Dissolving National Social Security Fund (NSSF) will yet be among other mis-advised moves by the NRM Government. What Government ought to do is simple. Have the sector liberalized but leave the NSSF investments intact such that the workers are at liberty to make savings with companies that will be players in the sector, without having to request NSSF to part with the workers' savings it is holding. Instead, Government should stop encroaching on savings by the workers. Uganda lisks moves which may see the economy completely collapse. With what has gone on in the privatization, it is ill advised to think of selling assets of NSSF.
William Kituuka Kiwanuka
NSSF boss Richard Byarugaba
By Vision reporter
THE National Social Security Fund (NSSF) is to dissolve in preparation for the liberalisation of the sector, Sunday Vision has learnt.
As part of the measures, the fund will sell shares held in various companies on the stock market. It has already sold shares previously held in Stanbic Bank.
It will also dispose off most of its assets. Some assets, however, are subject to litigation and are giving the managers a headache.
“The head of the investment department has all information about the assets to be sold,” a source told Sunday Vision. Efforts to get a comment from the department were futile.
Anxiety has gripped NSSF staff following the announcement of a shakeup, as most of them are losing their jobs. Only 67 staff will be retained.
When transformed into a pension scheme, NSSF will pay its savers a monthly pension, but not give them their full savings when they qualify, as has been the case.
This is part of an aggressive shakeup of its operations and investment mix in an effort to prepare for competition as new players move into the market.
Early this year, Parliament enacted a law to create a regulator for the pensions market. It is now in the process of debating another bill that will open up the pensions market to other players.
The Retirement Benefit Authority Act takes precedence over all existing acts relating to establishment, operation, management and regulation of retirement benefit schemes.
The Bill requires and calls for separation of functions, specifically the administration, trustee, custodian and fund manager functions that NSSF currently handles in-house.
Delays in passing the second bill, which will fully liberalise the pension sector, is intended to provide adequate provisions for a smooth transition to prevent confusion and poses risks for the workers’ savings.
“We could not pass that Bill which is about liberalisation of the pension sector before a regulator is in place,” Aston Kajara, the privatisation state minister told Sunday Vision before advising this newspaper to contact Maria Kiwanuka, who is the new finance minister.
However, attempts to get a comment from her were futile as her office telephone was picked by her aide who promised to call back, but did not.
Sources said the Government had decided to expedite the transition and the second Bill would soon be tabled before Parliament.
Previous efforts to open up the sector were hindered by lack of funds.
Now, the World Bank has agreed to extend $50m (sh130b) loan to “help build a more efficient, robust and deeper financial sector, which can support broad-based private sector growth”.
The first pillar will concentrate on supporting the development of a market for pension system reform, specifically supporting the emergence of a regulated, competitive and sustainable pension industry catering for both mandatory and voluntary pension savings.
NSSF properties include Workers’ House, Social Security House, Pension Towers, Nsimbe Estate and plots of land in Temangalo, Lubowa, Mbuya and Naguru, among others.
However, Workers’ House, Nsimbe and Lubowa estates are involved in cases of litigation, which is currently disturbing the fund managers.
In December, the fund sold 40 million Stanbic Bank shares at sh11b, making it the largest single trade since the Uganda Securities Exchange opened about 12 years ago.
Efforts to reach Richard Byarugaba, the fund’s chief executive officer, were futile as he was reportedly out of the country. Olive Lumonya, the NSSF branding and marketing manager, said investment decisions were made by the firm’s head of investments.
In April, Byarugaba said the fund was readying itself for completion. “A lot of our internal systems are being readjusted. We are improving service delivery channels with a view of becoming more efficient,” he said.
“We are also undergoing a restructuring process that will make us leaner but more efficient.
There have been many calls to liberalise and reform the pension sector, especially on account of the numerous financial scandals which have dogged the fund over the years.
Under the law, all workers are required to save with NSSF.
The Fund takes 5% of the salary, while the employer tops it with 10%. However, the workers can only get their benefits after clocking 55 years.
Workers have always complained that they can’t use their savings as security for loans and NSSF pays interest below the inflation rate.
In the proposed changes, retiring workers will get 30% of their savings and continue getting a monthly pension for the rest of their life.
Published on: Saturday, 23rd July, 2011