Cabinet has approved the amendment of the National Social Security Fund (NSSF) Act which will see the Fund remain the basic national scheme and continue to collect all mandatory contributions by workers in the formal sector.
The proposed amendments, passed by cabinet yesterday, also provide for voluntary saving with NSSF for both workers in the formal and informal sector, rendering the Retirement Benefits Sector Liberalization Bill 2011 before parliament irrelevant.
Addressing the press at the Uganda Media Centre this morning, Janet Mukwaya, the minister of Gender, Labour and Social Development, noted that government could not allow liberalizing the pension sector.
"Opening up mandatory contributions would complete the surrender of both the banking and non-banking financial sector to foreign capital because indigenous firms would have a very limited role to play," she said, reading from a statement.
"NSSF has demonstrated steady progress in its performance. Its total assets today stand at about Shs 9 trillion."
Furthermore, Mukwaya said cabinet has proposed for voluntary contribution by workers over and above their mandatory contribution and voluntary contributions by self-employed persons.
Currently, the law only permits enterprises with five employers and above to make a mandatory contribution to NSSF. An employer contributes 10 per cent while the employee contributes 5 per cent of their salary to the monthly contributions. With the amendment, a worker would now be able to contribute more than 5 per cent.
Among other proposals suggested by cabinet; is the provision for mid-term access of voluntary benefits on such terms and conditions that may be set by the NSSF Board. Cabinet also approved amendment of the law to allow government to borrow from the Fund instead of borrowing from the likes of World Bank or commercial banks.
NSSF averages Shs 77 billion collections per month and in June last year, the Fund hit the Shs 100 billion mark for the first time in its history. In 2016, the fund collected Shs 785 billion from contributing members up from 688 billion collected in 2015.
Mukwaya added that across many countries in Latin America and Central Europe with liberalized pension sectors, the number of workers covered by private schemes declined gradually.
She attributed this to the fact that most private pension schemes were mainly interested in recruiting workers whose wages made profits for sponsors and fund managers.
Ghana has a mixed system where security and National Insurance Trust (SSNIT) (which is the equivalent of NSSF Uganda) and the private schemes collect 13 per cent and five per cent respectively of employees' monthly pay.
"However, evidence shows that most of the private schemes concentrate in the urban regions of Accra and leave the upcountry areas uncovered. Only SSNIT covers each and every part of Ghana," Mukwaya said.
She, therefore, concluded that NSSF remains the most reliable in guaranteeing benefits. In addition, Uganda as a state has a primary duty of providing social security to her citizens.
The new law will also create a three-party NSSF board comprising government representatives, employers' representatives and workers representatives to improve managerial governance.
"Finally, I would like note that old age poverty remains a key challenge in Uganda today. Today, about 406,000 of the 1.4 million older persons are considered poor. This is a challenge we must tackle and tackling poverty starts during work age life. I therefore urge all workers in the country to start planning for their retirement," she said.