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Who wins in the proposed NSSF reforms?

Critics say shelving the proposed pension liberalization bill exposes the Shs 9 trillion fund to political and corporate governance risks

Kampala, Uganda | JULIUS BUSINGE | Uganda’s National Social Security Fund finally won the battle to retain its status as a mandatory scheme for all employees in informal and formal sectors as cabinet announced plans to withdraw the proposed liberalization bill from parliament.

The cabinet, instead, proposed to amend the National Social Security Fund Act Cap 222 to include some of the liberalization related proposals that were gathered by the Parliamentary Finance Committee.

These proposals relate to expanding social security coverage, enhancing efficiency and effectiveness in investment, introduction of new benefits and streamlining of staff appointment to key positions of the Fund.

The decision, however, has elicited debate among the working population. Announcing the new decision on March 09 in Kampala, the Minister of Gender Labor and Social Development, Janat Mukwaya, said the Cabinet’s decision to retain NSSF as the sole recipient of mandatory worker’s contributions was to shield it from business oriented competition.

“Opening up mandatory contributions (to other companies) would mean surrendering both the banking and non-banking financial sector to foreign capital because indigenous firms will have a very limited role to play,” she said.

She said NSSF has demonstrated steady progress in its performance with its total assets today standing at about Sh9 trillion.

She also said that the public sector retirement benefits schemes across the globe have over the years demonstrated that they are the most reliable tool of guaranteeing benefits.

“Furthermore, the state has a duty to provide social security to her citizens,” Mukwaya said.

The other justification for cabinet’s decision was that across all the countries in Latin America and Central Europe that liberalized, the number of workers covered by pension schemes has declined.

This is because the private pension schemes were mainly interested in recruiting workers with huge salaries at the expense of low income earners especially operating in rural areas.

For instance, in Uruguay, coverage fell from 55% to 51% after eight years of reform; in Argentina coverage fell from 45% to 40% after 12 years; Bolivia coverage fell from 19% to 15% after five years; Columbia coverage fell from 24% to 22% in five years.

In Ghana specifically, a mixed system is operated where Security and National Insurance Trust (SSNIT) (which is the equivalent of NSSF Uganda) and the private schemes collect 13% and 5% respectively of employee’s monthly pay.


The proposed amendments by cabinet will make NSSF a mandatory scheme for all Ugandans in the formal and informal sectors. New rules would also scrap the 5+ cap to include employers with less workers starting with one.

Another decision that will be popular with NSSF members is that the fund will now be allowed to provide for mid-term access of voluntary benefits.

The amendments will also enable NSSF to make independent investment decisions and transform the fund from a provident Fund offering lump sum benefits to a hybrid scheme offering both lump sum and pensions.

Amendments will also be made in sections 39 and 40 to provide for appointment of the Managing Director and Deputy Managing Director by the Minister on recommendation of the Board while persons over the age of 60 years shall not pay tax on their benefits.

The new proposals would also provide that the NSSF Board shall be tripartite and therefore comprised of government, employers and workers representatives.

Also the term of the managing director and that of deputy will be five years renewable subject to satisfactory performance. New amendments would involve provision for the appointment of the secretary by the board on a contract of five years renewable subject to satisfactory performance.

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