History of the Local Authorities Pensions Fund (LAPF)
The Local Authorities Pensions Fund (LAPF) was established by The LAPF Act No 9 of 2006 which repealed the Local Authorities Provident Fund Act No 6 of 2000. The difference between the former Local Authorities Provident Fund (LAPF) and The Local Authorities Pension Fund (LAPF) is the way benefits are determined, while in the former provident Scheme the Fund was mandated to Defined Contribution (DC) plan, in contrary, the existing Pension Scheme, the Fund is mandated to Defined Benefit (DB) plan. The plan which bases its calculation on the contribution level of the insured person and investment portfolio
With Defined Benefit (DB) scheme, the contributor retires above the poverty line. LAPF has now been transformed into a DB scheme and from early 2007. It has already started paying pension to its first group of qualifying pensioners who were employed by the Local Government Authorities.
Where we are now
The growth of the Fund in terms of members to 65,000 in 2006 stems from the fact that majority of LAPF members come from Local Authorities, LAPF itself, Government Loans Board and Institutions owned by the Local Authorities. All employers are mandated by LAPF Act No. 9 of 2006 to register their employees with the Fund. Both employers and employees are required to contribute to the Fund on a monthly basis, which then accumulates to become the workers’ retirement benefits. From 2000, this joint contribution rate stands at 20% of an employee’s salary, of which the employer’s share is 15% and 5% is contributed by the employee. However, this rate is subject to change basing on the Actuarial valuation of the Fund.
Where we are going
A far- reaching reform of LAPF is to provide a DB scheme. A DB scheme aims at ensuring that the contributor retires above the poverty line. In October 2006, the Parliament of the United Republic of Tanzania passed the Local Authorities Pensions Fund Bill which will see the conversion of the current Local Authorities Provident Fund to The Local Authorities Pensions Fund. The Bill will enable LAPF to pay pension benefits in January 2007.
LAPF has now been transformed into a DB scheme and come January 2006 it will start paying pension to its 600 qualifying pensioners who were employed by the Local Government Authorities.