Retirement benefit reforms can enhance workers social protection, but should be done with caution

Published 3 years ago -

The retirement Benefits Sector in Uganda continues to elude the biggest majority of workers. 71 % of the working population is not covered under any recognizable retirement benefit scheme. The existing major pension schemes; that are the public service pension scheme and NSSF, have been scarred by irresponsible management, poor governance and corruption. Calls to reform the sector have become more apparent, more urgent.  It for this reason that Government has come up with a law, The Retirement Benefits Liberalization Bill, 2011 to address some of  the challenges in the sector.

The Bill if passed into law and is done right will see more people like this enjoying retirment

The Bill seeks to remove monopoly over mandatory contributions; to provide for fair competition among licensed retirement benefit schemes; to provide for mandatory contributions and benefits; to consolidate and reform the law relating to retirement benefits.

As a party to the International Covenant on Economic Social and Cultural Rights, 1966, Uganda is obligated to ensure access to social security.  With 85% of Ugandans employed in the informal sector without any form of social security, the reforms are long overdue.

The reforms proposed in the Bill, will have specific implications on workers social protection in a number of ways.

In providing for fair competition among several schemes, one is promised efficiency and sound management of people’s savings. Some of the outlandish scandals in NSSF like the Temangalo saga, Uganda Clays dealings, corruption and poor governance were partly, down to its statutory monopoly. However to ensure good governance, institutional safeguards of all actors must be enshrined in the law, accessibility to information on the pension schemes as well as accountability.

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On another positive note, the bill provides for mandatory registration of all employees in the formal sector to a retirement benefit scheme, compared to The NSSF Act, which stipulates a threshold of 5 employees to one employer.  This would increase coverage of social security to workers. But this requires compliance and strict supervision. The technical and financial capacity of the Regulatory Body, URBRA, to supervise and regulate the several schemes, must not be in doubt, neither its insusceptibility from regulatory capture.

However we need to also borrow the experience of other countries that have liberalised their pension sectors. The ideological shift from liberalisation to nationalisation of retirement benefit schemes in many Latin American countries, can also guide this assessment.

The exponents of the Bill envisage that opening up the sector to other private players will improve service delivery. Innovation is synonymous with competition. NSSF currently provides five products; old age benefit, a survivor’s grant, invalidity benefit and emigration benefit. Workers can be guaranteed more products like health insurance services, from their contributions and savings.

Ideally the reforms should guarantee security of people’s savings: The promise made to the worker must be fulfilled when he/she is eligible to receive his/her benefits. Good governance and sustainability of the sector can be achieved by strengthening the position of the regulator, through the URBRA Act.

With competition, fares innovation, and the goal to provide the best services would increase the services and products available to the workers. Currently, Government does not have a comprehensive policy on health insurance to cover all citizens but these would be provided by the new schemes. This on the other hand calls for amending the NSSF Act to widen its products so as to level the playing field with whichever new retirement benefits schemes are licensed.

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As efforts to enhance social protection continue to draw debate, we need to be mindful of the key challenges that need to be addressed. The lack of a social protection policy that ideally should guide this discourse, easy access to information, fiscal sustainability of the retirement benefit schemes, accountability and transparency. These should be addressed in the law.

In conclusion, as noted by Dan Ngabirano [ a lawyer and accomplished author is this regard], reforms in the retirement benefits sector are too urgent to neglect and too important to delay. However there should be caution in this effort. In order to improve workers social protection the reforms must affirmatively answer this fundamental question:  “Will the proposed bill enhance the security, coverage and effectiveness of the retirement benefit sector?”



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