KAMPALA – The pensions sector regulator insists that the decision to amend the law, allowing savers withdraw up to 20 per cent of their money to cater for emergency financial distress was wrong, and could have been avoided.
In March this year, the retirement benefits agencies in the country started implementing a new policy that sanctioned a particular categories of savers to access their money. The move, followed a protracted debate between savers on one hand and the saving schemes and government on the other.
The change in policy, mainly affected the National Social Security Fund – NSSF, which entity had the category that qualified under the revised law, allowing only persons who had saved for up to alt least ten cumulative years and were aged above 45 years.
The new changes necessitated amendments in the NSSF Amendment Act, to specifically allow a pay out under new regulation. And by the end of September 2022, about Ugx440b had been paid out, Ugx360b less than earlier predicted.
Benjamin Mukiibi – the Director Research and Strategy at the Uganda Retirement Benefits Regulatory Authority, URBRA, said most people who actually went for the money were those not in most need.
“One of the reasons that the government, URBRA and NSSF gave was that if all people withdrew their benefits, the sector would slowdown to near collapse; and this would greatly affect the returns at the end of the year, since it meant that money had to be retracted from the investments,” reasoned Mukiibi.
In September, when the NSSF year ended, 35 per cent of the retirement benefits were mid-term access funds, unlike previously when almost all the payouts were lump sum.
However, Martin Nsubuga, the Chief Executive at URBRA said that research had shown that some people had realised that it was not prudent to rush for their money. Others reportedly re-saved after realising that their money was safe with NSSF.
Nsubuga said that some members’ rush to withdraw their midterm benefits, was a test to prove whether their savings existed at the Fund.
Speaking at a media dialogue on the pensions sector, Joan Mugenzi, a Transformational Master Coach and Founder of Imagine Me Africa, said many people practice recklessly spending cultures because they receive money without any planned in place, which was the case with the midterm access beneficiaries.
Since the law was amended to allow midterm withdrawals, there are fears that government might, most likely turn it into a culture to direct saving schemes let their members access their money in situations of emergencies.
It also means that whoever clocks 45 and having saved for up to at least ten years, is free to apply for the benefits, and therefore, the move was not for the Covid-19 pandemic related financial stress.
As a way of mitigating the effect of this and avoid the shocks on NSSF and other retirement benefits schemes, Nsubuga said that they were looking at using the NSSF law to give retirees their money in their bits, to cater for the risk of spending all the savings soon after receiving it.
Daisy Nabakooza, the Chief Manager, Supervision and Market Conduct, said the regulator is allowing and encouraging innovation into products that will allow even NSSF savers have other products that can create diversified streams of cash.
She noted that the retirement benefits housing mortgage scheme is one of the means aimed at ensuring meaningful and secure mid-term access to benefits.
Additional reporting by URN
