CIVIL servants will soon start contributing to their pensions, writes Richard Komakech.
In a proposed social services reform programme, the Social Security
Transition Group (STG) states that the current pension arrangement is a
financial burden to the Government.
Under the funded pension structure, the Government owes former civil servants up-to sh260b in pension arrears.
The Minister of Labour last year instituted the STG to reform the social security sector.
The sector is chaired by Presidential Adviser Onegi-Obel and
co-ordinated by the Federation of Uganda Employees chairman, Aloysius
Ssemanda.
The STG recommended an overhaul of all government funded pension
schemes to be replaced by a defined contributory social security
arrangement.
This will help to reduce the bureaucracy and allow pensioners to have more say over their money.
New entrants into the civil service and all existing officials under
the public service may start contributing to the new scheme in the next
financial year if the President endorses the new reforms.
The STG also proposes that the Government contributes a top-up
amount on the contributory scheme as its appreciation for their
service.
The STG will present its report to the President next month.
Among the proposals collected from several stakeholders is the
recommendation that the public service ministry compensation department
be scrapped to create a commission which will oversee the whole social
services sector
.
Pages
Zanzibar Social Security Fund
Nssf_New
Thursday, February 7, 2013
Social Security Fund gets new boss
By Cyprian Musoke
Uganda
BANKER Richard Patrick Byarugaba is the new boss of the National Social Security Fund (NSSF). The appointment was made by finance minister Syda Bbumba.
Byarugaba, who has been the head of Global Trust Bank, beat 32 other candidates in interviews conducted in May, the chairman of the board, Vincent Ssekkono, said.
“He is qualified for the job and carries a wealth of experience in managing large financial organisations of international repute, including commercial banks,†Ssekkono said in a statement yesterday.
A graduate of Statistics and
Economics from Makerere University, Byarugaba has held various positions at Standard Chartered, Nile and Barclays banks.
The Global Trust Bank management yesterday described the appointment as a “positive developmentâ€.
It said it would not affect the business of the bank, which it said, has a tested management team and good succession plans. A successor will be announced soon, the bank added.
Byarugaba replaces David Chandi Jamwa, who is facing charges of abuse of office in which the fund lost billions of shillings.
He is also accused of authorising the fund to purchase a sh11b land in Temangalo, a price said to have been inflated.
Jamwa’s predecessor Leonard Mpuuma was also charged in 2007 with causing financial loss, abuse of office and receiving a bribe.
The court ordered Mpuuma to pay sh100m on March 28, 2008 after he pleaded guilty.
He paid the money and was cleared of the charge of receiving a bribe.
The NSSF is a national saving scheme mandated by the Government to provide social security services to employees in Uganda. It was established by an Act of Parliament in 1985.
NSSF spokesperson Olive Lumonya said the interviews for the job were conducted by Ernst and Young, an accountancy and human resource management firm.
“The process was transparent and carried out by a panel of senior experts, after adverts had been placed in all the national and regional newspapers,†she said.
Who is Byarugaba?
Aged 49, Byarugaba who is married with children, brings a wealth of experience spanning a period of 25 years, Lumonya said.
At Barclays, he was the chief operations officer before moving to manage Gold Trust Bank.
Byarugaba is a qualified accountant with the Association of Chartered Certified Accountants and holds a management diploma from the Henley Management College of UK. “Byarugaba has a lot to offer in terms of experience and operations of day-to-day work,†Lumonya said.
Byarugaba takes over from Grace Isabirye, who has served in acting position since Jamwa was suspended last year.
Byarugaba started his career as a banking officer at Standard Chartered Bank in 1983 and rose to the position of executive director for finance in 1992, according to his CV. In 1994, he was transferred to London as regional manager for finance in charge of Africa.
While in London, he implemented a multi-million accounting software for the bank’s Africa operations.
He returned to Uganda in 1997. By the time he left for Nile Bank, he was in charge of finance.
In 2003, he was appointed Nile Bank managing director, a position he held until December 2006 when the bank was acquired by Barclays. He was appointed the Barclays chief operations officer until November 2008 when he became the boss of Global Trust Bank.
He has also held several board positions at Standard Chartered Bank, Nile Bank, Hospice Africa, Palliative Care Association of Uganda and the Uganda Institute of Banking and Financial Services. He is also a former president of the Uganda Institute of Bankers.
He enjoys jogging and football.
BANKER Richard Patrick Byarugaba is the new boss of the National Social Security Fund (NSSF). The appointment was made by finance minister Syda Bbumba.
Byarugaba, who has been the head of Global Trust Bank, beat 32 other candidates in interviews conducted in May, the chairman of the board, Vincent Ssekkono, said.
“He is qualified for the job and carries a wealth of experience in managing large financial organisations of international repute, including commercial banks,†Ssekkono said in a statement yesterday.
A graduate of Statistics and
Economics from Makerere University, Byarugaba has held various positions at Standard Chartered, Nile and Barclays banks.
The Global Trust Bank management yesterday described the appointment as a “positive developmentâ€.
It said it would not affect the business of the bank, which it said, has a tested management team and good succession plans. A successor will be announced soon, the bank added.
Byarugaba replaces David Chandi Jamwa, who is facing charges of abuse of office in which the fund lost billions of shillings.
He is also accused of authorising the fund to purchase a sh11b land in Temangalo, a price said to have been inflated.
Jamwa’s predecessor Leonard Mpuuma was also charged in 2007 with causing financial loss, abuse of office and receiving a bribe.
The court ordered Mpuuma to pay sh100m on March 28, 2008 after he pleaded guilty.
He paid the money and was cleared of the charge of receiving a bribe.
The NSSF is a national saving scheme mandated by the Government to provide social security services to employees in Uganda. It was established by an Act of Parliament in 1985.
NSSF spokesperson Olive Lumonya said the interviews for the job were conducted by Ernst and Young, an accountancy and human resource management firm.
“The process was transparent and carried out by a panel of senior experts, after adverts had been placed in all the national and regional newspapers,†she said.
Who is Byarugaba?
Aged 49, Byarugaba who is married with children, brings a wealth of experience spanning a period of 25 years, Lumonya said.
At Barclays, he was the chief operations officer before moving to manage Gold Trust Bank.
Byarugaba is a qualified accountant with the Association of Chartered Certified Accountants and holds a management diploma from the Henley Management College of UK. “Byarugaba has a lot to offer in terms of experience and operations of day-to-day work,†Lumonya said.
Byarugaba takes over from Grace Isabirye, who has served in acting position since Jamwa was suspended last year.
Byarugaba started his career as a banking officer at Standard Chartered Bank in 1983 and rose to the position of executive director for finance in 1992, according to his CV. In 1994, he was transferred to London as regional manager for finance in charge of Africa.
While in London, he implemented a multi-million accounting software for the bank’s Africa operations.
He returned to Uganda in 1997. By the time he left for Nile Bank, he was in charge of finance.
In 2003, he was appointed Nile Bank managing director, a position he held until December 2006 when the bank was acquired by Barclays. He was appointed the Barclays chief operations officer until November 2008 when he became the boss of Global Trust Bank.
He has also held several board positions at Standard Chartered Bank, Nile Bank, Hospice Africa, Palliative Care Association of Uganda and the Uganda Institute of Banking and Financial Services. He is also a former president of the Uganda Institute of Bankers.
He enjoys jogging and football.
NSSF could lose pensions monopoly
By Milton Olupot
and Mary Karugaba
newvision Uganda
THE National Social Security Fund (NSSF) is to lose its monopoly to manage pensions if a Bill being debated by Parliament passes into law.
There have been many calls to liberalise and reform the pension sector, especially on account of the numerous financial scandals which have dogged the Fund over the years. Under the law, all workers are required to save with NSSF.
The Fund takes 5% of the salary, while the employer tops it with 10%. However, the workers can only get their benefits after clocking 55 years of age.
Neither can they use their savings as security for a loan in a bank.
Besides, the interest paid on the savings is often below the inflation rate, meaning the workers do not get value for money.
The NSSF’s highest ever interest rate of 14% was later slashed to 3% after the fund suffered a scandal involving the sale of land in Temangalo near Kampala.
The inflation rate is now about 6% as of April ending. Now the new Bill seeks to address some of these anomalies.
For instance, it calls for radical reforms such as the opening up of the pension sector and allowing savers to use their contributions to secure bank loans and mortgages to buy residential houses.
The Bill, which was presented to Parliament yesterday, also protects a member’s contribution from being attached.
The Uganda Retirement Benefits Authority Bill, 2010 was tabled by planning state minister Prof. Ephraim Kamuntu.
“Where a judgment or order against a member of the retirement benefits scheme is made, no execution or attachment shall be issued in respect of the contributions of the member,†it says.
To manage the sector better, the Bill also provides for an independent regulator who will watch over both private and public pension schemes.
It requires pension schemes to have a prudent investment policy and to pay out high rates of return to the savers. It makes speculative investment of the savings illegal except if they are invested in securities, or in a bank.
After minister Kamuntu tabled the Bill yesterday, deputy Speaker Rebecca Kadaga sent it to the committee on the national economy for scrutiny.
Commenting on the Bill, Kamuntu said the regulatory authority would oversee the retirement benefits schemes and institutions which provide pension products and services.
He explained that the independent authority would also promote transparency, accountability and the integrity of pension schemes, while protecting the interests of members.
The minister said the authority will also ensure the stability of the retirement benefits sector, with a view of promoting long-term capital development.
“The absence of an independent regulator presents a gap in the financial system that has to be filled in order to meet the requirements for a healthy growing economy,†finance minister Syda Bbumba said.
According to the Bill, a person who desires to establish a retirement benefits scheme has to apply for a licence, upon payment of a fee. Existing providers will have to obtain new licences.
and Mary Karugaba
newvision Uganda
THE National Social Security Fund (NSSF) is to lose its monopoly to manage pensions if a Bill being debated by Parliament passes into law.
There have been many calls to liberalise and reform the pension sector, especially on account of the numerous financial scandals which have dogged the Fund over the years. Under the law, all workers are required to save with NSSF.
The Fund takes 5% of the salary, while the employer tops it with 10%. However, the workers can only get their benefits after clocking 55 years of age.
Neither can they use their savings as security for a loan in a bank.
Besides, the interest paid on the savings is often below the inflation rate, meaning the workers do not get value for money.
The NSSF’s highest ever interest rate of 14% was later slashed to 3% after the fund suffered a scandal involving the sale of land in Temangalo near Kampala.
The inflation rate is now about 6% as of April ending. Now the new Bill seeks to address some of these anomalies.
For instance, it calls for radical reforms such as the opening up of the pension sector and allowing savers to use their contributions to secure bank loans and mortgages to buy residential houses.
The Bill, which was presented to Parliament yesterday, also protects a member’s contribution from being attached.
The Uganda Retirement Benefits Authority Bill, 2010 was tabled by planning state minister Prof. Ephraim Kamuntu.
“Where a judgment or order against a member of the retirement benefits scheme is made, no execution or attachment shall be issued in respect of the contributions of the member,†it says.
To manage the sector better, the Bill also provides for an independent regulator who will watch over both private and public pension schemes.
It requires pension schemes to have a prudent investment policy and to pay out high rates of return to the savers. It makes speculative investment of the savings illegal except if they are invested in securities, or in a bank.
After minister Kamuntu tabled the Bill yesterday, deputy Speaker Rebecca Kadaga sent it to the committee on the national economy for scrutiny.
Commenting on the Bill, Kamuntu said the regulatory authority would oversee the retirement benefits schemes and institutions which provide pension products and services.
He explained that the independent authority would also promote transparency, accountability and the integrity of pension schemes, while protecting the interests of members.
The minister said the authority will also ensure the stability of the retirement benefits sector, with a view of promoting long-term capital development.
“The absence of an independent regulator presents a gap in the financial system that has to be filled in order to meet the requirements for a healthy growing economy,†finance minister Syda Bbumba said.
According to the Bill, a person who desires to establish a retirement benefits scheme has to apply for a licence, upon payment of a fee. Existing providers will have to obtain new licences.
Public servants to pay 5% pension
By Henry Mukasa
and Milton Olupot
CIVIL servants will have to contribute 5% of their salaries to a new pension scheme proposed by the Government, according to a Bill now before Parliament.
The Retirement Benefits Sector Liberalisation Bill 2011 that the finance minister presented to Parliament seeks to remove the monopoly enjoyed by the National Social Security Fund (NSSF).
If passed by Parliament, the proposed law would also lower the age at which a saver can access and utilise his or her money from 55 years to 45 years.
“The non-contributory public service pension scheme existing immediately before the commencement of this Act, shall upon the commencement of this Act, migrate into a contributory pension scheme,†one of the clauses of the proposed law states.
The pension sector in the country has been comprised of the public service pension scheme, a government scheme which caters for civil servants, and the National Social Security Fund (NSSF), which is responsible for retirement benefits for employees in the private sector.
The public pension sector will be renamed as the unified public service pension scheme, if the proposals are upheld.
The public pension scheme is guaranteed by the State and funded from taxes, while beneficiaries of NSSF savings contribute 5% from their wages and their employers top up with 10% to make it a total contribution of 15% for each employee.
The scheme targets organisations with five or more employees between 16 and 55 years.
“There is wide public perception that NSSF has not been run on sound governance principles. This could have a negative effect on savings mobilisation. It is, therefore, imperative that immediate action be taken to enact a law to reform and liberalise the retirement benefits sector,†the Bill says.
“This will avert the collateral damage that has been caused to the retirement savings of employees from the private sector and the retirement benefits sector as a whole,†it explains.
The Bill will provide for fair competition among licensed retirement benefits schemes but retain mandatory contributions and benefits for employees and employers in the public and private sector.
and Milton Olupot
CIVIL servants will have to contribute 5% of their salaries to a new pension scheme proposed by the Government, according to a Bill now before Parliament.
The Retirement Benefits Sector Liberalisation Bill 2011 that the finance minister presented to Parliament seeks to remove the monopoly enjoyed by the National Social Security Fund (NSSF).
If passed by Parliament, the proposed law would also lower the age at which a saver can access and utilise his or her money from 55 years to 45 years.
“The non-contributory public service pension scheme existing immediately before the commencement of this Act, shall upon the commencement of this Act, migrate into a contributory pension scheme,†one of the clauses of the proposed law states.
The pension sector in the country has been comprised of the public service pension scheme, a government scheme which caters for civil servants, and the National Social Security Fund (NSSF), which is responsible for retirement benefits for employees in the private sector.
The public pension sector will be renamed as the unified public service pension scheme, if the proposals are upheld.
The public pension scheme is guaranteed by the State and funded from taxes, while beneficiaries of NSSF savings contribute 5% from their wages and their employers top up with 10% to make it a total contribution of 15% for each employee.
The scheme targets organisations with five or more employees between 16 and 55 years.
“There is wide public perception that NSSF has not been run on sound governance principles. This could have a negative effect on savings mobilisation. It is, therefore, imperative that immediate action be taken to enact a law to reform and liberalise the retirement benefits sector,†the Bill says.
“This will avert the collateral damage that has been caused to the retirement savings of employees from the private sector and the retirement benefits sector as a whole,†it explains.
The Bill will provide for fair competition among licensed retirement benefits schemes but retain mandatory contributions and benefits for employees and employers in the public and private sector.
Liberalise pensions sector
Newvision Uganda
By Emojong Osere
and David Ssempijja
THE Government should speed up the liberalisation of the pensions sector to ease access to retirement benefits. The parliamentary public accounts committee chairman, Nandala Mafabi, said liberalising the industry would also improve the performance of the National Social Security Fund (NSSF).
The fund is mandated by the Government to provide social security services to salaried employees in the formal sector. “Due to the limited scope and problems facing NSSF, many Ugandans are calling for the liberalisation of the pension fund sector as a solution to some of the problems,†he said while addressing the annual banking, finance and insurance exhibition at the UMA show grounds main hall in Lugogo, Kampala recently.
“Uganda deserves a good social security and pensions systems. Liberalisation of the sector will increase coverage of the social sector system and create competition that will make NSSF improve its services and guarantee a good retirement package to employees,†Mafabi explained.
He added that opening up the sector would improve its regulation and provide long-term funds to boost the capital markets.
and David Ssempijja
THE Government should speed up the liberalisation of the pensions sector to ease access to retirement benefits. The parliamentary public accounts committee chairman, Nandala Mafabi, said liberalising the industry would also improve the performance of the National Social Security Fund (NSSF).
The fund is mandated by the Government to provide social security services to salaried employees in the formal sector. “Due to the limited scope and problems facing NSSF, many Ugandans are calling for the liberalisation of the pension fund sector as a solution to some of the problems,†he said while addressing the annual banking, finance and insurance exhibition at the UMA show grounds main hall in Lugogo, Kampala recently.
“Uganda deserves a good social security and pensions systems. Liberalisation of the sector will increase coverage of the social sector system and create competition that will make NSSF improve its services and guarantee a good retirement package to employees,†Mafabi explained.
He added that opening up the sector would improve its regulation and provide long-term funds to boost the capital markets.
The pensions reform Bill is overdue
newvision Uganda
THE Retirement Benefits Sector Liberalisation Bill 2011 has been brought before parliament. The main thrust of the Bill is to open the pensions sector beyond the National Social Security Fund and provide for civil servants to contribute towards their own pension.
As it stands now civil servants’ pensions are paid from the treasury while the private sector workers are mandated to contribute 5% of their income to NSSF monthly with employers contributing 10%. The new Bill also proposes that the age at which individuals can access their savings be lowered to 45 years from the current 55 years.
To begin with this law is long overdue. Uganda has a low savings culture as measured by bank deposits.
By liberalising the sector, private sector players will grow the sector and also compete for the more than sh15b NSSF collects monthly. This competition will force the industry to be more innovative, offer new products, like health, education insurance and mortgage since they will be attached to our pension contributions.
Secondly, the deployment of these collections to support commerce and industry will be more efficient, if it guarantees savers better returns. This means pension managers would have to invest in profitable projects locally. Elsewhere in the world long term funds are critical to the construction of transport, energy and telecommunications infrastructure and provision of housing.
The pension sector as a vehicle for the mobilisation of long term funds is one of the missing links that is holding back our growth and development. All this said, MPs debating the Bill should keep in mind issues of regulation — though this will be handled in another Bill. MPs should also ensure that our savings are employed first and foremost for the development of the country.
THE Retirement Benefits Sector Liberalisation Bill 2011 has been brought before parliament. The main thrust of the Bill is to open the pensions sector beyond the National Social Security Fund and provide for civil servants to contribute towards their own pension.
As it stands now civil servants’ pensions are paid from the treasury while the private sector workers are mandated to contribute 5% of their income to NSSF monthly with employers contributing 10%. The new Bill also proposes that the age at which individuals can access their savings be lowered to 45 years from the current 55 years.
To begin with this law is long overdue. Uganda has a low savings culture as measured by bank deposits.
By liberalising the sector, private sector players will grow the sector and also compete for the more than sh15b NSSF collects monthly. This competition will force the industry to be more innovative, offer new products, like health, education insurance and mortgage since they will be attached to our pension contributions.
Secondly, the deployment of these collections to support commerce and industry will be more efficient, if it guarantees savers better returns. This means pension managers would have to invest in profitable projects locally. Elsewhere in the world long term funds are critical to the construction of transport, energy and telecommunications infrastructure and provision of housing.
The pension sector as a vehicle for the mobilisation of long term funds is one of the missing links that is holding back our growth and development. All this said, MPs debating the Bill should keep in mind issues of regulation — though this will be handled in another Bill. MPs should also ensure that our savings are employed first and foremost for the development of the country.
Handle pension liberalisation carefullyUganda runs a monopoly state-controlled pension scheme, the National Social Security Fund (NSSF), which has, in the recent past, been plagued by financial scandals and inefficiencies. As such, many contributors do not see pension as an investment, but a ‘tax’ burden. This is further compounded by the fact that most pensioners, owing to Uganda’s low life expectancy, never live to put their pension to constructive use. The NSSF interest rate dropped from 14% to 3%, which is way below the current inflation rate of 14%. Over the past few years, the Government has continuously raised our hopes over the forthcoming liberalisation of the pension sector. This was further cited in the finance ministers budget speech of 2009/10. I am quite sure a majority of the members leapt for joy on hearing that the long awaited pension Bill had finally been tabled before Parliament. This was one of those days when I thanked God for the most recent NSSF scandal that I believe awakened Ugandans, towards lobbying for liberalisation of the pension sector. Most of us are eagerly anticipating the passing of the Bill in Parliament because we definitely foresee a number of future benefits resulting from cut throat competition among the various private players in the market. Private pension funds have been known to offer better services like providing indexed link products to protect pensioners money from inflation, shorter lead times taken for pay-outs, lifelong monthly payments, ease of access to pension funds by dependants, access to mortgages using pension funds and better interest rates. There is also need for transparency and accountability of the investment funds by the regulatory bodies thus offering more attractive retirement packages, with a better return on savings. I, however, believe that there are two sides to every story. Many of us have not stopped to think about what negative impact liberalisation could have on our society. The proposal of a regulatory body that will oversee all the private players is no guarantee of safe custody and growth of all our savings with the various pension funds. Allow me to take you back to the time of the collapse of large banks in Kampala. These banks were regulated by Bank of Uganda, but still collapsed. We need to note that without a proper and smooth transition of the NSSF fund from monopoly to liberalisation, investments which are underway could lead to liquidation of the fund, thus placing our hard earned savings at huge risk. For example, if the Bill is passed, and the NSSF fund is depleted by those that choose to invest in other private schemes, the pension scheme might not have enough funds to finance those investments that are still in the pipeline, which could create a liquidity issue for NSSF. This might not lead to a win-win situation for all players. Hopefully the Bill shall be debated taking into consideration all pros and cons, to ensure that it places the common man’s interests at heart. I hope the minister, in her upcoming budget speech, sheds some light on the progress of this proposed Bill. The writer is a senior tax adviser
NEW VISION Uganda
Uganda runs a monopoly state-controlled pension scheme, the National Social Security Fund (NSSF), which has, in the recent past, been plagued by financial scandals and inefficiencies.
As such, many contributors do not see pension as an investment, but a ‘tax’ burden. This is further compounded by the fact that most pensioners, owing to Uganda’s low life expectancy, never live to put their pension to constructive use.
The NSSF interest rate dropped from 14% to 3%, which is way below the current inflation rate of 14%. Over the past few years, the Government has continuously raised our hopes over the forthcoming liberalisation of the pension sector.
This was further cited in the finance ministers budget speech of 2009/10.
I am quite sure a majority of the members leapt for joy on hearing that the long awaited pension Bill had finally been tabled before Parliament. This was one of those days when I thanked God for the most recent NSSF scandal that I believe awakened Ugandans, towards lobbying for liberalisation of the pension sector.
Most of us are eagerly anticipating the passing of the Bill in Parliament because we definitely foresee a number of future benefits resulting from cut throat competition among the various private players in the market.
Private pension funds have been known to offer better services like providing indexed link products to protect pensioners money from inflation, shorter lead times taken for pay-outs, lifelong monthly payments, ease of access to pension funds by dependants, access to mortgages using pension funds and better interest rates.
There is also need for transparency and accountability of the investment funds by the regulatory bodies thus offering more attractive retirement packages, with a better return on savings.
I, however, believe that there are two sides to every story. Many of us have not stopped to think about what negative impact liberalisation could have on our society. The proposal of a regulatory body that will oversee all the private players is no guarantee of safe custody and growth of all our savings with the various pension funds. Allow me to take you back to the time of the collapse of large banks in Kampala.
These banks were regulated by Bank of Uganda, but still collapsed.
We need to note that without a proper and smooth transition of the NSSF fund from monopoly to liberalisation, investments which are underway could lead to liquidation of the fund, thus placing our hard earned savings at huge risk.
For example, if the Bill is passed, and the NSSF fund is depleted by those that choose to invest in other private schemes, the pension scheme might not have enough funds to finance those investments that are still in the pipeline, which could create a liquidity issue for NSSF.
This might not lead to a win-win situation for all players.
Hopefully the Bill shall be debated taking into consideration all pros and cons, to ensure that it places the common man’s interests at heart. I hope the minister, in her upcoming budget speech, sheds some light on the progress of this proposed Bill.
The writer is a senior tax adviser
Uganda runs a monopoly state-controlled pension scheme, the National Social Security Fund (NSSF), which has, in the recent past, been plagued by financial scandals and inefficiencies.
As such, many contributors do not see pension as an investment, but a ‘tax’ burden. This is further compounded by the fact that most pensioners, owing to Uganda’s low life expectancy, never live to put their pension to constructive use.
The NSSF interest rate dropped from 14% to 3%, which is way below the current inflation rate of 14%. Over the past few years, the Government has continuously raised our hopes over the forthcoming liberalisation of the pension sector.
This was further cited in the finance ministers budget speech of 2009/10.
I am quite sure a majority of the members leapt for joy on hearing that the long awaited pension Bill had finally been tabled before Parliament. This was one of those days when I thanked God for the most recent NSSF scandal that I believe awakened Ugandans, towards lobbying for liberalisation of the pension sector.
Most of us are eagerly anticipating the passing of the Bill in Parliament because we definitely foresee a number of future benefits resulting from cut throat competition among the various private players in the market.
Private pension funds have been known to offer better services like providing indexed link products to protect pensioners money from inflation, shorter lead times taken for pay-outs, lifelong monthly payments, ease of access to pension funds by dependants, access to mortgages using pension funds and better interest rates.
There is also need for transparency and accountability of the investment funds by the regulatory bodies thus offering more attractive retirement packages, with a better return on savings.
I, however, believe that there are two sides to every story. Many of us have not stopped to think about what negative impact liberalisation could have on our society. The proposal of a regulatory body that will oversee all the private players is no guarantee of safe custody and growth of all our savings with the various pension funds. Allow me to take you back to the time of the collapse of large banks in Kampala.
These banks were regulated by Bank of Uganda, but still collapsed.
We need to note that without a proper and smooth transition of the NSSF fund from monopoly to liberalisation, investments which are underway could lead to liquidation of the fund, thus placing our hard earned savings at huge risk.
For example, if the Bill is passed, and the NSSF fund is depleted by those that choose to invest in other private schemes, the pension scheme might not have enough funds to finance those investments that are still in the pipeline, which could create a liquidity issue for NSSF.
This might not lead to a win-win situation for all players.
Hopefully the Bill shall be debated taking into consideration all pros and cons, to ensure that it places the common man’s interests at heart. I hope the minister, in her upcoming budget speech, sheds some light on the progress of this proposed Bill.
The writer is a senior tax adviser
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