Diversification of its investment base coupled with good returns on these investments has boosted the National Social Security Fund (NSSF) capacity to pay its members 15 per cent interest for the financial year 2017/18, the highest rate ever paid out to contributors.
During the year, NSSF invested heavily in the fixed income segments and in shares of listed companies in Uganda and Kenya.
In the financial year 2016/17 the fund paid 11.23 per cent interest rate on members’ savings.
In a telephone interview with Daily Monitor shortly after its annual general meeting at Kampala Serena Hotel, NSSF managing director Mr Richard Byarugaba said its members should be happy because there is no any other investment in Uganda at the moment, paying a 15 per cent interest rate.
“We have had a good year (2017), we earned good returns on the fixed income and equity markets in East Africa the stock exchanges in Uganda and Kenya performed well in 2017. So, so we are sharing with our members the profits we have made,” he said
Mr Byarugaba said the fund’s total income grew by 77 percent from Shs912 billion in 2017 to Shs1.6 trillion, which was primarily due to a rise in investment income and member contributions, while total assets under management hit Shs9.98 trillion as at June 30, 2018, indicating a 26 percent increase from Shs7.92 trillion it registered in the previous year.
NSSF has between 800,000 and 900,000 active members who make regular contributions to the national saving scheme.
Going forward, he said, NSSF will continue to diversify its investment in the region by investing in long term fixed assets and in companies that are performing well.
“We have young members who are interested in long term tenure investments. So, we have to make allocations of our investments in long term investment in Uganda and in East African region,” he said.
However, commenting on the NSSF 15 per cent interest rate, the managing director of Alpha Capital, Mr Stephen Kaboyo said: “In my view, NSSF has defied all odds to announce a record interest rate of 15 per cent. It is a huge one considering the fact that during the second half of 2017, interest rates trended downwards underpinned by the monetary policy easing.”
He said: “At same time inflation dropped. Perhaps one thing that worked for them was the depreciation of the exchange rate which meant that part of the portfolio that was held outside Uganda did well after conversion into Uganda shilling.”
Mr Kaboyo said the announcement also makes a strong statement at the time of a raging debate on the liberalisation of the pension sector. He said the development demonstrates that NSSF can be as competitive just like any other market player.
“For this performance to be sustained, NSSF will have to look deeper at diversification of their portfolio, establishing multiple revenue streams, continue lowering their cost to income ratio and more importantly find innovative ways of addressing income volatility,” he said