Kampala — Government has shelved plans to liberalize the pension sector and will instead amend the National Social Security Fund (NSSF) Act Cap 222. NSSF will retain its monopoly as Uganda's Basic National Scheme and the proposed amendments by cabinet will make it a mandatory scheme for all Ugandan in the formal and informal sectors.
This position "renders the Retirement Benefits Sector Liberalization Bill 2011 before Parliament irrelevant", government said, and will be withdrawn.
The decision was revealed by Minister of Gender Labor and social development Janat Mukwaya in a press statement on Tuesday. Cabinet made the decision at their Monday meeting.
The amendments will make NSSF a mandatory Social Security Scheme for all Ugandans employed both in the formal and informal Sectors, mandated to provide the basic Social guaranteed benefits, except for Ugandans employed in the Public Service.
According to government, the new amendments to the NSSF act will aim to expand social security coverage and enhance efficiency and effectiveness in investment.
The amendments will also enable NSSF to make independent investment decisions and transform the fund from a Provident Fund offering lump sum benefits to a hybrid Scheme offering both lump sum and pensions.
Amendments will be made to also provide for appointment of the Managing Director and Deputy Managing Director by the Minister on recommendation of the Board while persons over the age of 60 years shall not pay tax on their benefits.
The Pension Reform Bill table in parliament in 2011 had intended to:
- End monopoly of the National Social Security Fund (NSSF)
- Pay monthly pension instead of lump-sum provident on retirement
- Allow those who have saved money for more than 10 years to access 30% of their savings to secure mortgages or loans from any financial institution
- Convert the public service pension scheme from a defined benefit scheme (where no contributions are made by the civil servant) to a defined contribution scheme (where both the government and the civil servants make contributions to the scheme)
- Increase coverage to all formal sector workers (removing the 5+ cap) under the NSSF arrangement. This would expand pension coverage that is currently at 5%, according to the World Bank's Uganda Economic Update for 2017