The Uganda Retirement Benefits Regulatory Authority (URBRA) has drafted guidelines on how schemes should invest savers’ money, as it gears up for the liberalisation of the pension sector.
According to the draft investment of scheme funds regulation 2013, schemes shall not invest more than 5 per cent of total assets or funds in cash and demand deposits, not more than 30 per cent in fixed deposits, time deposits and certificates of deposits and a maximum of 80 per cent in government securities.
Schemes will also not be allowed to invest more than 30 per cent of assets in immovable property, real estate investment trusts and units in property unit trust schemes, not more than 10 per cent in private equity and not exceeding 5 per cent in any other assets approved by the authority.
The guidelines aim to help trustees in deciding which investment choices to make available for scheme members.
According to Mr Andrew Kasirye, the URBRA board chairman, the guidelines seek to ensure that members’ money is prudently invested in ventures that will deliver adequate rates of return for its members.
“As the regulators, one of our primary responsibilities is to ensure that the ‘pension promise’ is honoured by those licensed and this can only be possible if those entrusted with pension funds invested them prudently up to retirement day,” Mr Kasirye said at a stakeholders’ workshop in Kampala yesterday.
He added that strategic asset allocation is a key element in designing and implementing an efficient investment policy framework for pension funds.
Additionally, not more than 30 per cent of assets or funds should be invested in commercial paper, corporate bonds, mortgage bonds and backed securities and collective investment schemes approved by Capital Markets Authority while a maximum of 70 per cent will be allowed in preference shares and ordinary shares of companies quoted in a stock exchange in East Africa.
Investing pension money will be done by fund managers on behalf of pension schemes as provided for in the URBRA Act.
URBRA proposes a penalty of not exceeding seventy five currency points (Shs1.5 million) for a fund manager who contravenes the regulations.
In case of a continuing contravention, an additional penalty of fifty currency points (Shs1 million) apply in respect of each day on which the offence continues.
However, stakeholders expressed concern over the maximum percentages, arguing that there is need to be mindful of investable assets and that due to market volatility, certain allocation could be out of proportion.
They argued that there is need for an extended period of noncompliance to enable schemes adjust investment assets when prices move.
However, Mr Kasirye, said percentage allocations seek to ensure that money is always available for those who want to get their contributions when they retire.