Banks eye pension sector profitability

A man at the NSSF headquarters. The Bill will introduce new players to compete with NSSF. FILE PHOTO. 

 

By Ismail Musa Ladu

In Summary

What the bill means
Breaking the monopoly. The Bill will break both NSSF’s and the Public Sector Pension Scheme’s monopoly from managing workers’ savings.
 
Ushering in competition. The Bill is likely to usher in a number of pension fund managers including banks and insurers, thus boosting competition and service delivery.

 

Commercial banks and insurance companies have started presenting themselves as an option to the National Social Security Fund even before the pension sector is opened up.

Commenting on the development, Mr Japheth Kato, the Capital Market Authority chief executive officer, applauded the move, saying players interested in partaking opportunities in the pension sector should not wait until the day NSSF’s monopoly is legally terminated.

The pension sector reforms will see the National Social Security Fund and the Public Sector Pension Scheme cease to monopolise savings of pensioners—with other sector partaking the opportunity in the business as well.

Taking the lead in wrestling NSSF’s monopoly once the sector is opened is Housing Finance Bank., which has since declared its intention to provide custodial services once the sector is liberalised.

“We will be competitive. Members will have control of their funds. And we guarantee the best of returns,” Mr Nicholas Okwir, the Housing Finance Bank managing director told Daily Monitor recently.

Due for passing

Sources at the ministry of Finance told Daily Monitor that efforts are underway to ensure that the Bill on liberalisation is passed before the close of year, largely explaining why commercial banks and insurance companies pondering on tapping into a liberalised pension sector.

The government has since taken a position to liberalise the pension sector after several players, including workers argued that NSSF’s monopoly had not only failed the sector’s steady growth but stifled competition, whose benefits on returns could be impressive.

Meanwhile, Mr Moses Bekabye, a member of a technical team on retirement benefit said the board of those who will regulate the sector—the Retirements Benefits Regulatory Authority has been established, pending official communication from the minister of Finance, Maria Kiwanuka.

However, analysts including JB Kakooza, are critical of the Uganda Retirement Benefits Authority Bill 2010 due to the fact that it creates a multiplicity of players along the chain, each with a fee to levy.

The Bill is also criticised for splitting NSSF so as to retain the monopoly of collecting money from contributors after which it cedes its management to ‘’Fund Managers’’.