NSSF offers members 10 per cent interest

 

Youth engage police during one of the demonstrations in Kampala. Photo by Isaac Kasaman

By Nicholas Kalungi

In Summary

Social security. The Fund yesterday announced an increase in interest paid to 450,000 private sector employees up from the 6% rate it issued the previous year

Members of National Social Security Fund will receive 10 per cent interest on their savings from the last financial year, the Fund announced on Monday.

Shs202 billion will be paid out in interest to members, Shs108 billion more than was paid the year before. Finance Minister Maria Kiwanuka approved the 10 per cent interest rate, which is higher than the six per cent paid last financial year.

Announcing the new interest rate yesterday, Ms Kiwanuka attributed the increase to the fund’s improved financial performance.

“This increase in interest rate is due to the Fund’s strategic exploitation of the investment environment, which was favourable compared to the previous year,” Ms Kiwanuka said. “The fund earned Shs264 billion from interest on its income portfolio compared to Shs133 billion the previous year.”
She said the performance demonstrates NSSF’s ability to compete in the on-going liberalisation of the pensions sector is completed.

NSSF’s investments are held in fixed income securities, equities and shares, as well as real estate. Some 80 per cent of its earnings came from fixed income securities in the last financial year. Some 14 per cent came from real estate while the rest came from equities.

Falling inflation
NSSF Board Chairman Ivan Kyayonka warned that falling inflation, which has been matched by a fall in interest paid on treasury bills, would hit future earnings.

“While most of the income came from fixed securities, the future is not the same,” he said. “Inflation and interest rates are coming down. However, as a result, we will lose out on income.”

Inflation reached 30 per cent – the highest level in two decades – earlier this year before falling to single-digit figures at the end of last month.

Mr Kyayonka said investment income from other areas is expected to grow to replace the lost income from treasury bills. “The 10 per cent interest rate we are offering is above the 8 per cent average inflation for the past 10 years,” he said.

Workers’ MP Sam Lyomoki said: “We appreciate the increment but the preferred rate is one that is similar or above the current market situation [otherwise] workers’ money can never appreciate and thus there will be no value for the savings.”

Mr Wilson Owere, the chairman of the National Organisation of Trade Unions, said: “The gradual upward improvement is good. .”

NSSF’s assets rose by 29 per cent to Shs2.7t in the past financial year.