Uganda companies vie for opportunity to offer pensions services

 

 

 

 

 

By FARIDAH KULABAKO Special Correspondent

Posted  Saturday, February 16  2013 at  16:16

In Summary

• A list of firms which will qualify is expected to be out by the end of the first quarter of this year.Seventy-eight companies have applied to the Uganda Retirements Benefits Regulatory Authority (URBRA) seeking approval to provide retirement benefits services in the newly liberalised industry.

A list of firms which will qualify is expected to be out by the end of the first quarter of this year.

Although the names of the applicants are still confidential, our sister publication, the Daily Monitor, has learnt that one of the applicants is the National Social Security Fund (NSSF), the national pensions fund that has monopolised the provision of pension services for decades.

Unlike NSSF, which has been handling administration, trustee, custodian and fund manager services in-house, the new Act requires that those services be outsourced.

All retirement benefit schemes operating in the country were meant to have applied for licences by
September 26, 2012, a year after the gazetting of the URBRA Act, or attract a cash penalty not exceeding Ush30 million ($18,000), or imprisonment not exceeding a year, or both. However, by that date, the authority which was to oversee the licensing had not yet been put in place.

Finance Minister Maria Kiwanuka extended the deadline for applications to December 31, 2012, following the institution of a board of directors in October. This was meant to enable the new board to enact the the necessary regulations for the industry.

Andrew Lwanga Kasirye, URBRA board chairman, said that the regulations to govern the operations of the different players in the industry are now in place.

The regulations stipulate that all schemes must have a trustee deed establishing retirement benefits scheme as an irrevocable trust to ensure continuity after the founders leave, and schemes must keep savers’ and the scheme’s money in separate accounts to ensure that savers get access to their monies when they need it.

A retirement benefits scheme receiving or which intends to receive mandatory contributions will be required to maintain a minimum deposit of not less than 1,250,000 currency points (Ush25 billion—$15 million) with the central bank or a financial institution approved by the Authority. A currency point is equivalent to Ush20,000 ($12).

Firms that provide custodial services on the other hand, must be financial institutions that must get a no-objection letter from Bank of Uganda before applying to URBRA.

The licensing of the firms is set to boost the provision of pension services in the country, effectively meaning savers will enjoy the benefits that come with competitive pension services such as schemes that offer a good service and high rate of return on investment.

Currently, NSSF, the national pensions fund, has a monopoly over the 15 per cent mandatory contributions that employers remit on behalf of their employees as savings.