Pension sector savings grow to Shs14 trillion

The contributions of retirement and pension schemes to gross domestic product has increased from 8.5 per cent in 2017 to 10.3 per cent for the period ended December 2019, according to the Uganda Retirement Benefits Regulatory Authority (URBRA).

This growth is reflected in the retirement benefits sector investment portfolio that increased from Shs11.8 trillion in 2018 to Shs14.28 trillion in 2019.
However, more than a third of the portfolio, which is about Shs11.3 trillion, is held by National Social Security Fund (NSSF).
Mr Martin Nsubuga, URBRA, chief executive officer, while explaining the 2019 annual sector performance report, said the positive trend is attributed to a strong and efficient supervisory regime.

“Over the last five years, the sector has consistently registered efficiency in scheme administration, reducing the sector expense ratio of expenditures as a percentage of total assets to 1.3 per cent in 2019 from more than 3.5 per cent before 2014,” he said.

The stringent supervisory demands and statutory requirements for disclosures, URBRA said, have helped to reduce trustee excesses that used to claw into members’ savings.
The sector performance report indicates that over the last five years, the retirement benefits sector has achieved an average growth in assets of 20 per cent annually largely on account of investment returns, giving savers an average interest of 10 per cent per annum.

“This steady sector growth rate has been attained despite relatively low industry coverage,” he said.
According to the national labour force survey of 2016/17, the size of the working population in Uganda is estimated at 15.3 million.

However, only 16 per cent of the working population is under some form of retirement benefits arrangement.
“If the entire working force were covered, the sector’s contribution to GDP would be even bigger,” Mr Nsubuga said.
Contributions increase
Throughout the year, employers, employees and voluntary savers, remained consistent in remitting contributions toward retirement savings.
Total contributions increased to Shs1.5 trillion from Shs1.28 trillion in 2018.

The increase was mainly attributed to improved compliance in remittance by employers, registration of new employers and employees, as well as increase in salaries. “With voluntary retirement savings, individuals could save as little as Shs2,000, meaning that even low-income earners, particularly in the informal sector, could also save and invest,” the Mr Benjamin Mukiibi, the URBRA head of research, said, noting at least Shs575b was paid out to retiring and retired members during 2019 up from Shs462b in 2018.

Mr Mukiibi said URBRA’s enforcement of high standards has significantly improved sector performance and efficiency with the ultimate aim of ensuring safety of members’ retirement benefits.

Challenges
The pension and retirement sector continues to experience challenges, operating as a semi-monopoly patroniesed by National Social Security Fund.
The push to liberalise the sector remains unsuccessful with a Bill – Retirement Benefits Sector Liberalisation Bill, continuing to gather dust in Parliament since 2011.

To date, there are 68 licenced retirement benefits schemes, 52 segregated supplementary occupational voluntary schemes, 12 umbrella schemes to 168 employers’ plans, and supplementary voluntary individual schemes.
Among the schemes supervised by URBRA are the three mandatory schemes established by Acts of Parliament including National Social Security Fund (NSSF), Parliamentary Pension Scheme and the Public Service Pension Scheme.