NSSF contributors to earn Shs 1.38 trillion

This is the lowest interest rate in the past 10 years citing mid-term payments and a tough economic environment

Kampala, Uganda | PATRICIA AKANKWATSA | The National Social Security Fund contributors are set to earn 9.65% interest on their savings for the financial year 2021/22 translating into Shs1.38 trillion. This is the lowest interest ever recorded in the past 10 years.

Henry Musasazi, the Finance Minister in charge of General Duties, who declared the interest at the 10^th Annual Members General Meeting on Sept.27, said mid-term payments reduced the available funds for investment and distorted NSSF’s investment portfolio by pushing more funds into short-term ventures that earn lower returns.

The Fund operationalised the mid-term benefit in March this year, in line with Section 20(A) of the NSSF (Amendment) Act, 2021. The amendment grants savers aged 45 or older, and have contributed to the Fund for at least 10 years, access to 20% of their benefits, while a person with a disability, if 40 years or older, is eligible to receive up to half of their savings.

“The interest declared is above the 10 years average rate of inflation which stood at 5.5% as at end of June 2022 and is a competitive rate in the market this year, given the economic shocks faced in 2020 that have continued to impact the global economy to date,” he said.

NSSF Managing Director, Richard Byarugaba said the low-interest pay-out is attributed to the reallocation of investment in long-term to short-term fixed income instruments to provide liquidity for mid-term payouts, inflation pressures, and spillovers from turbulence in the global economy.

“The Fund this year paid an unprecedented Shs. 1.19 trillion in total benefits to members, over 40% of which went to midterm payments. We had to invest in short-term instruments whose returns are lower to provide for liquidity to pay eligible mid-term benefits to claimants,” he said.

“Further, several shocks hit the world economy which had already been crippled by the COVID-19 pandemic, including higher than expected inflation the world over, spillovers from the war in Ukraine as well as production slowdown in China.

“All these impacted the projected global economic growth from 6.1% to 3.2% in 2022 which ripple effects we felt in the dip of East African regional markets, where NSSF holds several investments,” he added.

Byarugaba said the strategic decision to make short-term investments to have liquidity for midterm access shed 0.69% points off the potential interest and the volatility of East African markets also cost a potential 1.75% in interest that would have put this year’s interest almost at parity with the previous years.

Asset base surges

Other performance indicators show that the Funds Assets under Management increased by 11% to Shs17.3trillion and member contributions increased by 9% to Shs1.48trillion during the same period under review.

Amongi Betty Ongom, the Minister for Gender, Labour and Social Development who presided over the Annual Members Meeting congratulated the Fund for its good performance and commended it for efficiently executing the midterm benefits payment that is one of the key provisions in the NSSF Amendment Act 2021.

“All qualifying members who applied for mid-term have been paid, and all received their money in just 9 days, compared to the statutory 45 working days in the Regulations,” She said.

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