Govt Slow On Pension Liberalization – Kiwanuka

1446 Views Kampala, Uganda

In short
The opening up of the pensions sector that could see National Social Security Fund (NSSF) get some competition has pulled two sides of the debate further apart. The liberalization process would see NSSF cede at least 5percent of contributions to other players and members would also be allowed to save money with a pension fund of their choice.

The opening up of the pensions sector that could see National Social Security Fund (NSSF) get some competition has pulled two sides of the debate further apart.
 
The liberalization process would see NSSF cede at least 5percent of contributions to other players and members would also be allowed to save money with a pension fund of their choice.
 
At the launch of the fifth Uganda Economic Update, finance minister Maria Kiwanuka pointed out that there would be no rush to have hurried reforms, but rather a phased approach.
 
//Cue in:  “There will be…
Cue out: …the safety framework.”//
 
The proposed liberalization has mostly been opposed by trade unions and other experts in the field. They argue that NSSF should remain untouched. Additionally, they also say that if the sector is opened up, workers’ savings will be open to risk taking and profit driven firms, which could put member funds at risk.
 
A key highlight in the World Bank Uganda Economic Update was that for a liberalized pensions sector to be efficient, member funds must be protected with proper regulation. Uganda’s pensions regulator, Uganda Retirement Benefits Regulatory Authority (UBRA) is barely two years old, which has led many to question its ability to keep pension schemes in check.
 
The sector has been unregulated. UBRA has now required all schemes to be licensed and to file returns as a means of protection of member funds. In the report, NSSF is also still considered to have high costs of administration and in the previous history has also had governance challenges. NSSF has the mandate to collect money from about 500,000 workers but has only managed to collect from close to half of them.
 
The report also points out that between 2008 and 2012, member funds value on average depreciated by almost 10 percent because the return declared was less than the inflation during the period.
 
Geraldine Ssali, the Acting Managing Director of NSSF, was bullish about the prospects for NSSF.
 
//Cue in: “We are using…
Cue out: …we go along.”//
 
Busani Ngwenya, Managing Director Alexander Forbes Uganda, argues that the liberalization is necessary. He also says that at the moment, the reforms NSSF had undertaken were a direct result of the proposed liberalization.
 
//Cue in: “The introduction of…
 Cue out: …we’re all happy.”//
 
On Monday, NSSF advertised jobs for at least 26 people as it prepares itself for the competitive market. In the Retirement Benefits Sector Bill (2011), they had proposed to completely repeal the NSSF Act, however, after intervention from the Ministries of Gender and Public Service, Trade Unions and Consultants, the NSSF Act will merely be amended to cater for the changes that liberalization will bring.