Unliberalised pension sector costlyP

By Charles Bwogi 
NEWVISION UGANDA
Reluctance to liberalise the pensions sector has continued to exert fiscal stress on the Budget every year, industry experts have said.

There is widespread consensus among donors and stakeholders in the financial sector like insurance companies, fund managers (like Stanbic Investment Management Services and African Alliance) on the need to reform the sector to facilitate mobilisation of long-term funds.

“It is one of the few choices the Government has to embrace, to wean itself of the donor dependency syndrome,” a source in the sector said.

The source said although the sector is small, it controls about sh150b in private funds while by last year, the National Social Security Fund (NSSF) controlled over sh414b.

The 2005/06 budget report says 40% of the 2005/06 financial year Budget was financed by foreign revenues, while over 70% of the development budget was financed by donors, a scenario sector experts believe can be averted if the sector is liberalised and the scope of pension collection and saving widened.

A report from the Federation of Uganda Employers said social security savings are the largest source of long-term savings and should be given priority.

“Such savings should fund national development by providing investors with investable capital at reasonable terms,” the report said.

Despite the many promises to effect reforms in the sector, the Government is just “finalising a contributory pension scheme for all public servants, members of parliament, ministers, the military and civil servants.” “This reform will be implemented in conjunction with reforms in NSSF,” the budget report said.

At the centre of it all is the demand by savers to have NSSF allow them access their savings in installments (annuities), especially when there is need as opposed to the mandatory lumpsum payment accessed after retirement.

Other shortfalls in the social security sector are; delayed benefits, insufficient returns to contributors, inadequate value of benefits, small range of benefits, little visibility of contribution to national development, little or no provision of social aid, absence of a national social protection strategy, insufficient regulatory framework and excessive direct government control.

Last financial year’s budget report also said “measures aimed at liberalising the pension schemes will be put in place.”