NSSF ready to pay ‘mid-term’ starting March 17

Kampala, Uganda | THE INDEPENDENT & URN |  In accordance with the National Social Security Act (2022), the National Social Security Fund (NSSF) will commence payments to eligible members for the ‘Mid-term access’ in respect to Section 20A (1), (2), effective March 17th.

This was revealed today by Richard Byarugaba, the NSSF managing director, during a media dialogue that took place at Serena Hotel.

Section 24A of the Bill provides that “a member who is forty-five years of age and above and who has made contributions to the Fund for at least 10 years is eligible to mid-term access to his or her benefits of a sum not exceeding 20% of his or her accrued benefits”.

NSSF says about 41,174 members are eligible for mid term benefits access as of March 1, 2022. Qualifying members who have updated their contact details will receive a confirmatory SMS this week.

Byarugaba emphasized to the media that payment systems have been put in place to enable the payments.

“Today we have started receiving applications for qualifying members of the mid-term Benefit and I want to assure all NSSF members and Ugandans that we are more than ready to start paying out money to eligible members. In accordance with the regulations – stipulated by the Minister of Gender, Labour and Social Development last week, a National ID, Verifiable mobile phone number, verifiable Bank Account, NSSF Number, 1 e-photo is all that is required to finalise the verification and application process,” he said.

SCOUL and Kakira Sugar are the leading companies with the biggest number of members eligible for mid-term, with over 1,000 each.

“Up to 57% of the payments will be below sh10m. Qualifying members whose NSSF balances are below sh15 million can apply with *165*6*4# on MTN and *185*7*5# on Airtel,” Byarugaba told the press. Applications can also be done on the NSSF website.

He said up to sh1 trillion has been earmarked for Midterm Benefit payment, which averages sh50 billion per week.

Byarugaba however warned that the interest payable to its contributors starting this year is likely to fall below double digits that has been paid out in recent years, following the implementation of the midterm access payment to qualifying members.

In preparation for the mid-term access payout to qualifying members which commenced today, the NSSF took a number of measures that will have a direct impact on the interest accumulated by the savers by the end of the year.

Byarugaba, revealed that in order to see that there is available cash to pay qualifying members, the fund has not invested in (more profitable) long-term bonds since June 2021, because they were uncertain of when the law would be passed.

Without being exact on the anticipated interest rate (which traditionally is only announced by the minister) Byarugaba explains that their decision has affected NSSF’s proceeds and as of February, the fund had only hit 10% of the projected 11.7% of its profits and this is not likely to get any better.

“The bonds we have been investing in, have a yield of 7 percent interest unlike those investments with 15 percent and this has affected the Fund,” Byarugaba explained.

Since 2012, NSSF has offered a double-digit interest rate to its members, even in the two years when the Covid-19 challenged economy. The Fund paid 10.75% and 12.15% for the financial years 2019/20 and 2020/21 respectively.

In January, presented Museveni signed into law the NSSF amendment act 2021 which provided for midterm access of up to 20% of the accrued benefit to members who have contributed for at least 10 years and have clocked 45 years and more, or 40 years for people with disabilities.

Now, a total of 41,174 members are expected to access up to 19 million each on average. In total, the fund expects to pay 793 billion shillings more on top of the 900 billion normal annual benefits payment, and this totals to a 1.6 trillion-shilling payout this financial year.

According to Byarugaba, NSSF payouts this financial year will surpass its incoming contributions and this is the first time ever that has happened. They expected to receive 1.5 trillion shillings, but indicators show they can only achieve 1.4 trillion.

Beneficiaries who will apply for midterm access i.e. before October when the finance minister declares the new interest payout rate, will earn the statutory 2.5% on the money they would have applied for.

The managing distractor says that since the fund is a defined contribution scheme, the investment risk falls on the members unlike in the defined benefits scheme where such a risk would be for the employer.

He adds that under a contribution benefits scheme as NSSF is, if some members opt to get out before the others, the remaining members may have to cover the cost through lower interests;

Among other amendments made in the NSSF act, the fund is now allowed to enroll the informal sector members, and this will call for a different way of running the fund like creating two funds, one which continues to maintain the long-term fund and one for the short term i.e. 5 years and below which will accommodate the midterm beneficiaries and the informal sector contributors.