Monday April 28 2014

Harmonise NSSF reforms with regional body - ministry


KAMPALA- Uganda’s retirement benefits sector reforms must be in harmony with the East African integration process, the Secretary to the Treasury has said.

Mr Keith Muhakanzi, who is also the Permanent Secretary in the Finance ministry, wrote in a letter addressed to Mr Pius Bigirimana, the PS Ministry of Gender, Labour and Social Development on March 28: “… while we make concessions on the proposal in the Bill, we should note that there are other stakeholders in these reform programme beyond the trade unions,” reads the letter.

The letter adds: “... the reform programme is aimed at having a vibrant and efficient retirement benefits sector that encourages individual savings and benefits the country...”

Retirement benefits sector
The East African Community (EAC) treaty requires that EAC member states must harmonise their national laws. The proposed pension reforms have raised controversy.

Kenya, which initially had advocated for full liberalisation, has pulled back and is reverting to a national pension scheme (Kenya NSSF) that offers mandatory retirement plan with contribution of 12 per cent. Tanzania also opted for partial liberalisation and kept a mandatory minimum with the NSSF of Tanzania. Rwanda’s private sector is still centralised.

Mr Muhakanizi, who also heads the team reforming the retirement benefits sector, said the committee, which was constituted to review the Retirement Benefits Sector Liberalisation Bill, 2011, should not get rid of the National Social Security Fund (NSSF) AcT. “The NSSF Act shall not be repealed as had been envisaged earlier,” he wrote.

“...NSSF should stay as it is, however the NSSF Act of 1985 cap 222 will be substantial amended to be in conformity with the broader legal and regulatory framework for the entire Retirement Benefits Sector,” he added.

Social security analysts’ take
To ensure that Uganda’s pension sector remains robust and is trouble free, social security analysts such as Mr Martin Wandera, a former Workers MP, have argued that NSSF should be preserved as a the national mandatory pension scheme that will retain, at a minimum, the 15 per cent mandatory contribution.

This would offer safety of a minimum retirement package to members and provide core retirement benefit to members.

They argue this would enable the pension sector, through the NSSF, to play a key role in investments, such as infrastructure development.
Besides the new amendments, the Ministry of Finance has recommended that the Bill’s name be crafted to capture all the reform elements. The reform committee had proposed the Bill to be codenamed Social Security Bill.

However, workers’s representatives are resentful of the Bill. The chairman of National Organisation of Trade Unions, Mr Usher Owere, said workers should be alarmed because the group spearheading reforms have ignored the proposals of workers’ representatives, saying such conduct is suspicious.

“We are the ones who pushed for that (harmonisation with EAC) because they had wanted to repeal the Act,” he said.