Pension Fund Returns in Tanzania: Are Retirees Getting Enough?

Pension funds in Tanzania are under increasing scrutiny as workers and retirees seek assurance that their contributions are growing sufficiently to support long-term financial security. Today, the country’s social security system is dominated by two major pension institutions, the National Social Security Fund (NSSF) and the Public Service Social Security Fund (PSSSF), following the consolidation of multiple public schemes in recent years.

Before 2018, Tanzania’s pension landscape included five separate funds: the National Social Security Fund (NSSF), Public Service Pension Fund (PSPF), Local Authorities Pension Fund (LAPF), Government Employees Provident Fund (GEPF) and the Parastatal Pensions Fund (PPF). These were merged under the Public Service Social Security Act of 2018, creating the PSSSF to serve public sector employees while NSSF continued to cover private and informal sector contributors.

Returns: Stability Above All

Both NSSF and PSSSF prioritize capital protection and steady returns, with a large share of assets invested in government securities, a safe but generally low-yield asset class. The PSSSF recently reported a Tsh 1.3 trillion profit from government bonds and securities for the 2024/25 financial year, reflecting relatively strong performance in risk-free instruments.

Similarly, NSSF’s asset base has grown substantially; reports show assets increasing from about Tsh 4.83 trillion in 2021 to over Tsh 8 trillion by early 2024, representing nearly 66% growth over three years.

While these figures demonstrate growth in asset size and profits, industry analysts note that high exposure to fixed‑income instruments may limit real returns, especially in periods of inflation. Real returns returns after adjusting for inflation, are a more accurate measure of how much contributors actually gain in purchasing power over time.

Challenges Weigh on Performance

One of the primary challenges to securing higher pension returns is limited investment diversification. With about 84% of PSSSF investments tied to government bonds, there is limited exposure to potentially higher-yielding assets such as equities, real estate, or private sector infrastructure projects.

This conservative approach protects pensions from market volatility but may not keep pace with inflation and rising living costs, raising concerns about the long-term adequacy of retirement income.

Furthermore, the government itself owes significant debt to pension funds, which affects liquidity and performance. Recent audits revealed outstanding loans totalling Tsh 3.57 trillion, with substantial balances inherited from the old public schemes prior to the merger.

Governance and Sustainability Concerns

Tanzania’s Controller and Auditor General (CAG) has flagged sustainability concerns linked to these outstanding government debts, urging stronger internal controls and follow-up mechanisms before and after pension funds extend loans. This highlights the tension between pension funds’ dual roles as secure retirement vehicles and sources of long-term capital for national development.

Opportunities for Improvement

Experts suggest that improving returns will require measured steps to diversify portfolios. This could mean increased investment in infrastructure projects, real estate that sustainably generates rental income, and selective equity exposure. High diversification could boost returns without undue risk if supported by strong governance and robust actuarial analysis.

Both NSSF and PSSSF have strategic plans that aim to broaden investment horizons while maintaining prudence. Enhanced digitalization at NSSF, now reporting around 82% automation in operations for member registration and benefit processing, is expected to improve efficiency and attract broader participation, including from informal workers.

Conclusion: Balance Between Safety and Growth

Tanzania’s pension funds have delivered financial stability and growth in asset base, but there is growing public interest in whether these returns are sufficient for tomorrow’s retirees. With conservative investment dominating current portfolios, real returns may lag inflation, making thoughtful diversification and sustained governance reforms essential.

As Tanzania continues to deepen pension reforms and align investments with economic development goals, striking the right balance between risk and return will determine whether today’s workers retire with financial security in an evolving economy.