The pensions reform Bill is overdue

newvision Uganda
THE Retirement Benefits Sector Liberalisation Bill 2011 has been brought before parliament. The main thrust of the Bill is to open the pensions sector beyond the National Social Security Fund and provide for civil servants to contribute towards their own pension.

As it stands now civil servants’ pensions are paid from the treasury while the private sector workers are mandated to contribute 5% of their income to NSSF monthly with employers contributing 10%. The new Bill also proposes that the age at which individuals can access their savings be lowered to 45 years from the current 55 years.

To begin with this law is long overdue. Uganda has a low savings culture as measured by bank deposits.

By liberalising the sector, private sector players will grow the sector and also compete for the more than sh15b NSSF collects monthly. This competition will force the industry to be more innovative, offer new products, like health, education insurance and mortgage since they will be attached to our pension contributions.

Secondly, the deployment of these collections to support commerce and industry will be more efficient, if it guarantees savers better returns. This means pension managers would have to invest in profitable projects locally. Elsewhere in the world long term funds are critical to the construction of transport, energy and telecommunications infrastructure and provision of housing.

The pension sector as a vehicle for the mobilisation of long term funds is one of the missing links that is holding back our growth and development. All this said, MPs debating the Bill should keep in mind issues of regulation — though this will be handled in another Bill. MPs should also ensure that our savings are employed first and foremost for the development of the country.