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World Bank calls for pension reforms

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World Bank calls for pension reforms

Finance minister Maria Kiwanuka (L), talks to Dr Albert Zeufack, the sector manager, poverty reduction and economic development, World Bank during the launch of the World Bank report on Uganda’s Economic update on pension reforms in Kampala yesterday. PHOTO BY STEPHEN WANDERA 

By Stephen Otage

Posted  Wednesday, June 18   2014 at  01:00

In Summary

Government urged to include informal sector in the pensions sector to avoid social distress

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KAMPALA

The World Bank has advised government to undertake urgent reforms in the pensions sector so as to accommodate workers in the informal sector and avert social distress which can arise out of social insecurity.

While launching the fourth World Bank Uganda economic update on pensions reforms yesterday, Mr Phillippe Dongier, the World Bank Country director, observed that despite the strides Uganda has made towards achieving economic stability, growth and poverty reduction, there is need for government to undertake immediate reforms in the pensions sector so as to avert instability arising from exclusion of some sections of the population from the accelerated development.

“As the public service grows in size, public service pension expenditure is expected to grow rapidly as has been witnessed in other countries. Uganda may want to reform the pension scheme soon, when the cost is still manageable instead of waiting until it becomes much more expensive,” he said.

At the same event, Ms Maria Kiwanuka, the Finance minister, explained that some of the measures government has undertaken to put all Ugandans in formal employment was the introduction of taxes on education and agriculture in the 2014/15 national Budget so that businesses, which have been appearing as informal and not keeping records, can quickly be assessed for their profitability or losses to qualify for taxation.

“We are not taxing the schools. Private schools like any other institution, are required to show that they are not making profits. It is taxing of profits not the school,” she said.

She explained that just like agriculture, all businesses will be required to produce records to justify whether they are profitable or not, so that among other benefits, the workers can start contributing for pension which is mandatory in formal employment.

“We do not believe the story that you need to have much money to hire an accountant. If you buy uniforms, show us the receipts. Show us the expenditure of the income you have earned from the moey you receive and when we see that you are not making profits, you will be exempted,” she said.

The report, among other outstanding issues, highlights the plight of retired Ugandan workers who are wallowing in poverty in rural areas without state protection, cannot easily access their monthly pension as well as a young jobless, unskilled population, which will have no pension when it grows because they are not saving during their active age.

sotage@ug.nationmedia.com