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

By: REA­GAN WA­MA­JJI

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.

RETIRE
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.

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.

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?”