4 March 2013

Uganda Insurance Eye Liberalized Pension Sector

Kampala, Uganda — As the move towards liberalizing the pension sector draws near, companies, mainly insurance firms are strategically placing themselves to provide the service.

The insurance firms are among the 78 companies reported to have applied to the Uganda Retirement Benefits Authority (URBA).

On June 28, 2011, Uganda's president, Yoweri Kaguta assented into law the long awaited Uganda Retirement Benefits Regulatory Authority Act 2011.

This law has however been received with a lot of speculation, misapprehension and has caused a lot of confusion among the general public.

Some workers even petitioned Parliament protesting liberalisation of the pensions and retirement benefits sector.

The workers according to a local publication claimed, "To avoid opening up workers funds to speculators, government should conduct detailed study of the existing in-house occupational retirement benefits and healthcare schemes... to enable evidence based decision making on this matter."

According to Hamza Mutebi of UAP Financial Services Limited, the URBA has been receiving applications from retirement benefit schemes and market players since December last year as it is a requirement that every pension scheme and service provider be licensed prior to undertaking any business.

He adds that as a result of the URBA Act, registration of schemes is mandatory and it has therefore become an offence to operate a scheme without registration. This, on conviction, may attract a maximum fine of Ush36 million ($14,000) or imprisonment not exceeding 12 years, or both.

Currently, the National Social Security Fund (NSSF) has been monopolizing the sector, providing pension services for decades.

The East African Business Week has learnt that NSSF is also among the 78 companies that have applied of which 11 have expressed interest to provide retirement benefits scheme services, fund managers (7), administration (5), trustees (53) while two have applied to offer custodial services.

Josephine Omunyidde, the Corporate and Communications Manager at the National Insurance Corporation (NIC) says that they have applied because the firm has experience in that regard as they have been providing the services and are ready to provide pension services.

"NIC has experience in life insurance, which in itself is Pension and we have been providing to several companies. If any company applies to provide pension services, there is a process that has to first be followed," Omunyidde said.

NIC has been providing retirement services to lecturers at Makerere University Kampala (MUK) and a number of other companies.

Kennedy Gichuhi, who works with the Insurance Company of East Africa (ICEA) also confirmed to the East African Business Week that the firm had also been providing pension services in form of retirement benefits and has applied to continue providing.

"We have been providing these services in accordance with the Insurance Regulatory Authority (IRA) requirements and we have now applied to comply with URBA requirements," he told the East African Business Week.

A retirement benefits scheme receiving or which intends to receive mandatory contributions will be required to maintain a minimum deposit of not less than 1,250,000 currency points (Ush25 billion--$10 million) with the central bank or a financial institution approved by the Authority.

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