The need for portability of benefits across EAC borders

Kampala, Uganda | THE INDEPENDENT | Since its establishment in 2014, the East African Pension Supervisors Association (EAPSA) has been promoting the pension agenda within the region focusing on mutual cooperation, information sharing, and capacity building among pension supervisory authorities. Key among the issues on the EAPSA agenda is the discussion on how to ensure portability of retirement benefits across the East African Community (EAC) member states.

Discussions have so far resulted in the development of a draft Council Directive on coordination of social security benefits. If adopted, the directive will facilitate the movement of workers across borders and eventual portability of benefits. This is anchored in Article 10 (3) (f) of the East African Common Markets Protocol which stipulates that the free movement of workers shall entitle them to enjoy the rights and benefits of social security as accorded to the workers of the host partners states.

According to URBRA Director Supervision and Market Conduct,  Daisy Nabakooza, the main reason for advocating portability of benefits, is to go past lumpsum payouts whenever people change jobs from country to country. The EAC common markets protocol allows for free movement of labour across borders – one can get a job in Kenya, Rwanda or any country in the EAC. Looking at this movement of labour, whatever is related to that labour should also be able to move, including retirement benefits. Most countries have allowed for transfer of benefits within their jurisdictions.

“It is important for benefits to be portable so as to build a fund for an indivudual. We want to move past the lumpsum payment and get into pension payments. This means that savings have to be built over a long period of working.  You cannot achieve that when people get their lumpsum benefits and go out everytime they change jobs and countries. You cannot drive towards pension benefits in a market where everyone gets their lumpsum and moves out,” Nabakooza said.

She expressed optimism that the proposed East African Retirement Benefits Bill will address the prevailing barriers to portability. The key barriers include: different tax regimes among EAC states; differences in the set up of pensions regulatory frameworks which are even absent in some countries; and difference in strength of currencies in different EAC states. The other issue is the minimum wage which is not harmonised across the region, or even non-existent in some member states.

At a personal level, people still have a lumpsum mindset and a poor saving culture. Many still want to take out their money whenever they change jobs, without due regard to how that affects their retirement package.