Different experts have discussed the pension liberalization scheme that was recently tabled before parliament in a debate organized by OSIEA and Agency for Transformation at Kampala Serena Hotel on Tuesday morning.
In his discussion, Dan Ngabirano, a lecturer at the school of law at Makerere University explained that a right to information is a relevant tool as far as the new bill is concerned adding that a lot of information is not known about the country’s workforce.
“By the year 2010, Uganda’s workforce was about 15.2 million and only 2.5 million of these were employed in the formal sector yet many of these are living above the retirement age.
Not many people know this yet this information is critical in enforcement of the right to social security,”Ngabirano noted.
He added that even if there is liberalization of the pension scheme, there looms a governance crisis in both private and government schemes and hence stressed the need for a right to information.
“The Temangalo and Nsimbe scandals (by NSSF) can all be attributed to lack of transparency and accountability by the management. All agencies save for where it threatens national security need to avail information to the public.”
Ngabirano explained that there already is the retirement benefits law in place through the Constitution, Armed Forces Pensions Act, Pensions Act and NSSF Act and stressed that even if the pension liberalization scheme is passed into law, it wouldn’t be effective if there wasn’t right to information.
“You can’t talk about social security when you don’t have information and the retirement benefit schemes have to be with a corporate identity where stakeholders are provided with timely, accurate, relevant and material information .If not well handled, the retirement benefits sector can cause disastrous effects on the economy.”
The Agency for Transformation boss Morrison Rwakakamba however noted that there is no need for liberalization of the pension sector explaining that it can be best handled by government for the benefit of all people.
“Social security is a business of government because whereas it can invest in public goods like roads and dams, the private sector is only profit oriented. It’s not about profits but old age replacement income that in the future if you retire, you can feed on it,” Rwakakamba noted.
He added that if the NSSF which is the sole pension scheme body is liberalized, national sovereignty might be lost when fund management is under companies thus surrendering national savings to them which undermines the country’s capacity to utilize them for development.
“We would end up borrowing money from countries like China and the World Bank which money has conditions that undermine technology transfer and development of local content. Locally generated and consolidated savings have a potential to transform the country and instead of borrowing money to in foreign currencies to finance projects like dams, railways and roads, government can use NSSF shillings at negotiated moderate interest rates that are eventually recouped to savers in Uganda.”
Rwakakamba added that driven by profit motives and maximum returns other than safety of workers’ money, private pension schemes would inevitably divert savings into complex but risky investments which might turn out to collapse the economies like they did to USA and European economies in 2009 which he stressed would require government to bail them out using tax payers’ money.
“Fund managers have capacity to exploit lucrative offers on market by taking quick decisions that sometimes end up in high returns but NSSF is inhibited to engage in tactical trading on the stock exchange by bureaucratic procedures that entail no objection from the Finance Minister, Solicitor General and Chief Government valuer among others and these offer protection to savers’ money.”
“The only problem with NSSF is administration but we should strengthen it for better results.”
However an expert from the boy tasked for pensions (UBRA) Moses Bekabye, liberalizing would bring about more players in the sector which he said would bring about competition.
“We are saying there should be a few players alongside NSSF and provide necessary competition which means innovation. Liberalization would also mean that pension funds grow and people get adequate savings in retirement,” Bekabye explained.
“We aim at attaining long term sustainability and the system will be fully automated as we see that everyone in the formal sector contributes,” he said.
Reported by Daily monitor