Enwealth Financial Services Group Managing Director Simon Wafubwa making his presentation during the breakfast.
Uganda needs to widen her pension reforms to address challenges of governance, sustainability and inclusiveness in a bid to boost competitiveness and sector growth like her regional peers. This is according to experts from Enwealth Financial Services, a pensions administration firm with a footprint across Africa.
While discussing the pension regulatory landscape and emerging trends at the annual Trustees Breakfast Forum this morning in Kampala, Enwealth Managing Director Simon Wafubwa said, “Pension sector reform is a recent shift in consolidation of public pension schemes as well as bringing on board informal sector schemes. Recently this has been taking place in most African countries including, Nigeria, Ghana, Kenya and Tanzania, among others. The purpose is to address old age social security through increasing the participation of working population both in public and private sector to address the challenge of old age social security risk. In Kenya for example, we have been able to implement regulations such as the Income Draw Down Funds that safeguard members and give them flexibility. Transfers from one IDD to another are allowed after a membership of 5 years, where all transfers shall be done in a lump sum and no provision for partial transfers of funds. This gives members choice and flexibility in case their scheme is not performing as desired”.
However, a comprehensive social security strategy goes beyond just pensions. Ideally, it should also encompass post-retirement medical insurance and housing benefits. This would provide a more holistic safety net for retirees, addressing not just their financial needs but also their health and well-being in their golden years.
Uganda’s pension sector has two pension schemes, namely, a non-contributory Public Service Pension Scheme (PSP) for civil servants and the National Social Security Fund (NSSF) for other formal workers including government agencies, non-government organizations and formal private sector business firms with five (5) or more workers.
Industry experts observe with life expectancy at birth having improved from 47 years to about 63 years in the last ten years, and at retirement improving from less than 10 years to around 17 years, limited pension savings during the working life of majority of the young population creates a higher social security problem to government.
In March 2023, the public service pension Fund Bill, 2023, was tabled before Parliament. The Bill sought to among other things commercialize the pension sector. Members of Parliament, however, expressed concerns saying if passed, it would destabilize the pensions sector. As a result, it was dropped later in May that same year.
Acting URBRA CEO Mrs. Rita Faith Nansasi Wasswa said, “There have been partial reforms in the past that addressed structural problems and payment mechanisms both in public pension schemes and national social security schemes. They did not however address the coverage and efficiency challenges that continue to characterize the current pension regime.”
“Retirement Benefit arrangements move resources obtained during work life to post-retirement when income is no longer obtainable. This implies that assessment of the sector must go beyond financial performance to cover the interests and rights of savers. Consistent remittance of contributions and timely payment of benefits must be emphasized,” she said.
In 2023, Uganda’s pension sector registered a 10% increase in total assets, reaching an unprecedented UGX 22 trillion. UGX 20 trillion of this is managed by NSSF. However, even with this notable achievement, the sector continues to grapple with concerns of the operating environment including the wider economic performance, inflation, foreign exchange rates, population trends, and employment rates.
“These require the pensions sector to work collaboratively with other sectors. As a key player in the financial services sector, URBRA should constantly monitor the trends to see how they ultimately affect the savers’ retirement benefits,” Mrs. Wasswa concluded.
