MBABANE: “Forcing civil servants to be part of the proposed Eswatini National Pension Fund(ENPF) will undermine Government’s “defined benefit” agreement with civil servants and subsequently collapse the Public Service Pension Fund(PSPF)”.
This was the view of eSwatini’s internationally recognized Economic expert who spoke to Swaziland News editor Zweli Martin Dlamini this week, the expert said the Eswatini National Pension Fund Bill in its current form, “remains a threat to the existence or sustainability” of the Public Service Pension Fund.
“You need to understand that, there are two(2) types of pension funds and the Government through the PSPF is providing civil servants a “defined benefit” pension. Now what is a defined benefit?. A defined benefit is determined according to a formula that is agreed upon, the Government-PSPF defined benefit was agreed upon and subsequently included in the law. It was agreed that a civil servant’s pension benefit will be determined by the formula and, based on the salary of that particular civil servant at the time of retirement. So a defined benefit has nothing to do with how much you have saved but it’s a guaranteed pension”, he said.
When describing the “defined contribution” currently used by the Eswatini National Provident Fund(ENPF), the Economic expert said, it’s more like savings and you receive your pension based on the amount you have saved at the time of retirement.
“Now let’s analyze the different between a “defined benefit” pension and a “defined contribution”. A defined contribution arrangement is about how much you have put-in. It’s more like the money you are saving in a bank and you are paid based on the amount you have saved at the time of retirement yet currently, the Government through the PSPF is paying based on the salary you are earning regardless of the amount you contributed. The ENPF as it is now, you are getting according to your contribution including the amount contributed by the employer. Now, instead of paying the lump-sum, the Provident Fund wants to pay members a pension. But what is not clear is that, are they proposing to pay on a “defined benefit” or a “defined contribution?”. In my view, the proposed Eswatini National Pension Fund cannot be sustainable if it can operate like the PSPF and pay on a defined benefit nationally. But in the event it’s a defined benefit with civil servants included again, that would be a violation of the agreement the civil servants have with their employer-Government, because the PSPF is paying civil servants on a “defined benefit” knowing that, there’s a guaranteed sustainability with the contribution from their members who are civil servants. So once you reduce the civil servants contribution to the PSPF by forcing them to contribute to the proposed ENPF, that would definitely collapse the Public Service Pension Fund because, paying retiring civil servants based on the defined benefit, means the contribution from Government must not be tempered with. Government by law, pledged a certain percentage as a contribution to the PSPF and if this amount is reduced, the whole PSPF will collapse”, said the Economic expert.
The expert said, the Eswatini National Pension Fund as proposed by the Provident Fund could still be sustainable without involving the civil servants because, it might pay members nationally, based on a “defined contribution” not a defined benefit.
“The PSPF is doing well and paying civil servants their pension, you cannot therefore say, you want to create a new National Pension Fund while collapsing the existing PSPF”, he said.
The sentiments of the internationally recognized Economic expert with vast experience in revenue or tax administration come amid serious debate regarding the conversion of the Eswatini National Provident Fund into a National Pension Fund.
The Economic expert who asked not to be named “as he works for an international institution” was assisting the editor to fully understand the ENPF conversion and how it might collapse the PSPF if the Eswatini National Pension Fund Bill could be passed by Parliament in its current form.
The PSPF Offices.