What you need to know:
Liberalisation will ensure safety of members’ savings.
Kampala- About 351 players have so far expressed interest to provide services in the pensions sector, of which 45 are pension schemes, 10 administrators, eight fund managers, four custodians, five corporate trustees and 211 individual trusts.
However, two fund managers; a custodian, an administrator and 65 individual trustees, who applied for licences are yet to be licensed.
It has also been noted that the delayed passing of the Retirement Benefits Sector Liberalisation Bill, 2011 into law has held back the opening up of the pension sector to competition.
Speaking at a media breakfast meeting in Kampala yesterday, Mr Moses Bekabye, the Uganda Retirement Benefits Regulatory Authority (URBRA) interim chief executive officer, said although players are eagerly waiting to compete in a liberalised pension environment and some rules and regulations have been drafted, the process is still constrained by lack of law to institute the reforms.
“The law will transform the entire pension sector because it will also address key issues in the sector. URBRA will, however, not relent until the law is passed,” Mr Bekabye who wants the Bill passed into law by February next year said.
Increased pension coverage
Liberalising the sector will also help increase pension coverage from the current less than seven per cent of the working population, ensure safety of members’ savings through increased checks and balances, and ensure prudent investment of savers’ money to yield better returns.
Mr Bekabye further said improving governance and transparency of the pension sector will be key towards achieving increased pension coverage.
Ms Rose Kwena, Head Corporate Communications, Retirement Benefits Authority, Kenya said governance is one of the biggest challenges facing the pension sectors in many countries, requiring that regulators need to “have teeth to bite” non-compliant players.
She urged the Ugandan Parliament to urgently pass the law to enable URBRA develop the necessary rules and regulations to govern the sector.
Breaking NSSF monopoly
A lthough a taskforce that was formed to review and amend the Bill to make it more representative of all interest groups finished its job and took back the bill to parliament, it is yet to be passed.
Among the key reforms the law intends to introduce to the pension sector is to break the National Social Security Fund monopoly and create healthy competition in the sector, remove the threshold of five and above employees to start mandatory contributions and introduce a contributory pension scheme for civil servants among others.
Tax payers have for long shouldered the burden of paying for civil servants’ pension demands upon retirement due to the design of the system where they (civil servants) don’t contribute any money for their pensions, rather government draws money from the Consolidated Fund to pay pensioners, who receive a monthly stipend upon retirement. “NSSF invests about 90 per cent of savers’ money in government bonds and securities, about 10 per cent in real estate and less than one per cent in securities which is contrary to what is done in Kenya. Competition will make them move out of their comfort zone,” URBRA’s Bekabye said.