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Targeting NSSF money

“In general these amendments are in the best interest of the members and they leave the member in a much better position,” he posted, “They’ll also drive additional savings which is good for long term financing options for the economy.”

The commentators who appear to have the best explanations of the benefits of the Bill do not dwell on the workers. They swing to the big picture and long term.

Francis Kamulegeya, a Senior Partner at PwC Uganda, is one. His firm has been lobbying the government to change the tax law to stop taxing contributions to pension fund for the last ten years.

He said that the new plan is good for employees, employers, pension funds, fund managers, retirement benefit schemes, provident funds, insurance companies, the banking sector and to the economy.

He explained: “(The proposed law) will help drive the culture of long-term savings, as people now have a choice either to spend all their employment income now and pay tax or put away some of their employment income as a saving for their retirement and don’t pay tax on this portion of income put away for their future retirement”.

Byarugaba takes the same approach. He told The Independent that the NSSF (Amendment) Bill 2019, will lead to expansion of social security coverage, efficiency and effectiveness in investments and address numerous issues of governance and innovation around products and other benefits.

“We welcome and support the Bill,” he said. “The proposed amendments are progressive and address the concerns of the members and the country at large.”

The carry-all answers from Byarugaba and other experts sound good. But is failing to explain the benefits to the savers a good idea?

Hidden motives

According to some commentators, the failure to explain benefits of the reforms fuels speculation of a hidden motive.

Until now, most savers – including the NOTU boss, Wilson Owere- have been pushing for a reduction in the age at which savers can withdraw their benefits from the Fund. For most workers, their savings are an investment and they want to enjoy returns now.

They workers have also been lobbying for opening up of the pension sector. Many hoped this would create choice and end the era of forced saving with NSSF. Instead the reforms appear designed to force even more workers to save with NSSF.

The Bill proposes to make contributions compulsory for all workers in the formal sector and also allow voluntary contributions for workers in formal and informal sectors. But appearing to treat current savers badly could complicate attracting new voluntary savers. And enforcement could prove counterproductive.

There is also a proposal for the government to be enabled to borrow funds from the Fund directly. Many commentators see this as opening a Pandora Box since NSSF has a legacy of corruption. Nearly all its previous managers have ended up in court over corruption allegations.

Prof. Augustus Nuwagaba, a senior economist with bias in development economics says NSSF should lend to government on condition that the terms and conditions are clear and loans are designed in such a way that members’ savings will not be lost or stolen.

“I support the move by government to borrow directly from the NSSF,” he said, “But they [NSSF] need very serious investment advisors. If anything happens and members’ savings is lost, that can be problematic.”

He says amending the NSSF Act is good, if it leads to financial depth and creates avenues for the government to get money to fund budgets and related development projects. The question is why the government is not pushing this line, instead of claiming the reforms are for the good of workers benefits.

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