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Thursday, 11th August, 2011
AS the pension market opens up, there are concerns over inadequate stakeholders’ consultations and transparency in the manner the reforms are handled.
Parliament, early this year, passed a law that created the authority to regulate the establishment, management and operation of the retirement benefits schemes.
Workers’ representatives and trade unions are jittery about the new policy reforms, one of which will see them get only 33% of their savings and thereafter be paid a monthly pension till death.
“We are disappointed. We are suspicious. Our concerns have been continually ignored,” Sam Lyomoki, the Workers’ Member of Parliament, said.
“The reforms have been rushed without the views of the workers. Those people pushing for the reforms want to use workers’ money for selfish motives.”
He explained that before any reforms and laws are passed there is need to consult workers widely so that they decide on the fate of their savings.
“Workers are the ones who should first decide whether to take all their money (savings) or not,” said Lyomoki, who is also the chairperson of the sessional committee on social services.
Currently 5% of workers’ salaries are deducted as part of their contribution to the NSSF with employers making an additional 10% contribution to the body on behalf of the worker.
The money is then paid in a lumpsum to the worker once they make 55 years under the current laws.
Lyomoki said he has written to the President for another round of consultations.
“If the Government is not listening to our demands, we shall have no option but call for a nation-wide demonstration that will paralyse the economy,” he warned.
Usher Owere, the president of the National Organisation of Trade Unions (NOTU), says “the owners (workers) of the money should be involved” in the whole process.”
“The Government has been playing with workers’ money for long but this time they will not handle,” he warns. “Why doesn’t the Government consult workers?”
Owere claimed that the pension sector reforms were “hijacked” by the Ministry of Finance before carrying out adequate consultations with workers and stakeholders.
“We have gone to the Constitutional Court for interpretation why the social and security fund was removed from the Ministry of Gender, Labour and Social Services to the Finance Ministry,” he explained.
“The social policy remained with the gender ministry. Under what mandate is the finance ministry pushing the reforms? From the word go, the process should involve workers.”
Owere also raised concerns over the delays in naming members of the newly-created Uganda Retirement Benefits Regulatory Authority.
But Peter Ngategize, the finance ministry’s competitiveness investment climate strategy national co-ordinator, said the appointment of the office bearers is a long process.
“You cannot approve and vet before the pension sector liberalisation bill is passed into law. It is still with Cabinet,” he explained. “It is until this bill is passed that the authority will become operational.”
The Pensions Liberalisation Bill, is already in Parliament, state minister for finance Fred Omach said recently.
Once the Bill is enacted into law, the pensions sector will be opened to private players, thereby ending the NSSF monopoly.
Experts say reforming the pension sector is critical for competition and growth as it provides a key avenue for increasing access to long-term finance through increased mobilisation of savings.
But streamlining the regulatory framework for the pension industry will ensure efficiency in management and investment of pension funds and this will provide incentives for saving mobilisation.
“All people with vested interests should be consulted to guide the transition,” Rosemary Ssenabulya, the Federation of Uganda Employers (FUE) head, advised.
“We are going to recommend that the Ministry of Finance puts up a committee which will be responsible for the transition period of the NSSF made up representatives from the private sector, employers, trade unions and other stakeholders.”
Dr Jan Tibamwenda, an economist in an opinion sent to The New Vision argued that the starting point should be an acceptance that the money in NSSF is owned by workers 100%.
“Since we live in a democratic era, it is only fair that when NSSF is transformed into a pension fund, those who prefer their NSSF funds to be paid like monthly salary could be catered for by providing two options in the law,” he stated in an opinion to Business Vision.
“Those who want their money lump sum should be allowed to have and those who have not seen the light and want it paid like monthly salary should also be allowed.”
He also pointed out at the issue of the time value of money that should not be overlooked because money now has more value than money in future.
“The lump sum money paid to a retiree now is more valuable than the money paid to him like monthly salary over time due factors such as inflation,” said Tibamwenda.
He argues that giving savers their money in lump sum will trigger investment whereas giving monthly installments will wed them to poverty.
By Ibrahim Kasita: The New Vision Newspaper
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