Mr Martin Nsubuga, the chief executive officer of  Uganda Retirement Benefits Regulatory Authority. PHOTO/ISMAIL MUSA LADU


Don’t be trapped in old age poverty, says URBRA boss

What you need to know:

Uganda Retirement Benefits Regulatory Authority (URBRA), the country’s pension sector regulator, is concerned about low sector coverage. In an interview with the Prosper Magazine’s Ismail Musa Ladu, URBRA’s chief executive officer, Mr Martin Nsubuga, explains how sector coverage can be widened.

You are a committed advocate of saving for old age. Why aren’t Ugandans saving for retirement?    
Out of a working population of more than 20 million, only 3.02 million are covered by over 60 retirement benefits schemes. Although there has been significant progress made in terms of sector coverage, the number remains significantly low compared to the working population.

 One of the key challenges is that the labour market is largely informal, meaning many of them are excluded from mandatory. 

But that shouldn’t be a problem as long as they earn some money, right?
Granted, but further evidence shows that while some may take the individual initiative to save, they do so with unlicensed, unregulated entities. We have also seen a 2020 Financial Capability Survey conducted by Bank of Uganda revealing that the top saving mechanisms for informal sector players include Village Saving and Loan Associations (VSLA) and saving boxes.

Other people save in cash rounds also known as merry-go-round, while some keep their savings with friends and relatives.
The big issue is that people in the informal sector are more likely to be excluded from the safe and secure platforms where funds are managed and invested according to established principles, with emphasis on security and favourable outcomes for the saver.

There are many other ways in which people can be excluded from the full benefits of the retirement savings programmes. Would you want to explain some of them?
Some of the factors that may perpetuate exclusion include geographical location in a sense that financial services and Retirement Benefits Services in particular, are still perceived as a preserve of urban, elite settings. Many remote areas are yet to be reached by schemes and service providers.

As much as technology has improved access to financial services, there are still many people who are not tech-savvy. 

According to Uganda Bureau of Statistics (Ubos) regarding the national labour force, 50 percent of men are employed, compared to 40 percent of women. Going by the Ubos report, more men are engaged in paid employment while women spend up to 30 hours a week on unpaid domestic chores.

Even when formally employed, women tend to concentrate in less-paying service work and elementary occupations rather than highly-paid professional work and key positions such as chief executive officers and senior officials. All these circumstances have implications for women’s retirement savings, and must be addressed so that no woman is left behind.

The issue of irregular remittance of contributions remains a key concern for us because it disadvantages many savers. We always make supervisory interventions to recover unremitted contributions. In FY 2021/22 alone, we recovered Shs3.6b in unremitted contributions. Non-compliant employers can easily lead to the exclusion of some individuals from the full benefits of retirement benefits arrangements.

Importantly, high unemployment rates and poverty levels must be addressed. While the aspiration is to have all Ugandans saving for retirement, many are constrained by unemployment. The youth unemployment rate for example, is estimated at 17 per cent which is quite high. This situation leads to the exclusion of many people from retirement saving arrangements.

And then the matter of inadequate savings. For those covered by the existing sector arrangements and products, the issue of adequacy remains critical. It is good to save for retirement, but it is better to save funds that will enable one to afford the important requirements of old age. Ideally, in retirement, one should access affordable health care, live in a decent place, and have a reliable cash flow among other requirements. That is why I advocate for old age saving—it will come in handy.

In the recent National Social Security Fund (NSSF) Annual Members’ Meeting, it was reported that over 80 per cent of the registered savers had less than Shs10 million shillings in their retirement benefits accounts. Other members remain inactive for extended periods, which affects their accrued benefits! All these realities speak to the need for meaningful inclusion and adequacy of retirement benefits.

So how much should one save frequently before retirement?
 Experts recommend that one needs up to 70 per cent of their pre-retirement monthly income to sustain the life they led prior to retirement. But in Africa and Uganda, those who are saving are not saving enough due to low and infrequent contributions. 

Judging by the contribution to mandatory schemes, which is only 15 percent of one’s monthly gross earnings, many people’s retirement income may not meet the recommended 70 per cent replacement ratio.

 So going forward, what should happen?
Governments and all key stakeholders should, therefore, seek ways of addressing the key factors that impede inclusion and adequacy. Policies and regulations are important, but there is need for the population to adjust their mindset and fully embrace long-term retirement planning and saving.

There are good reasons why all players should work towards inclusive pensions and retirement benefits arrangements. It is important to realise that old age does not discriminate. It comes to all, no matter your economic, social or education background. Once you get too old to work, you must retire, and there is a need for all to have a sound retirement plan.

It is estimated that the population of older persons will continue to grow owing to developments in science, improved health care which contribute to a longer life. If the current trend of low coverage, the country risks having an ever-growing number of older persons wallowing in old age poverty. It is also important to note that Inclusiveness has implications for the economy. With the current rate of coverage, the sector accounts for over 60 per cent of Uganda’s domestic savings and 12 per cent of the national GDP. That contribution can get even better if coverage and inclusion are emphasized.

There is this continental conference that you are set to host, which also coincides with the Annual Pension Symposium. How will it further the conversation on old age saving or the retirement plan?
It is going to be a very important dialogue for the pension sector. The 4th Annual Conference Africa Pension Supervisors Association (APSA) will attract delegates from different parts of the world, seeking to exchange insights and ideas to promote pension inclusion. 

The ideas generated will feed into policy and practice required to increase pension inclusion.  The objective really is to identify, explore and build shared understanding of pension inclusion challenges not only in Uganda but Africa as whole. This we hope will set a stage for delivering an integrated pension and retirement benefits solution to excluded individuals across the continent.