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The Ministry of Labor and Social Affairs (MoLSA) disclosed that two agencies under its supervision have collected close to two billion birr in pension funds, both from government employees and private institutions, in the past five months.
The Social Security Agency for Government Employees (SSAGE) collected 1.5 billion birr. Out of this total amount, studies to invest over 1.1 billion birr in productive sectors of the economy have been completed, according to a report presented to the House of People’s Representatives on Thursday, January 3. Out of the total planned investment, 566 million birr has already been invested. In return the investment made in the past five months has earned it 38.9 million birr in gross income. It has 68,389 persons collecting retirement benefits. Meanwhile, the newly-established agency, which collects pension funds from employees of private organizations, Private Organization’s Employee Social Security Agency (POESA), also managed to collect 484 million birr during the same period, surpassing its plan to gather 416.7 million birr.
POESA registered 117,947 employees working in private organizations. Meanwhile, it had allotted 1.4 billion birr for investment from its coffers and earned six million birr in profits from unspecified investment venture.
POESA collected more than 800 million birr in the first year of its operation, according to the Ethiopian Revenue and Custom Authority (ERCA). ERCA is the body delegated by the pension fund to collect private organization pension contribution on its behalf.
The permanent employees of private organizations have started contributing a percentage of their salary to POESA like public employees since July 08, 2011. Employees’ rights to pensions are guaranteed, if employees move from one institution to another, as long as the institutions are covered by pension schemes.
Private companies which have permanent employees settle pension contribution payments through the revenue collecting office of the government. It was planned that employees will be provided with a social security number if they do not have tax payer identification number (TIN). As of now however, no social security number is assigned to employees. For those employees who have a TIN, it serves in lieu of social security number.
The pension fund does not cover private employees in the private sector working on a contract basis. Private firms, which have permanent employees but did not have a provident fund scheme prior to the enactment of the proclamation, are forced to join the pension fund scheme. However, organizations that had provident fund programs prior to the establishment of the fund can join it if they wish.
According to the Private Organization Employees Pension Proclamation No. 715/2011 employees of private organizations shall receive retirement pension for life when they serve at least 10 years, upon attaining retirement age of 60 years. Those who serve for at least 20 years and separate from service by voluntary resignation or for any other causes, excluding special cases cited on the proclamation, have the right to receiving retirement pension for life upon attaining retirement age.
Both the employee and employer are expected to contribute in a progressive manner. At the start of the pension plan on July 08, 2011, the employee was expected to contribute five percent in the first year of operation. In the second year, six percent as of July 07, 2012 and seven percent in the final year, while the employer is subjected to contribute seven percent in the first year of operation, eight in the second, nine in the third and thereon 11 percent, which is the final limit. The pension contribution from both parties adds up to 18 percent of the gross salary of the employee at the final year.