Civil Servants to Pay for Their Retirement

When the UPDF top officials appeared before the parliamentary committee on Defence and Internal Affairs in September, they were accused of keeping “disgruntled soldiers in the military which is a threat to national security.”

In their report to the House, the MPs said: “It’s not only unconstitutional but also a gross violation of human rights of soldiers when they apply for retirement and they are denied the chance.”

But while speaking to the press recently, Chief of Defence Forces Katumba Wamala explained: “We don’t want to retire our people when their retirement package is not ready. We feel constrained when we retire our people and they are not getting their pension.”

Today, more than 2,000 soldiers want to retire but have not been granted their wish for one reason: there is no money to pay them. The problem cuts across the public service arena, where, besides inadequate funds, there is glaring rot in the general system, which requires immediate resuscitation, said Rita Nansasi, the legal services manager at the Uganda Retirement Benefits Regulatory Authority (URBRA).

Every day, tens of former government employees flock the ministry of Public Service to ask for their money. Often times, they hit a dead end. Some retirees have found their names missing from the public service records. Others have been underpaid while the unlucky ones died before receiving their packages.

Unlike soldiers, other government departments are allowed to retire their workers when they clock 60, although it’s not a guarantee that one will get his or her money. Yet like other Ugandans, these pensioners are faced with challenges of sustaining larger families and children.

Is there a way out?

For some government officials and private individuals, there seems to be a consensus that government cannot keep on allocating money to pay for whoever retires. A monthly contribution of each employee would be the answer, analysts say. In the current status, government employees don’t save for retirement, yet when they leave office, government is expected to cover their pension.

This, according to analysts, is unsustainable and explains, partially, why many former government employees have not received retirement funds.

“[About] 0.4 per cent of GDP is spent on pensions every year, but only for public servants, who are less than two per cent of the population,” Rachael Sebudde, an economist at the World Bank Uganda country office, said.

“This means that government shoulders the full extent of the pension obligations of public or civil servants. And I can tell you it can’t keep like that forever.”

In a July 2014 report titled “Reducing Old Age and Economic Vulnerabilities: Why Uganda Should Improve its Pension System”, the World Bank said that a more efficient pension system could help Uganda avoid the financial pressure that normally arises as the number of public pension recipients grow.

“This [government] burden is borne out of the annual fiscal year budgetary allocations. The public service pension scheme is non-funded, no contributions are made by the participants, on top of the defined benefit nature of the scheme,” said George Mulindwa, the head of business development at African Alliance.

The only way out, Sebudde said, is pension liberalisation.

Reforms

Finance Minister Maria Kiwanuka supports the reforms, where public servants would contribute five per cent of their salary and then government would pay 10 per cent of the employee’s salary to the scheme.

“Government is making progress in reforming the retirement benefits sector to improve savings in the economy, protect savings of workers, and restore trust in the retirement benefits system,” said Kiwanuka in her 201415 budget speech.

The reforms are intended to repeal the Pensions Act cap 286, which makes Public Pension System non-contributory. Its name would also be changed to Unified Public Service Pension Scheme where civil servants would pay for their retirement.

“All public officers with less than fifteen years of service and all new entrants to the public service in both central and local government shall contribute to the Unified Public Service Pension Scheme,” notes the 2011 Pension Sector Liberalisation Bill.

“Government as employer shall contribute towards the retirement benefits of its employees.”

Corruption

In the 201314 fiscal year, for instance, the budgetary allocation for pension was Shs 260bn. And in the same year, it became apparent that more than Shs 165bn of pension money for public servants was swindled. This is another burden that the new regulator, URBRA, has to deal with.

“Public pension system has been one of the most inefficient and very corrupt,” Nansasi said.

After reforms, it is hoped that supervision by an independent body would enhance efficiency and safety of the pensioners’ money. The architects of the bill reasoned that when workers contribute, their money would be readily available upon retirement.

The bill, which is at the committee level in Parliament, is expected to pass into law in the first half of next year. And the soldiers together with other government employees can be allowed to retire happily with their money.

Source : The Observer

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