NSSF issues above-inflation interest rate to members
Posted Wednesday, October 2 2013 at 01:00
NSSF paid Shs12 billion to more than 1,000 members per month.
KAMPALA -Riding on the back of a business model that emphasises relationship rather than enforcement, coupled with prudent and aggressive investments in equity market (Stock market), largely explains the 11.23 per cent interest rate the government has declared on the members’ funds.
According to the government, this is good news given that the 11.23 per cent interest rate members will receive on their savings, up from 10 per cent, is above the 10-year average inflation rate which is currently standing at 9.23 per cent.
“In exercise of the powers conferred upon me by Section 35 (2) of the National Social Security Fund (NSSF) Act, and after consultation with the Board of Directors, I am pleased to declare that the Fund will pay an annual interest rate of 11.23 per cent to its members for the last Financial Year,” Mr Matia Kasaija, State Minister in charge of Planning declared yesterday at the Ministry of Finance headquarters. He continued: “I have already signed the statutory instrument – The National Social Security Fund (Interest on Benefits) Notice, 2013 – to effect this declaration.”
The rate will be calculated and credited on the balance standing on the members’ accounts as of July 1, 2012. A breakdown shows that the 11.23 per cent interest rate translates into Shs 277.7 billion compared to Shs202 billion that was paid out last year.
According to NSSF the 10 year average inflation rate is standing at 9.23 per cent, meaning the declared interest rate is tangible.
Last year, NSSF declared a 10 per cent interest rate on all its members’ savings up from 6 per cent in the financial year 2011/10. This was attributed to the Fund’s ability to advantage of the business environment although it was patchy.
The Fund, however, encountered challenges in the real estate investment category. According to NSSF board chairman Ivan Kyayonka, the Fund reaped big from the equity markets. “As the equity market recovered and maintained gains of about 55 per cent, the Fund received significant earnings from its participation in the Umeme IPO,” said Mr Kyayonka. He continued: “The Fund earned Shs13b from its investment in Umeme: Shs2b dividend and Shs11b in capital gains.”
Interest paid to members
· Financial Year 2010/11 – 7%
· Financial Year 2011/12 – 10%
· Financial Year 2012/13 – 11.23%