The National Social Security Fund (NSSF) that stands at Shs4.9 trillion in total assets has proposed to increase workers’ savings from 15 to 30 per cent.
NSSF boss Richard Byarugaba on Monday said pensioners squander their savings and the move would bring about attractive products to contributors. Mr Byarugaba broke down contributions as 10 per cent to be deducted from the employee and 20 per cent from the employer.
“We conducted a research and found out that about 72 per cent of workers after picking their retirement benefits become destitute after two years,” he said to back up the proposal.
The minister of Finance Matia Kasaija, Workers MP Sam Lyomoki and National Organisation of Trade Union chairman Wilson Owere applauded the initiative as long overdue.
The proposal is, however, insensitive and a burden to employers and workers who have tight budgets. Like the Uganda Manufactures Association executive director Sebagala Kigozi says, anything that increases expenditure affects budget.
The idea of opening the Fund to members with proof of development-oriented plans such as housing and education is long overdue.
However, the proposal of deducting more money instead of initiating the above schemes for existing savers at the current savings rate is wrong.
Workers may want to know what 30 per cent deductions will do that 15 per cent, cannot. And why such reforms are not put forward without increasing the percentage of their contributions.
On the side of employers, the 20 per cent is not healthy with the shape of our economy and the burden of taxation already on job creators.
The question of members squandering benefits has nothing to do with how much one has saved over the years. It is a failure of individuals to plan and use their money responsibly, coupled with the absence of facilities in the Fund to help workers plan for their money ahead of and during retirement age.
NSSF should, therefore, allow the debate on pension reforms to go ahead. With the Uganda Retirement Benefits Regulatory Authority Act, 2011 in place, and the Retirement Benefits Sector Liberalisation Bill 2011, if passed, will among other things liberalise the sector, remove the monopoly over mandatory contributions currently enjoyed only by the NSSF, encourage fair competition and repeal the NSSF Act.
NSSF has enjoyed monopoly of the pensions sector since December 1985. The Fund has been charged by law to receive, hold and invest savings from workers and employers. It also should pay a fair interest on these savings annually.
The new reforms will give NSSF a new mandate to develop products that would be competitive and member-friendly.
SOURCE: Daily Monitor