Minister says no to NOTU on NSSF

What is happening now?

Rubanda County East MP, Henry Musasizi, who is the chairperson of the Parliamentary Finance Committee which is handling the Bill told The Independent on August 10 that they have received proposals from many sector players, including workers, and are harmonizing them with the Ministry of Finance before presenting the Bill to Parliament for consideration.

Musasizi dismissed as untrue reports that the president ordered the withdrawal of the Bill from Parliament. However, he also raised concerns about the reforms when asked why the Bill had spent six years in Parliament without making any headway.

“It is a sensitive Bill,” Musasizi said, “There are many uncertainties surrounding it.”  He said, because of the Bill’s complexity, his committee visited Ghana to study its pension reform success story and is benchmarking Kenya, Malaysia, Nigeria, Chile and other countries that have succeeded in this area. He said his committee needs time to put everything together.

Law society, CMA speak out

But Francis Gimara, the president of the Uganda Law Society, says Musasizi’s Committee made a fatal error to proceed with the Bill without a strong law in place. He aid Parliament should first pass a comprehensive Trusteeship Law before passing the pension liberalisation law. According to him, since the Pension Bill states in part that the new saving schemes will be managed by trustees – just like the National Social Security Fund Board, it requires a strong law to regulate and hold trustees more accountable.

But supporters of the Bill like Keith Kalyegira; the CEO of Capital Markets Authority, say it must be passed quickly as it will increase retirement savings to up to 30% of GDP. He said reform should focus on increasing mandatory savings by reforming the public service pension scheme, limiting the full withdrawal of employee savings when they change employment, increasing the mandatory savings from a total of 15% to 20% with NSSF retaining a combined total of at least 10% of total savings, and making it mandatory for savings to be paid out monthly rather than as a lump-sum on retirement.

Generally, those behind the Bill say it will offer savers more options, end the monopoly of the National Social Security Fund (NSSF), and allow those who have saved money for more than 10 years to access 30% of their savings to secure mortgages or loans from any financial institution. It also seeks to convert the public service pension scheme from a defined benefit scheme (where no contributions are made by the civil servant) to a defined contribution scheme (where both the government and the civil servants make contributions to the scheme), and increase coverage to all formal sector workers (removing the 5+ cap) under the NSSF arrangement. This would expand pension coverage that is currently at 5%, according to the World Bank’s Uganda Economic Update for 2017.