NSSF members have a reason to celebrate

Fund pays 15% interest to members, the highest in history

Kampala, Uganda | JULIUS BUSINGE | National Social Security Fund rarely misses the opportunity to boast about the billions of shillings it rewards to its members every year in form of interest income. This was the same situation on August 28 as the pension fund announced a 15% interest rate on members’ contributions, the highest ever in the country’s history, during the 6th Annual General Meeting held at the Pearl of Africa Hotel in Kampala for the Financial Year 2017/18.

The announcement was made by the State Minister for Finance, Gabriel Ajedra Aridru. “The government is committed to supporting the fund…it is through such institutions [NSSF] that we will grow the culture of saving that we need as a country.

We remain steadfast on our focus on macroeconomic stability,” Ajedra said. “Each percentage point is equal to Shs73.5bn which means that the new rate translates into Shs1.1trillion that will be credited to members compared to Shs681bn paid out the previous year, equivalent to 61% increase.”

This year’s AGM was held at a time government was considering amending the NSSF Act to incorporate some issues that were raised during the pension sector liberalization consultations and debate in Parliament. Key issues among others includes; midterm access of savings, new products and widening the Fund’s scope of investment beyond East Africa.

The Fund’s Board Chairman, Patrick Kaberenge and Managing Director, Richard Byarugaba said the contribution had grown tremendously over the past years.

The duo informed members that the Fund’s Assets Under Management (AUM) had grown from Shs5.68trillion in 2015/2016 to slightly over Shs10trillion as at the end of July 30, 2018, with 75% of the total assets invested in fixed income (treasury bills and bonds), 18% in equities (listed companies), and about 7% in real estate.

They said 60% of the assets were invested in Uganda, 31% in Kenya, 8% in Tanzania and 1% in Rwanda. Kaberenge said that the Fund carefully assesses areas of investment before making final decision so as not to lose members’ savings to bad investments.

He defended the declared 15% interest rate for FY2017/18, the highest in the Fund’s history pegging it on the good performance of the economy. “We move with the economy; last year it wasn’t doing good and we managed 11.2%…,” he said adding, “As the years go by with the economy of Uganda growing, we think even Shs20trillion target by 2025 is an understatement.”

Kaberenge said that the 15% interest rate was higher than the 7.4% ten year average inflation rate – meaning the members attained value for their money – and that signified the good governance and current status of the Fund. According to its financials, the Fund’s total income grew by 77% to Shs1.6 trillion before interest to members and taxes compared with a year earlier citing rise in investment income, strong recovery of regional equity markets and depreciation of the local currency.

Its total Assets Under Management (AUM) also hit Shs9.98trillion as at June 30, 2018, representing a 26% increase from Shs7.92trillion the previous financial year. “Uganda experienced improved economic growth of 5.8% compared to 3.9% the previous financial year, which meant that generally, the investment environment saw significant improvements at a macro level,” Byarugaba said adding, “We were also aggressive in the market, seizing opportunities presented by growth in regional markets especially in Uganda and Kenya.”

Total member contributions also increased by 14% to Shs1.05trillion for the FY2017/2018 compared to Shs917billion the previous year. This was the first time in the history of the Fund, that it recorded over a trillion shillings in collections from members.

It was attributed to a steady rise in compliance level reported at 81% over a three months’ period, and contributions from the Fund’s voluntary members totaling to 10,000 as at June 30, 2018. Benefits paid to qualifying members rose by 29% to Shs360billion for FY2017/2018 from Shs278billion the previous year.

Byarugaba also said that the Fund continues to effectively manage its costs. The cost to income ratio declined by 1% to 12.6% for the Financial Year 2017/2018 from 13.4% the previous year. The Fund currently has 2.2million members but only 900,000 are active.

The target is to have 5 million by 2025. “We have not only grown more efficient in the way we do business, but we have maintained the required discipline to ensure high levels of productivity at the lowest cost possible,” he said, adding, “This is a commitment we made and we will continue to focus on creating value for our members at a low cost.”

Despite of this record performance, members raised issues regarding possible access to their savings before the mandatory 55 years, introduction of new retirement packages inform of housing and property instead of cash, and investment beyond the East African region.

However, Ajedra said the issues raised would be given priority by government in addition to the amendment of the Public Procurement and Disposal of Public Assets law to ease the investment process of the Fund.