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Employers can support employees to attain financial independence

URBRA CEO Martin Nsubuga (left) and Finance Minister Kasaija talk to the press recently on Uganda government pension plans to ensure a better life for those who are retiring. COURTESY PHOTO

COMMENT | Lydia Mirembe | If Uganda were a civil servant, he or she would be due for retirement this year having attained the mandatory age of 60. For Uganda as a nation, 60 is a very young age. For citizens that inhabit this Pearl of Africa, 60 is when they actually begin to feel age-related bodily changes. That is the time to start a new phase in life – to retire or ‘re-tyre’. The key question always is how to transition into a comfortable retirement, characterized by financial independence.

While retirement planning boils down to individual decision, employers play a crucial part in supporting their employees to ensure a good retirement. For (some) Ugandans in formal employment, there is an established framework for retirement saving. The NSSF Act (2021), provides that: “Every employer, irrespective of the number of employees, shall register with the fund as a contributing employer and shall make regular contributions for his or her employees in accordance with the Act and regulations made thereunder. The employer contributes 10% of the employee’s gross earnings, while the employee contributes 5% of the same. Public service workers are covered under the public service pension arrangement. The available laws even provide for voluntary retirement saving.

Given the average sector coverage of 18%, it is clear that many Ugandans are not in any structured retirement saving plan. Out of Uganda’s estimated working population of over 15 million, only about 2.8 million are covered under the available retirement benefits arrangements. Nearly 80 percent of Uganda’s working population are therefore engaged in economic activities but it is not clear whether they have any arrangement for retirement saving. The uncovered population includes such groups as artisans, farmers and a growing number of youth who subscribe to the idea of a “gig economy” where they don’t have a permanent job placement with predictable remuneration. However, even in an informal setting, a proprietor or a leader can make arrangements to support their informal workforce to prepare for retirement.

It would be quite disheartening for an employer to find their retired employee living in despicable conditions. In fact, at a societal level people tend to point fingers at the former employer, making all sorts of accusations about how the employee ended up. They accuse the employer of exploitation, thoughtlessness, … and other ignoble descriptions. Every employer should be proud to see their employees make progress on all fronts and retire happily at the end of their years in service.

One of the gateways to such delight, is through retirement saving at a time when the employee is still young, strong and productive. Remember, jobs are not permanent – they can end any time. The employer should therefore have keen interest in how employees prepare for retirement. Employers are increasingly fronting retirement benefits as one of the key factors to attract and retain good employees. In fact, lately, many prospective employees will be hard-pressed to take a job that doesn’t offer retirement benefits. The retirement benefits sector has seen a growth in the number of employers covered under the umbrella schemes.

Apart from remitting contributions to mandatory schemes, employers can also establish occupational schemes, where the two parties can agree on how much each will put into the fund. They can sensitise the staff and impart personal financial management skills. They can encourage voluntary retirement saving too.

So as Uganda celebrates its 60th anniversary, it is important to reflect on the ways to attain financial independence – especially in retirement. The theme this year is: African interdependence and our shared destiny. Whereas retirement saving leans much on individual choices, there are many ways in which people depend on others – mainly their employers, peers and an enabling system. Through the establishment of the Uganda Retirement Benefits Regulatory Authority (URBRA), government set up an enabling legal and regulatory framework. It’s now upon employers and employees to take advantage of the system and prepare for retirement.

Happy 60th anniversary to all Ugandans!

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Lydia Mirembe is the Manager, Corporate and Public Affairs, Uganda Retirement Benefits Regulatory Authority (URBRA)

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