NSSF benefits not sufficient in retirement – report

Majority of retirees spend most of their benefits (money) on education of their family and relatives, buying land, building a house and investing in a business, according to NSSF National Beneficiaries Survey Report released on March 21.

Importantly perhaps, by the time of retirement not many retirees have saved enough money to accomplish the aforementioned needs and demands. This is because the average amount paid to beneficiaries is about Shs24 million.

However, 60 per cent, according to the report received less than Shs10 Million. This, according to NSSF senior management, is an indication that benefits (savings) are not sufficient for retirement. And for that, members need to be educated on how to multiply the meagre benefits in order to survive on them for longer.

The report reveals that education ranked highest at 40 per cent in terms of expenditure. This is followed by buying land and improving a house at 34 per cent and 33 per cent respectively.

Dangerous business, working overtime 

The findings of the report also indicate that members who venture into business face the most uncertain prospects due to the high business failure rate especially for new micro enterprises.

“Business is not a significant survival option for the surveyed retirees, only 18 per cent were surviving on business income,” reads the report in part.

In terms of readiness to receive benefits, beneficiaries aged 45 and above were fully prepared, this however was determined by the want for the benefit but not necessarily reflecting the proper utilisation of the funds.

According to the report, there is a high dependency rate for the beneficiaries over the age of 45. Majority in this age group still have major responsibilities like education and housing to deal with. This is in addition to having the bulk of the benefits (savings) put to none income generating expenses, limiting benefits shelf life.

As a result of the continued pressures, retirees shoulder immense responsibility over dependents well into their retirement.

Due to this, many opt to continue working to keep afloat. The report found out that 6 out of 10 beneficiaries are still involved in active employment even after retirement and collecting their full benefits-savings. 45 per cent of those aged 50 and above were still working full or part time.

Rigidity

Explaining the state of affairs most retirees find themselves in, according to Mr Patrick Ayota, the NSSF Managing Director, begins with the fixed mindset.

He said despite a very low reach of financial literacy among beneficiaries about 79 per cent of the beneficiaries already had fixed plans for their benefits before they were paid by NSSF. 

He said: “About 66 per cent of beneficiaries did not seek any advice before or after receiving the benefits. This points to a fact that most of the decisions made are based on the experience of the beneficiary which has been created over their work life and they see no need further consultations.”

The need of life after retirement are not being met by just the NSSF benefits but through a combo of other strategies.

According to economist Fred Muhumuza, not many retirees have the kind of money that can generate them sufficient return from financial market space.

He also notes that the small tickets size of the investments made imply that the modest returns available on the financial markets do not attract members to invest there, this is coupled with a possible low level of familiarity and awareness of these options.

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