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NSSF BILL: Mandatory contribution by all in formal sector

FILE PHOTO: NSSF chief Richard Byarugaba gives a brief at a press briefing

Kampala, Uganda | THE INDEPENDENT | A bill that aims to expand social security coverage by making contributions to the National Social Security Fund (NSSF) mandatory for all workers in the formal sector has been presented to parliament for its first reading.

Minister of State for Youth and Children Affairs Florence Nakiwala Florence on Tuesday moved the National Social Security Fund ( Amendment) Bill, 2019 for its first reading.

The bill aims to enable workers in the formal and informal sectors to make voluntary contributions to the National Social Security Fund and in addition, seeks to enhance the spectrum of benefits available to workers and to improve management of the National Social Security Fund.

The bill has already been publicly criticized by NSSF members, questioning the changes in Section 38 on tax. (SEE NEW BILL and the 1985 ACT below)

The bill will go through a first, second and third reading in parliament. The president will then have to assent, before it becomes law.

According to  Minister of Gender Labour and Social Development Janat Mukwaya, the the current law was enacted in 1985 and does not adequately address emerging challenges in the management of social security in Uganda.

She states that the proposal to amend the NSSF Act particularly arises from the need to streamline the management of the Fund to expand the scope of social security coverage and benefits.

“The Act in its current state does not make express provision for the representation of workers, employers and other stakeholders on the board of directors. The appointment of the Managing Director and Deputy Managing Director by the Minister without the role of the board undermines the ability of the board to supervise them.”

She states further that although it is in the best interest of all employees to save for retirement, the Act currently gives the Minister discretion to determine the category of employees who are eligible to contribute for their retirement.

“Currently, only workers in a company that employs five or more employees are eligible to contribute for their retirement which contradicts Paragraph VII of the National Objectives of Directive Principles of State Policy under the Constitution, the ILO Convention 102 on social security and the Social Protection Policy 2015 which all call for social security coverage of all persons regardless of the number of their employees.”

Mukwaya said that while expenditure by the Fund is subject to approval of the annual budget by the Minister, the Act does not make provision for a window for limited expenditure prior to approval of the annual budget by the Minister.

The Bill seeks to amend the National Social Security Act:

  •  (a) to provide for the appointment of a stakeholder board appointed by the Minister comprised of representatives of Government, employers and employees;
  •  (b) to clearly specify the different roles of the Ministers responsible for social security, finance and public service in the management of the Fund;
  •  (c) to expand social security coverage by providing for mandatory contribution of all workers regardless of the size of the enterprise or number of employees and also allowing voluntary contributions to the Fund;
  • (d) to empower the Fund to recover from a third party any sum owed to a defaulting contributing employer to cover any contribution, penalty or interest;
  • (e) to provide for midterm access to voluntary contributions;
  •  (f) to provide for the deference of taxes on contributions and scheme income to the time of payment of benefits;
  • (g) to provide for the appointment of the Managing Director and Deputy Managing Director by the Minister on the recommendation of the board for a term of five years renewable on satisfactory performance;
  • (h) to provide for the appointment of the Secretary to the board on a five year contract renewable on satisfactory performance;
  • (i) to empower the Minister to prescribe a threshold of expenditure by the Fund prior to approval of the annual budget by statutory instrument;
  • (j) to empower the board to use in house expertise and fund managers in the investment of scheme funds including lending to Government;
  • (k) to empower the board to introduce new benefits rn consultation with the Minister; 0) to provide for payment of an annual levy by the Fund to the Uganda Retirement Benefits Regulatory Authority; and
  • (m) to enhance fines in the Act.

THE FULL BILL

National Social Security Fund (Amendment) Bill,2019) by The Independent Magazine on Scribd

THE NSSF ACT 1985

Nssf Act 1985 UGANDA by The Independent Magazine on Scribd

2 comments

  1. 1. NSSF is not a bank or credit institution and therefore involving itself in the business of lending especially insider lending (NSSF lending to its appointing authority) is inviting the crane bank situation in broad day light. Let government continue accessing NSSF funds through Treasury bills and bonds but not direct borrowing. There is no where in the world where a pension funds lends directly to government. The interest rate and repayment terms can not be set at arms length because of the conflict of interest.
    2. Setting the age at 60 for on to access benefits tax free is a s good as legislating to deny savers their benefits when they are useful. Most companies have retirement age at 55yrs. what will happen to those employees who retire at 55 during the 5yrs up to 60yrs?
    3.We should have encouraged early retirement at 50yrs with no tax to create jobs for our young people
    4. The claim that members get more money and government gets more tax is underestimating our education and expertise. Tax and net income are known to be mutually exclusive. Let NSSF illustrate with a practical example.
    5. Who has complained to cause such an enslaving bill to be brought up. I though government was planning to amend the law on pension for civil servants first? We the savers were never consulted and we are better off with the current arrangement because its better than what has been proposed
    6. Why is NSSF moving up and down promoting the bill yet the ministry that brought it is silent? Is NSSF already conflicted?
    7. What is Uganda Retirement Benefits Regulatory Authority regulating to qualify for a contribution from our NSSF savings. I thought liberalization was abandoned and hence we only have NSSF leaving the authority with no one to regulate?

  2. 1. The claim that members get more money and government gets more tax is underestimating our education and expertise. Tax and net income are known to be mutually exclusive. Let NSSF illustrate with a practical example.

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