A cabinet sitting on Monday approved key amendments to the National Social Security Act, dealing a death blow to efforts to liberalise the pension sector.
The amendments maintain NSSF as the sole national savings scheme for both the formal and informal sectors.
The development renders the Retirements Benefits Sector Liberalization Bill, 2011, inoperable, a fact reinforced by the gender, labour and social development minister, Janat Mukwaya, at a news conference today.
“This position, therefore, renders the Retirement Benefits Sector Liberalization Bill before parliament irrelevant,” Ms Mukwaya said.
Ms Mukwaya said that the decision to maintain NSSF as the main savings scheme was premised on the numerous concerns raised on what could happen if the pensions sector is opened for competition, especially in the prevailing “weak regulatory environment”.
NSSF’s asset base grew by 20% from Shs6.6 trillion in 2016 to Shs 7.9 trillion in 2017, according to figures released by the fund at its annual general meeting last September. Compliance levels rose to 80% from 78% in 2016, while contributions grew by 15% to Shs917bn from Shs785bn in 2016.
Ms Mukwaya said opening the pensions sector would amount to a “complete surrender of both the banking and non-banking financial sector to foreign capital because indigenous firms will have a very limited role to play.”
Last July, the ministry of finance, the main architects of the pensions sector liberalisation bill, withdrew it from Parliament after pressure from the National Organisation of Trade Unions of Uganda and the Central Organisation of Free Trade Unions.
A meeting at the ministry, attended by Notu and Coftu representatives, and officials from the ministry of gender, Bank of Uganda, and the Capital Markets Authority saw officials led by the secretary to the treasury grudgingly accept to withdraw the bill from parliament.
At the same meeting, held last July, it was also decided that the NSSF act would be amended and brought up to date to give the fund more wiggle room in exercising its mandate.
Supporters of the bill said it sought to open up the pensions sector to more players and introduce fair competition among licensed retirement benefits schemes for mandatory contributions. This competition would mean workers earned more from their savings. They could also access it whenever they preferred, unlike with NSSF.
Changes introduced under the amendments include mandatory savings by all workers in the formal sector regardless of the size of the employer and extending the contract of the managing director and deputy managing director to five years from the current three.
The fund can also lend money to the government under the amendments.
Additionally, employers who fail to remit employees savings face tougher penalties.