By Thomas Tut Doap
Who will be eligible for Post-Service Benefits: An open statement from the Directorate of Pensions & Social Insurance, the National Ministry of Labour, Public Service & Human Resource Development
Juba, October 12, 2012 (SSNA) -- The government employees of undivided Sudan were provided a defined benefit pension benefit based on final salary and financed by employee and employer contributions. After partition of Sudan, the Government of the Republic of South Sudan (GRoSS) decided to replace the earlier scheme with a new pension scheme for its civil servants that will provide fair and adequate benefits in a financially sustainable system. The new scheme will continue to be of defined benefit type and financed by employee and employer contributions Benefits under the new scheme will be based on full career salaries updated in line with average civil Servant’s salary increases (process often termed as valorisation). Furthermore, all pensions will be enhanced annually to maintain their value in face of price inflation.
The calculation of pension benefits, under the old scheme, was centralised at the headquarters of the National Pensions Fund in Khartoum. Pension calculations based on full career salaries are different from those based on final salary. Thus, there is need for understanding on how pension calculations will be performed under the new pension scheme.
The draft bill of the Civil Service Pensions Scheme (CSPS) has special provisions to manage the transition from the old to the new scheme. In addition, the calculation of pension benefit varies under different types of terminations. It is essential that these differences be clearly understood, some of which are complex in nature.
The South Sudan Pensions Fund is the entity being created in South Sudan to administer pension funds including the Civil Service Pension Scheme. Currently draft legislation is with the National Legislative Assembly awaiting approval.
Administration and accounting of the new scheme will be through the Pension Information Management System (PIMS), a computer based management system, which will include a pension calculation module.
2. What is a pension?
A pension is a legal contract between an employer and employee: the employee agrees to defer a portion of his or her current salary to be paid a benefit in old-age when the employee can no longer work. A pension also has elements of life insurance as payments are made to surviving family members upon the death of the employee or the pensioner.
Pensions are important because they ensure guaranteed regular income when employees can no longer work, are disabled or have died. In South Sudan the government is working to create pensions for civil service, SPLA and employees who work outside the government structure for private sector employers. The first step is the creation of the South Sudan Pensions Fund to ensure a strong and well-governed structure to protect the pension system and rights of all current and future members. The second step is to establish the rules for each of the employee groups – how much employees and employer will contribute and how much to pay in pensions. The Civil Service Pension Scheme has been drafted and for other groups (such as SPLA and the police) the process is underway. All of these schemes have a single employer, the GoSS, and they represent the majority of citizens currently working in the formal sector. The employees in formal sector outside of government service are employed by a large variety of employers that operate under varying financial levels.
The informal employees are comprised of self-employed and other individuals spread throughout the country with many having irregular or even meager incomes. To design pension systems for these last two groups the government would hold a series of meetings around the country to explain options and ask for feedback from the stakeholders – employees in the formal and informal sector, private employers, self-employed persons, financial experts, financial institutions, unions and academicians. During these meetings the government would propose and discuss options including the current contributions being made by employees and their employers and discuss the structure of pensions in the future.
Most governments around the world provide a pension benefit to civil service, military and other employees – including in South Sudan and earlier in Sudan. The government, acting as the employer, makes a contribution. An additional amount is deducted from an employee’s salary. Together the employer and employee contributions form the basis of a fund from which to pay pensions.
3. What is the Civil Service Pension Scheme?
In South Sudan the civil service employees have been contributing for decades. Initially contributions were made to the National Pensions Fund in Khartoum and more recently contributions were made and held by the national and state governments of South Sudan. Soon contributions will be made to the South Sudan Pensions Fund, a centralized recordkeeping and protection system developed to collect contributions, calculate and pay pension benefits that has a strong and independent board to ensure the proper safety and the accuracy of the pension system. The Ministry of Labour worked with 13 other national ministries and independent commissions that met more than 34 times to design and develop a sustainable, equitable, strong and safe civil service pension scheme rules.
[The timeline bellow highlights the broad and open policy approach to involving many groups to create a cost-effective civil service pension system, including the support of two pension bills that are presently before the National Legislative Assembly.]
4. Who gets a pension?
Over the next several years the new South Sudan Pensions Fund will be created and expanded to calculate and pay pensions for virtually all groups of workers:
- National, State and County civil service
- SPLA and other security forces
- Police and Fire Brigade
- Private sector such as businesses and NGOs,
- Self-employed persons
- Workers in the informal economy such as cattle keepers, live stock farmers, fishermen and housekeepers and cooks
Different schemes may have separate contributions and benefit payment amounts for the various employee groups since they have varying human resource needs and financial constraints. But many in South Sudan have worked in several situations. Some examples include:
- One person worked on a farm and joined the SPLA, where he helped bring freedom and independence to South Sudan.
- Another person fought for independence for South Sudan but was never part of the regular army – he/she fought with a militia.
- One person worked at a State hospital for 10 years before leaving to assist the wounded Heroes/Heroines who were injured. S/he worked at a clinic near her/his home but has no employment records
- Three brothers worked in civil service as teachers, one left to join the SPLA for more than 12 years. Today all three are teaching again.
- Twin sisters worked in civil service for over 30 years.
- One man spent 30 years in the SPLA and lost his leg 6 years ago. He cannot walk without a crutch and cannot work.
- One woman worked in civil service but is too old today to work. If she leaves civil service her salary will not continue.
- One man worked in civil service for 10 years and then worked in Australia for 2 years; he is now back working in civil service
All of these people will have pension provisions created and provided in the near future.
As civil service is the first program to start, rules have been agreed upon and are included in the two pension laws currently under review by Parliament. Civil Service Pensions will be under the following circumstances –
- Employees whose civil service records are intact
- Survivors whose family members died while in-service and whose civil service records are intact
- Survivors whose family members died after starting their pension payments
- Employees whose civil service records are partially intact (special rules will apply for civil servants with missing records)
- Survivors whose family members died while in-service but whose civil service records are partially intact (special rules will apply for civil servants with missing records)
- Employees who worked in civil service and also served in the SPLA or CANS
- Employees who worked in civil service and also in SSCC
5. How much will the employees contribute?
Civil service employees will contribute 5% of their total salary. The government, acting as the employer, will contribute 11% of the employees’ total salaries. The old civil service pension from Khartoum had a different contribution amount. Currently, employees contribute 8% of their basic salary plus (+) Cost of Living Allowance (COLA), which gives less benefits at the end of their pensionable service. Contributions sent to the National Pension Fund were recorded and now, under a negotiated settlement with the North, payments will be transferred to the South Sudan Pensions Fund at retirement or when an employee dies. The South Sudan Pensions Fund will pay pensions to the pensioners and survivors in South Sudan regardless of whether contributions were sent to the North or have stayed in the South.
6. How much will employees and their families be paid under the Civil Service Pension Scheme?
For those retired civil servants or families of deceased civil servants who have previous pension awards, their pension payments will be resumed. Any payments that were not made will be calculated and paid as a single lump sum arrears amount.
For those whose service was terminated prior to the introduction of the new scheme, their benefits will be calculated in accordance with the new scheme provisions. All past benefits due will be paid as single sum arrears amount and future regular monthly pension payments will be started.
In the future, employees or their dependents will be paid benefits as and when service is terminated in accordance with the scheme rules.
The basic annual civil service pension entitlement is calculated as 1.5% of each salary paid to the employee, this amount is added to past accumulated entitlement. In order to maintain the financial value of past pension entitlements, they will be increased to offset the effects of inflation. When the employee retires or dies the accumulated pension will be paid to the employee or surviving family in case of death.
These benefits can be sustained with 5% mandatory employee salary deduction and 11% government-as-employer contributions.
Past service rendered before the introduction of the civil service scheme will have a special one-time calculation to determine the related past pension entitlement In order to meet the cost of financing these past pension entitlements and to pay benefits for those already retired it is critical that the following transfers be made to the South Sudan Pensions Fund:
- Amounts entitled from National Pension Fund (Republic of Sudan) under the Negotiated Settlement Agreement;
- Past contributions accumulated in Central and State bank accounts;
- Past government-as-employer contributions of Central and State governments not already made;
In case any of these transfers are not made then the gap will have to be financed from the National Budget.
7. When will the new law be passed?
This question would rightly be answered by our Honorable Members of Parliament, whose sound and jingoistic ruling is hereby solicited. However, as far as the Business culture of the August House is concerns, one would expect some delays. Sometimes, the specialized Committee of a certain discipline would like to put the Bill for public hearing, whereby a sample of public arena is invited to partake in the discussions of the Bill in question. Good news is that the August House was recalled back to ratify the recently signed 9 agreements with the Republic of the Sudan. One of those agreements was on the Post-Service Benefits, of which references were made to the South Sudan Pensions Fund, which is yet to belegalized. The Laws-makers have no choice but to, concurrently, deal with what the law dictates. Meaning to say that it’s illegal to use an entity, which does not legally exist in national and/or international Treaties, such as the ones our government is about to enter into.
8. The Framework Agreement to Facilitate Payment of Post-Service Benefits
The Framework Agreement to Facilitate Payment of Post-Service Benefits (primarily pensions) is one of nine agreements between Sudan and South Sudan and applies to Post-Service Benefits payable under the relevant pension laws of Sudan or South Sudan. It applies to civil servants and organized forces. Organized forces are defined to include armed forces, police and others. It also applies to private sector employees (previously covered by the National Social Insurance Fund).
The Framework Agreement provides that the two sides will form two bodies: a Joint Ministerial Committee on Pensions (JMCP) and a Joint Technical Committee on Pensions (JTCP). The costs of the JMCP and JTCP are to be shared by the parties.
The JMCP is to be co-chaired by the two Ministers responsible for pensions, in the case of South Sudan by the Acting Minister of Labor. The Ministries of Interior and Defense are also to be represented. It is to be established within 30 days of signing the Agreement. It must meet within 15 days of being established. It will adopt internal rules of procedure and adopt additional timeframes and completion dates to carry out the agreement. It may request the assistance of the International labor Organization (ILO) or another international body with expertise in pension issues for the JTCP.
Within 30 days of the establishment of the JMCP, the parties are to establish the JTCP. Each party shall identify five members of the JTCP. The JTCP shall meet within 15 days of its establishment. The JTCP has many tasks, including the following ones for which preparation will be needed:
1. Identify individuals eligible for benefits
2. Provide guidance for calculation of benefits
3. Resolve problems hindering calculation of benefits
4. Complete any incomplete files with 45 days
5. Facilitate transfer of funds
6. Facilitate transfer of data
7. Develop materials to inform prospective beneficiaries
8. Assist identification of assets
The JTCP has responsibility both for setting rules and procedures to make pension calculations, and in some cases may be responsible for pension calculations. Disputes will be referred to the ILO or another international institution agreed upon by the parties. The Framework Agreement provides that all relevant financial payments will be transferred to the South Sudan Pensions Fund as the entity for all groups entitled to Post-Service Benefits from Sudan. Accordingly, once the JTCP agrees on a particular claim and the amount payable, the amount shall be paid to the South Sudan Pensions Fund.
No dates of service are specified in the Framework Agreement. However, as it applies to service in the unified Sudan, service at least through 2005 will be covered. The JTCP will therefore have to be active until all persons with covered service before 2005 (and their survivors) have died. For more details of this agreement please visit the following web site: www.rssnegotiationteam.org
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