235 amounting to K299 million.
He added that the board has allocated a further K315 million from fixed income Securities to clear more statutory retirees adding that the fund will be paid when the investment matures.
When asked about the key challenges the fund experiences which delays the paying off of retirees immediately upon retirement, Bobo explained that the formulae used to calculate benefits is among the factors as benefits tend to be more than contributions.
In addition, he said closure of the scheme to entrants has greatly affected the fund as well rules embedded in the Public Service Pensions – PSP Act, making it difficult to change Article 189 (use of final salary in computing benefits) and Article 187 of the Constitution which does not allow the fund to make any changes to the benefit formula for existing members.
The release of funds will also aid to ease market liquidity which has come under pressure from the increased arrears for local contractors and government suppliers. The Minister of Finance has also indicated that more funds will be paid out for local road contractors and government suppliers, after the verification exercise and confirmation of work done is completed.
