Bank of Uganda has
opposed some provisions in the National Social Security Fund Amendment Bill,
2019 as unfair to other pension sector players.
The BoU Deputy Governor,
Louis Kasekende disclosed this while leading a delegation officials from the central bank to submit
their views on the NSSF Bill, which is being scrutinized by the joint Finance
and Gender Committee on Tuesday.
The Bill seeks to
among others make it mandatory for all workers to register and contribute to
NSSF, allow self-employed people to contribute to NSSF, provide for midterm
access to benefits for only voluntary members and that the NSSF board
shall have a role in the appointment of the Managing Director.
The Bill also seeks to provide for taxing benefits of savers who withdraw before
attaining the age of 60 years but exempts employer’s and employee’s
contributions below 30 percent of their income and investment income of NSSF.
However, Kasekende says pension reforms should be industry-wide as opposed to
just focusing on the NSSF, saying “a sector-wide approach is more likely to
result in a fair and equitable outcome for all concerned stakeholders.”
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The other retirement
benefit schemes include the Public Service Pension Scheme Parliamentary Pension
Scheme and Bank of Uganda Pension Scheme and over 60 other licensed umbrella
schemes and voluntary schemes. According to Kasekende,
“piecemeal reforms have a potential to introduce contradictions that may
undermine confidence in building a savings culture for retirement”.
He urged the committee to consider implications of some of the proposed
provisions in the NSSF Bill to the pension industry as a whole. These
include among others allowing NSSF to use in-house expertise in fund management to build internal capacity
and reduce the cost of external fund management.
However, Kasekende says there is need for uniformity for all retirement schemes
to use in-house resources and the committee should amend the Uganda Retirement
Benefits Regulatory Authority Act, 2011 to ensure equity for all
schemes. The Act prohibits an administrator of a benefits scheme from
acting as a fund manager of the same scheme.
Kasekende however proposes that in-house fund management regulations should be
clear and that schemes should demonstrate internal capacity to credibly manage
the funds among others. He also argues that “any cap on URBRA compulsory
annual levies given to NSSF should be extended to all schemes.”
He said tax treatment of pensions should be equitable and fair to all
retirement schemes. Kasekende however noted that the proposal to tax
benefits of members who access benefits below 60 years old contravenes the 1995
Uganda Constitution and URBRA Act, 2011, which exempt pension benefits from
He explains that any taxation policy for the sector should consider the
need to preserve confidence in saving for the future, saying taxation at pay
out time may undermine the confidence that NSSF members have acquired over time
due to comfort and ability to monitor the status of their fund credit.
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He has also urged MPs
to ensure that the law is not “too generously in favor of midterm access so
that the principal objective and viability of retirement funds is not
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Labwor County MP, Michael Ayepa and Kachumbala County MP, Patrick Isiagi
disagreed on midterm access. Isiagi opposed the provision for midterm access
for even voluntary contributors while Ayepa argued that some members may need to
get access to their contributions before attaining 55 or 60 years to cater for
mortgages, schools fees and other challenges resulting from unemployment.
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The Finance Committee chairperson, Jane Avur Pacuto asked the members to consider
investing from the remaining 95 percent of their incomes so that the
contributions in NSSF are not accessed before full term.