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Pensions regulator names asset classes for fund managers BoU warned on Jinja land deal

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NSSF Buiding in Kampala. NSSF has been the only firm managing

NSSF Buiding in Kampala. NSSF has been the only firm managing people’s pensions but this will change when the sector is liberalised and other players come on board. FILE PHOTO  

By MARTIN LUTHER OKETCH

Posted  Friday, January 17  2014 at  02:00

In Summary

Once the pension sector gets liberalised, the amount collected is expected to hit Shs11 trillion from Shs3.4 trillion.

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Kampala- The Uganda Retirement Benefits Regulatory Authority (URBRA) has named eight classes of assets where the fund managers will be allowed to invest pension funds once the sector gets liberalised (or reformed )during the course of this year.
URBRA is hopeful that Parliament will pass the Bill liberalising the pension sector come February, a development which, if in use, will lead to more players other than the National Social Security Fund (NSSF) coming on board to begin managing people’s pension money.

The Interim chief executive officer URBRA, Mr Moses Bekabye, told journalists in Kampala on Wednesday that the list of the eight classes of assets which the fund managers are going to invest in is going to be gazetted soon.

“This is to create orderly and proper investment of pension funds by the fund managers in assets that are approved by the Capital Markets Authority (CMA),” he said. He said investment in each asset class will have a percentage cap.

He anticipates increased funds collected by the private fund managers from the government entities and the private companies as well once the sector gets liberalised.

Regarding the projected growth in funds to be collected when the pension sector gets liberalised, he said: “The NSSF currently collects Shs3.4 trillion but when the sector gets liberalised, the amount being collected is expected to hit Shs11 trillion.”

He said Uganda is expected to have 45 schemes with about 10 fund managers for a start, and once the sector gets opened up there will be increased availability of longer term funds for investment in Uganda at the same time increased saving in the economy.

Kenya has 13 licensed fund managers and 1,300 schemes, while the pension now contributes 18 per cent of Kenya’s GDP following the liberalisation of the sector in 2000.

Benefits of a liberal sector
The improvements in governance of the sector through liberalisation (opening up the sector to allow more players), coupled with prudent investment of these funds would have the following benefits.

To individual savers: Guaranteed benefits to savers in form of a pension or other forms of benefits. Improved trust and confidence in the pension system thus encouraging private savings, leading to improved savings culture.

Increased coverage allowing majority Ugandans to have a social safety net.
To government: Increased volume of funds saved through various schemes which would be used to finance Government projects such as infrastructure, among other benefits.

ASSET CLASSES TO BE INVESTED

Cash and demand deposits in financial institutions licensed under the Financial Institution Act 2003 and other similar institutions in East Africa. The amount of money to be invested in this asset class is 5 per cent.
Fixed deposits, time deposit and certificate of deposit in institution licensed in Uganda under the FAC 2003 and similar institutions licensed in East Africa 30 per cent.

Commercial paper corporate bonds mortgage bonds and asset backed securities, collective investment schemes approved by the Capital Markets Authority 30 per cent.

Government securities treasury bills and treasury bonds 80 per cent. Shares of companies quoted in stock exchange in East Africa.

Collective investment schemes approved by the Capital Markets Authority 70 per cent.
Real estate’s investment trust and property unit approved by the Capital Markets Authority 30 per cent.

Private equity 15 per cent and any other asset classes approved by the CMA 5 percent.

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