Wednesday July 23 2014

Reforming the pension sector has nothing to do with NSSF

By Jason Tumugabe

I applaud the Daily Monitor in educating the public on retirement benefits and pension reforms. However, while some content present a good view of economic advantages and good proposals for the reforms, it seems many people have interpreted reforming the pensions sector to mean reforming National Social Security Firm (NSSF).

I want to remind readers that pension is different from NSSF and in fact, NSSF by law is a provident fund, but the scheme that government runs is the pension. Therefore, if we want to discuss reforms in the pension, let it be so but if we want to include other retirement benefits like the provident fund (NSSF), then let’s generalise and discuss reforms in the retirement benefits sector.

Currently in Uganda, there have been two types of retirement savings systems – the private sector through NSSF and the public sector through the government pension scheme. We also have occupational voluntary savings, which is not prominently talked about. The savings through NSSF have always been guided by the NSSF Act and it stipulates categorically that it’s a provident fund; and by its nature the beneficiaries have been getting lump sum payments when the time falls due. The beneficiaries are certain of their dealings with NSSF through savings statement that can easily be accessed online. Whereas NSSF is established by an Act of Parliament, government is aware that the money under NSSF was saved after all government taxes were paid and it is, therefore, purely for the beneficiary. The objective of the provident fund is not profit-making, but to keep savers money safely, invest in less risky ventures while assuring the owner that their monies are safe.

The savings through the public service have always been guided by the Public Service Pensions Act and it is stipulated clearly as a pension scheme. This benefit is contained in the Constitution (Article 254), the Pensions Act Cap 281, the pension regulations and the standing orders. The current pension scheme for the public service is non-contributory and covers the following categories: the traditional public service, the teaching service, the Judiciary, police and prisons service, the local government and recently the military. I’m surprised that while the government pension sector has suffered numerous scandals, no one has come up to critique and recommend reforms even when it seems more urgent to curb corruption, abuse and misuse of pension funds. Retired civil servants suffer blatant abuse while claiming for their pension and the much needed reforms there are not explained.

The Uganda Retirement benefits Regulatory and Authority Act (URBRA) should be supported to pick interest in understanding what the pensions include as opposed to other retirement benefits schemes; and how they are treated under the liberalisation. The public would like to see the discussion on the fate and plan to liberalise or reform the government pension scheme to address the plight of civil servants.

A Daily Monitor article, “NSSF battles with reforming workers’ social security”, published on June 24, was quite elaborate in terms of contributors and the contributions made. But another story in the same edition, “Reforming the pension sector”, Mr Moses Bekabye, the interim CEO URBRA makes the same misleading statement that “ reforming the pensions sector is crucial because without reforms that will introduce competition, NSSF will still invest 90 per cent of savers money in fixed investment, which is disincentive to savers.” Mr Bekabye is advised not to mix up pension with NSSF. He was required to comment on the pensions sector but he instead gave a comment on NSSF, which is outside the sector in question and the regulations governing the two sectors are different.

The pension sector liberalisation is totally different and outside the reforms needed for NSSF. To help the public follow the discussions, we must limit these discussions to the laws that govern them. A pensioner in the public sector will get confused when people talk about NSSF while discussing pensions.
Secondly, when time for reforms in NSSF is allowed, those mandated under its governance structures and the contributors will handle the issue of how NSSF invests but it’s not the mandate of URBRA. The liberalisation discussion calls for openness and truthfulness for us to have meaningful reforms for the benefit of the owners.

If URBRA is to fulfill its objective of supervising, regulating the establishment, management and operation of retirement benefit schemes, the laws establishing those schemes must independently be looked at and the relevant stakeholders consulted in a transparent manner. For example, the Ministry of Public Service is responsible for the management and control of the pension scheme and any beneficiary would apply to the ministry. On the contrary, the beneficiary of the provident fund applies directly to NSSF guided by the NSSF Act.

The Social Protection Policy, a plan under which all these discussions would be guided, is not yet out from the Ministry of Gender, Labour and Social Development. The public should know that there is nothing wrong with liberalising the pensions sector and if there is, those under the sector should argue their case. For us in the private sector under the provident fund (NSSF), we want amendments in the NSSF Act and we are ready to contribute ideas to have our sector reformed to match with the current dynamic social and economic challenges whilst maintaining its lump sum nature.

Mr Tumugabe is a mobiliser of NSSF contributors for a just cause of not losing their funds.