MPs should endorse proposed NSSF reforms

The Cabinet has made key proposals which, if endorsed by Parliament, will have a lasting impact on the operations of the National Social Security Fund (NSSF).

Government established NSSF in 1985 as a provident scheme. The Fund superintends the collection of contributions from private sector workers, its investment and settlement of benefits to members.

The Workers’ Fund is worth Shs10 trillion, according to information on its website, making it an elephant in Uganda’s financial sector. And this has been its Achilles Heels too. It has in the past tempted some top managers and politicians to either fiddle with the cash or clamour for the institution’s control.

In a storm of alleged maladministration and less-than-satisfactory returns on investment, the government moved the Fund’s supervision from Gender and Labour ministry to Finance. Reason? Better expert direction. Fifteen years later, the Cabinet wants NSSF to revert to the former parent ministry. That would be a homecoming.

The more radical reform proposal is lowering the minimum age for eligibility for benefits to 45 years in spite of increasing life expectancy.

Under the current NSSF Act, a member can be paid benefits if 50-years-old and unemployed or on attainment of 55 years. The other qualifiers comprise emigration, bagging a government job or contributing to similar schemes.

Currently, an employer each month remits to NSSF five per cent and 10 per cent of an employee’s salary, in direct and indirect deductions. That amounts to 15 per cent of one’s pay. For many in certain income category, the government deducts another 30 per cent monthly in pay-as-you-earn tax. These combined slash a worker’s actual take-home by 45 per cent. Add to that local service tax and Value-Added-Tax.

Besides, there are inescapable overhead costs on food, housing, clothing, medical care and transport. Add tuition, and an employee is stripped of any disposable income.

This is why we welcome the Cabinet resolution. Providing early access to a portion or whole of one’s savings at 45 years is in our view economically sensible since the individual will have both the physical energy and agility of mind to invest in order to create new personal revenue streams.

We argue that this is better a buffer against the vagaries of old age when people are likely jobless yet vulnerable to diseases that are costly to treat. This indeed is the quintessential purpose of NSSF.

In the alternative, the Fund must have add-on services for members such as mortgage arrangements, direct borrowing or borrowing for investment against one’s savings. Inflation overtime erodes the value of fixed savings. NSSF should provide value for contributors beyond interest and actual saved amount.