Making the most of your pension

Sunday June 2 2019

Planning. The couple made it a point to start

Planning. The couple made it a point to start constructing their house before retirement because they wanted to use their retirement package to start a chicken business. While funds ran out before completion, only a portion of the pension package was used in building a house and the remainder was used to start a chicken business. PHOTOS BY RACHEL MABALA. 

By Joan Salmon

Many people have held on to offices, adjusted their age all in the name of fear of living without an assured pay.
The fear of the unknown is so real that many shrivel a few years after leaving active service. However, that need not be the case as long as you plan ahead.
Jacinta Namubiru, during her heydays as a civil servant diligently saved up through her workplace savings group with a dream to one day move her family to their own home.

Namubiru’s plan
After years of saving, with a bit of the first batch of savings, Namubiru acquired a piece of land (50 by 100) in Naalya. The construction process did not take off immediately because she thought it wise to save up enough to get the construction to roofing.
It was not until after two years that the shell was completed. Thereafter, plastering was done and six months down the road, it was habitable, “We then moved from the rented house. The joy was immense as the pressure of renting was off me long before I retired,” Namubiru says.

Invests in poultry
Namubiru has since left civil service and used her savings and two months of pension pay to start a chicken business.
“Apart from the proceeds from the chicken business, I used my monthly pension pay to cater for the daily home needs. I am thankful that I have a place of my own and a business which not only keeps me active but brings in money.”

Unfortunately, not all are this lucky yet we cannot turn back the hands of time to give you some time in office.
Nonetheless, you can plan for the years ahead so that you live in decency without you becoming dependant on any one.
Richard Byaruhanga, the managing director of NSSF, shares that there are different types of pension payments, a lump sum for those from private organisations and annuity for civil servants. “These can be invested to afford a pensioner a sustainably good life,” he says.

For a lump sum payment, Byaruhanga says, most people might try to complete a house. “However, it is not a wise idea because you will have nothing left for your daily expenses unless they are rentals. It is therefore best that one builds their house before retirement,” he says.
Even with rentals, Byaruhanga says the danger is that there is a lot of work involved before one starts realising returns as well as in the due course. “For example, you will need to look for the tenants, make repairs, and maintenance. All these are not only time consuming, but also require money which is in limited supply and your energy which is waning.”

He adds that others venture into business. However, most usually fail miserably because they either did not know much about the business but only dreamed of doing it someday or simply plunged into unknown waters. “More to that, business requires a lot of energy to see it start making profits yet sadly, you are not that agile anymore,” he shares. It also needs a lot of capital to make business work, “Data shows that 98 per cent of NSSF pensioners have used up their savings within two years,” he says.


Byaruhanga also advises against investing in shares, “All there is to earn are dividends which only come once a year. That makes them an unwise investments and cannot sustain one’s living. Even capital gains cannot be realised unless one sells out. This investment is only ideal if it is a long term investment.”
Livingstone Mukasa, the CEO of Mazima Retirement Plan, advises pensioners to reduce their risk appetite after retirement, “Inasmuch as you have to continue with your daily activities, you need to slow down if you are to sail through retirement. That said, wisely invest because there is need for your money to make more money so that you have a sustainable income.”

Fruits. With their house finished, they chose

Fruits. With their house finished, they chose to use the older house as a chicken house as they await proceeds to build a better and bigger chicken house.

While Mukasa is open to pensioners investing in real estate, he cautions that one should ensure they only start what they can finish. “It is of no use to start a huge project only to stop half way. You also have to have it at the back of your mind that chances are high you have no other way to finance its completion.” Byaruhanga advocates for marketable securities such as treasury bills, treasury bonds or fixed deposits.

“Although the returns are low for they are based on the interest rate on the market, one is assured of earning something every month that they can reinvest for daily income.”
Mukasa also advises that one uses their pension to earn a living while beating inflation and one of the best ways would be laddering.
“This is where you invest in different ventures that mature at different times, say quarterly. However, it is only great for people with a huge take home pension so that they can achieve great benefits.”

Laddering works for treasury bills and bonds where you have one maturing after very quarter or paying you quarterly instalments. The method can also be applied to things like forestry where you have trees at different ages. In all this, Mukasa says, “Take a bet and see how long you are likely to live. While it is a big gamble, it helps you to make projections on what you can do to keep you earning a daily income.”
On the other hand, Byaruhanga advises pensioners that it is wise to invest in various ventures such as real estate before retirement, “That will give you a more sustainable income.”