NSSF savers ruled out of house loans

Potential buyers inspect a home in Regina Estate in Lubowa, Wakiso District recently. Photo/Ismail Kezaala

What you need to know:

NSSF says the law establishing the Fund, the NSSF Act, debars such charges on a saver’s account, or payable benefits.

National Social Security Fund (NSSF) members, whose numbers and contributions tower in Uganda’s retirement and pension sector, are ineligible to swap their accrued benefits for housing loan due to conflicting legislations.
Mr Richard Byarugaba, the NSSF managing director, yesterday said the law establishing the Fund, otherwise called the NSSF Act, debars such charges on a saver’s account, or payable benefits.

Why retirement benefits structure must change
The conflicts in the provisions of the NSSF legislation and that of Uganda Retirement Benefits Regulatory Authority (URBRA), which is the sector regulator, bubbled to the surface after the latter on Tuesday launched a Regulation to permit members of retirement schemes to swap up to 50 percent of their accrued benefits for either a mortgage or loan for residential house acquisition.

Finance Minister Matia Kasaija, who is the political overseer of the sector, billed the Uganda Retirement Benefits Regulatory Authority (Assignment of Retirement Benefits for Mortgages and Loans) Regulations, 2022 as panacea for solving the housing shortage in the country than grosses two million.
“The key objective of the regulation,” he said as he launched the rules this week, “is to ensure that retirees have decent shelter so that they don’t suffer homelessness and indignity.”
The Regulation gazetted on February 25 provides that beneficiaries will be able “to assign up to 50 percent of their accrued benefits as security for a mortgage or loan for purchasing a residential house before they reach retirement”.

However, as the cloud of fanfare and glitz at the event drifted away and the implication of the policy took shape, sector players, including NSSF’s Byarugaba, who attended the launch, became alive to a legal conundrum.
At the launch on Tuesday, he had praised the new Regulation as the key to “unlock the full potential of Uganda’s mortgage industry”.
“We are big fans of the mortgage market and we have always wanted the people of Uganda to access the mortgage market because we believe utilising 50 percent of your savings as collateral is a much better use of your benefits than the 20 percent midterm,” he said.

But when he returned to discuss the subject yesterday, Mr Byarugaba’s enthusiasm was present, yet he reported his hands were tied.
“My (NSSF) law does not allow me to do that. We love it (the Regulation), we have been trying to do it, but we cannot do it now because of the law even if you asked me how we would do it,” he said, adding Fund members would only benefit if the law was amended.

Section 35(4) of the NSSF Act provides that “subject to this Act, any assignment of or charge on the account of a member of the Fund, or any benefit payable out of this account or any agreement to assign or charge any such account or benefit, shall be void”.
However, both the URBRA Act, 2011, and the Regulation issued roughly three months ago, contravene the provisions of the NSSF Act, itself amended only last year to provide for mid-term access for members aged 45 and above and who have contributed to the Fund for at least a decade.

The Regulation launched on Tuesday operationalises Section 68(2)a of the URBRA Act, 2011, which states that: “A prescribed proportion of the benefits accruing to a member in a retirement benefits scheme may be assigned and used by the member to— (a) secure a mortgage or a loan for purchasing a residential house from any institution and on such terms as may be prescribed in regulations made under this Act.”
It remained unclear why officials, including the Chambers of the Attorney General, who clears all laws and regulations issued under them as chief legal advisor to government, did not catch the conflicting provisions.

Attorney General Kiryowa Kiwanuka said last night that he was out of the country, and unable to comment.    
In Kampala, URBRA chief executive officer, Mr Martin Nsubuga, in a rejoinder, said NSSF will have to comply because the law establishing URBRA as a sector regulator is “supreme” over all retirement schemes.
“We are aware [of NSSF’s interpretation], but the URBRA Act is superior, and the Regulations, therefore, would apply [to NSSF and its members],” he added.

Section 95 of the URBRA Act provides that: “This Act takes precedence over all existing Acts relating to establishment, operation, management, and regulation of retirement benefits schemes, and where there is a conflict between this Act and any other written law other than the Constitution, this Act shall prevail.
We were unable to establish whether an Act of Parliament can amend another by infection, or the changes would require either a repeal or substantive amendment by the House. 

NSSF is a financial elephant in town; it has more than two million members and it is worth Shs15 trillion, making it healthier and wealthier than several commercial banks in Uganda.
Thus, its members’ ineligibility under the benefits-for-housing loan arrangement would take the sting out of the effectiveness of the scheme.
Presented with the URBRA chief executive officer Nsubuga’s interpretation that NSSF must comply, Mr Byarugaba responded: 

“The law of URBRA says every scheme should have a scheme deed, which determines how a scheme operates, and forms a scheme. We do not have one, so how can you say their law is supreme over us. We were formed by an Act of Parliament. My legal team tells me the law has to be amended.”
This unfolding back-and-forth and disagreement over interpretation of the mother Acts of NSSF and URBRA implies a resolution will likely take longer if members are to benefit and will require one of three options: await a binding legal opinion of the Attorney General, Parliament amends one or both laws, and or contention goes to, and is adjudicated, by court --- if administrative processes fail.


THE CONFLICTING LAWS
“A prescribed proportion of the benefits accruing to a member in a retirement benefits scheme may be assigned and used by the member to— (a) secure a mortgage or a loan for purchasing a residential house from any institution and on such terms as may be prescribed in regulations made under this Act.”  Section 68 (2) (a), Uganda Retirement Benefits Regulatory Authority (URBRA) Act, 2011
 
“A member may enter into an agreement with an institution to use his or her accrued benefits as security for a mortgage or a loan for purchasing a residential house in accordance with these Regulations.” 
Uganda Retirement Benefits Regulatory Authority (Assignment of Retirement Benefits for Mortgages and Loans) Regulations, 2022
 
“Subject to this Act, any assignment of, or charge on the account of a member of the Fund or any benefit payable out of this account or any agreement to assign or charge any such account or benefit shall be void.”
Clause 25, Section 4 of the National Social Security Fund (NSSF) Act.
 
“This Act takes precedence over all existing Acts relating to establishment, operation, management, and regulation of retirement benefits schemes, and where there is a conflict between this Act and any other written law other than the Constitution, this Act shall prevail.”
Section 95 of the URBRA Act.

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