For Many years, Uganda’s pension coverage has been skewed towards the formal sector, specifically through the National Social Security Fund (NSSF), excluding the informal sector, persons who are self-employed and those working in Small and Medium Enterprises (SMEs).
However, Uganda Retirements Benefits Regulatory Authority (URBRA) has started opening up the sector by licensing pension schemes targeting the informal sector.
Mazima Retirement Plan, the trading name of Mazima Voluntary Individual Retirement Benefits Scheme (MVIRBS), is one of the schemes licensed by URBRA in 2016 to tap into the informal sector.
Business Focus (BF) interviewed Livingstone Mukasa (LM), the Chief Executive Officer at Mazima Retirement Plan about the scheme and a wide-range of issues. Below are the excerpts of the interview:
BF: Tell me more about Mazima Retirement Plan?
LM: The idea started in 2015 when my students asked me to write a book about investing. I realized there are 17.4million people in Uganda who go to work, but only two million have a retirement savings account. Remember life expectancy is going up in Uganda which requires saving for the old age. If you don’t start saving now, how are you going to live in retirement (old age)?
So we thought of coming up with a plan targeting people working in the informal sector. We ended up at URBRA, the regulator of the pension sector for guidance and in March 2016, Mazima Retirement Plan was born.
We started with zero members and money. We are basically targeting those below 40 years of age although even those above can save with us.
One year down the road, we have over 1000 members and funds have hit over Shs600m. We are growing every passing day.
BF: Why should one join this plan? What are the benefits?
LM: The fund is managed by a board of five people (founding trustees) and after six years, members can change the board if they so wish.
To become a member, one pays only Shs20, 000 and presents a copy of a certified government ID like National ID, driving permit or a passport. One must also be 18 years and above. A minor is only accepted if a guardian is already a member. Once a member, you can fund your account hourly, daily, weekly, monthly or regularly. We are very flexible.
The benefits of joining us are enshrined in the law; we give annual interest that is above inflation. We invest in secured assets, fixed income/deposits and Treasury Bills and Bonds.
The pension funds are also protected by law from bankruptcy. We also encourage you to stay on the journey of saving.
BF: You say pension funds are protected, but many Ugandans are still skeptical about the safety of their money in pension schemes like yours?
LM: It may take some time for some people to believe us, but Mazima is as secure as NSSF. As managers, we don’t have access to savers’ money, so it is safe. It is with the Custodian (Housing Finance Bank) and the regulator keeps watch on us. It can say it is more secure than the SACCOs.
We also have systems and members can pay their contributions conveniently through a number of methods including banks and Mobile Money. Members can also know their contributions anytime online.
BF: Many Ugandans think low income earners can’t save. Does this explain why saving is low in Uganda?
LM: We have many bucket savers; someone who waits for the bucket to get full and save some. Unfortunately, this is a leaking bucket, so the best way is to save when some money gets in not when the bucket is full. It is better to save before you spend.
If six million Ugandans can save Shs600, 000 each annually, that will be Shs3.6 trillion and this money can play a big role in transforming the economy. People complain of the bad economy but if you can’t save in the bad economy, chances are high that you will not save in a good economy.
BF: What’s your take on the delayed full liberalization of Uganda’s pension sector?
LM: When they were conceiving the liberalization of the pension sector, they missed the eye of the niddle; democratizing the pension sector. Why is it acceptable that 15 million people don’t have retirement savings accounts?
Mazima has changed the view on savings; we are pro-liberalization in the view of expanding coverage. With 10% coverage, pensions in Uganda contribute 10% to Uganda’s entire GDP. What if we unleash another 20% won’t the economy grow faster?
BF: Your last word…
LM: We are mainly a God-fearing nation. If you are praying to live longer, why are you not planning to live longer?
If you want to live longer, then start saving today. A person that fears risk has no return and he who doesn’t invest, doesn’t have a return.