The government of Uganda is facing an additional financial burden of at least Ush60 million ($16,751) annually to cater for the expanded Makerere University Retirement Benefits Scheme that was approved by the Ministry of Finance.
The Finance ministry remits 10 percent of an employee’s gross salary to the scheme, as employer contributions, and employees contribute five per cent of their gross salary. An expansion in the scheme’s membership directly leads to an increase in government’s costs in the short term. However, the ministry has accumulated arrears against the pension scheme in recent years.
While the overall number of contract and project staff deployed at Makerere University could not be verified, university sources claim the least paid contract employee earns a gross salary of Ush500,000 ($139.6) per month. The annual employer contribution due from government of Ush600,000 ($168) would be paid for the same employee. This would translate into an annual pension bill of Ush60 million ($16,751) for every 100 new but least paid employees added to the Makerere University Retirement Benefits Scheme (Murbs) register.
The latest data shows that the arrears accumulated by the Finance ministry against the university pension scheme from 2015 to 2020/2021 are Ush23.9 billion ($6.67 million), while Ush10 billion ($2.8 million) has since been recovered from the Treasury through court processes.
In addition, new contribution arrears incurred by government against the scheme between March and June 2021 were estimated at Ush6.2 billion ($1.7 million). This has led to low tax revenue collection with a deficit of Ush2 trillion ($558 million) by the end of 2020/21, while the total revenue deficit was Ush499 billion ($139 million) between July and September 2021, according to Uganda Revenue Authority (URA) data.
Consequently, weaker government spending patterns triggered by the Covid-19 pandemic have similarly affected pension schemes.
Assets held by Murbs were worth Ush255 billion ($71.2 million) by the end of June 2021, and its total income was Ush27.3 billion ($7.6 million). Total interest declared against members’ savings for financial year 2020/21 stood at 13.35 per cent, up from an average interest rate of 12 per cent dating back to its inception in 2010. Its membership was 5,983 employees by the end of June 2021.
“Employer contribution arrears owed to the scheme are to be cleared over a period of four years. Pension benefits are mandatory for the university employees and government’s failure to settle its obligations to the scheme could discourage someone from doing their job,” said Kakuba Godwin, chair of the Murbs Board of Trustees.
“Ministries and departments do not have reasonable pension arrangements for civil servants, and there is a need to develop a contributory pension system that requires both government and its employees to contribute to a well-managed retirement benefits fund. But pension benefits must be commensurate with one’s previous salary, position, years of service and the prevailing cost of living,” said Julius Mukunda, co-ordinator of the Civil Society Budget Advocacy Group.
A pension benefit usually boosts an employee’s morale because it instills hope of a decent reward after devoting many years of service to a particular employer,” observed (CSBAG).
Whereas the university has experienced numerous labour strikes triggered by pay grievances among academic and support staff in the past, the potential impact of the expanded pension on employees morale remains to be seen.
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