14 September 2012

East Africa: Trade Union Body Opposes Pension Changes

Much as efforts are underway to liberalise the pensions sector, workers, under their umbrella body the National Organisation of Trade Unions (NOTU) are against the move describing it as a "wrong rationale for liberalisation".

Wilson Owere, the NOTU secretary general argued that in their view, in its current form, the proposed bill to liberalise the sector will do more harm than good.

"NSSF must be preserved in Uganda's national interest. The proposed bill was based on a cabinet paper premised on two erroneous foundations. This paper stated that there has been a public perception that NSSF has not been run on a sound principal," said Owere. He pointed out that they had written tothe President to intervene and save the situation.

He called for immediate action to be taken to enact a law to reform and liberalise the retirement sector in order to avert the collateral damage that has been caused to the retirement savings of the employees from the private sector and the retirement benefit sector as a whole.

"We do not agree with the reasongiven for liberalisation. Should drastic changes be made because of unproven public perception?" he asked.

Owere said the corruption in URA and KCCA has been addressed by changes in their leadership.

"There was no bill that was formulated to liberalise KCCA or URA. The paper did not even attempt to understand the constraints or issue that NSSF faces as it manages members funds," he said.

He said every nation needs a pool of long-term savings.

"Kenya, Tanzania and Rwanda all have this pool of savings in their respective local national pensions schemes in which mandatory contributions are made," he said.

He pointed out that only national schemes have the capacity to expand coverage.

"One of the goals advocated by ILO for partner states is the expansion of the pension schemes to its citizens, especially within the informal and the underprivileged segments," he said.

He defended NSSF, saying it had shown tremendous efforts towards safeguarding members' funds.

He highlighted the EAC policy that requires that EAC member states harmonise their national laws.

"The proposed liberalisation bill will make Uganda an outcast within the EAC. Kenya, which had initially advocated full liberalisation has pulled back and is reverting to national pension scheme, (Kenya NSSF) that offers mandatory retirement plan with contribution of 12%," he said.

He proposed that NSSF be kept as a national mandatory pension scheme that will retain at least 10% mandatory contribution and the pension sector be liberalised to control up to 5% of the contributions.

"We suggest that an additional 5% be permitted as voluntary contribution of an employee to a scheme of his/ her choice, which can be directed to fund mortgage, education or health."

He said all contribution up to 20% tax deductible, saying this will significantly improve the saving culture in Uganda.

"Benchmark NSSF performance structure to global standards, mandate NSSF to deliver more and amend the NSSF Act to remove bottlenecks that curtail the productivity of the fund," he said.

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