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NSSF PRESS STATEMENT

THE REPUBLIC OF UGANDA

PRESS STATEMENT
BY
HON. JANAT B. MUKWAYA
MINISTER OF GENDER, LABOUR AND SOCIAL DEVELOPMENT
ON
APPROVAL BY CABINET OF THE PROPOSED PRINCIPLES TO AMEND THE NATIONAL SOCIAL SECURITY FUND ACT CAP 222

6TH MARCH 2018
 
1.    Cabinet during its Sitting of Monday 5th March 2018, approved the Proposed Principles to Amend the National Social Security Fund Act Cap 222

2.    Accordingly, Cabinet authorized me to issue drafting instructions to the First Parliamentary Counsel to draft the National Social Security Fund Amendment Bill, 2018 in accordance with the approved Principles

3.    The following principles underlie the proposed amendments to the Act:

i.    Expanding social security coverage;
ii.    Enhancing efficiency and effectiveness in investment;
iii.    Providing for introduction of new benefits
iv.    Improving Governance; and
v.    Streamlining appointment of staff to key positions of the fund;
4.    To this end, the following proposed amendments to the National Social Security Fund  Act were approved:
i.    To specifically provide that the NSSF Board shall be tripartite and therefore comprised of Government representatives, Employers representatives and Workers representatives.  
ii.    To amend Sections 39 and 40 of the NSSF Act to provide for appointment of the Managing Director and Deputy Managing Director respectively by the Minister on recommendation of the Board.
iii.    To specify in the law that the term of the Managing Director and Deputy Managing Director be five years renewable once subject to satisfactory performance.
iv.    To amend Section 41 to provide for the appointment of the Secretary by the Board on a contract of 5 years renewable subject to satisfactory performance.
v.    To amend Section 7 of the Act to provide for mandatory contribution of all workers regardless of the size of their enterprise. Furthermore, provision should be made for voluntary contribution by workers over and above their mandatory contribution and voluntary contributions by self-employed persons. Consequently, all employers registered under the Companies Act, Partnership Act or any other law for the time being in force governing the establishment of business entities should be specified as persons who shall register as contributing employers.
vi.    Amending Section 19 to give the Board powers to introduce new benefits in consultation with the Minister
vii.    To provide for mid-term access of voluntary benefits on such terms and conditions that may be set by the Board
viii.    The Act should be amended to give the Minister power to provide by Statutory Instrument a threshold of expenditure by the Fund prior to approval of the annual budget by the Minister
ix.    Furthermore, the Board should be given the discretion to use in house expertise and fund managers in the investments of scheme funds.
x.    To allow NSSF to lend to Government
xi.    To provide for the exclusion by Statutory Instrument issued by the Minister the process of acquiring assets for purposes of earning income or capital appreciation from the application of the Public Procurement and Disposal Act as well as appraisal by the Solicitor General and Government Valuer.
xii.    To amend the Act to include a provision that any amount of contribution and any other sum together with interest or penalty thereon may be recovered from a third party who owes money to a defaulting employer.
xiii.    To amend that Act to provide that an employer who fails or refuses to remit contributions within the prescribed time may have the business managed by a third party. Accordingly, Recovery of NSSF contributions shall have priority or ranked pari passu in any instance where property of an employer is seized or sold or otherwise realized in pursuance of an order of attachment in execution of a decree issued by a competent Court.
xiv.    Persons over the age of 60 years shall not pay tax on their benefits.
xv.    To provide that the annual levy paid by the NSSF to the Uganda Retirements Benefits Regulatory Authority be capped.
xvi.    Sections 44 and 45 of the Act should be amended by increasing the fines for offences under the Act from ten thousand shillings to fifty currency points or imprisonment for a period not exceeding six months or both.

5.    Furthermore, prior to approving the above principles and proposed amendments to the NSSF Act, the Cabinet also resolved that:
i.    The NSSF be retained as the Basic National Scheme;
ii.    The NSSF should collect all mandatory contributions by workers in the formal sector; and
6.    This position therefore renders the Retirement Benefits Sector Liberalization Bill 2011 before Parliament Irrelevant.
7.    The decision by Cabinet to retain the NSSF as the sole recipient of mandatory contributions of Workers was informed by the following reasons:
i.    Opening up mandatory contributions to competition would complete the surrender of both the banking and non-banking financial sector to foreign capital because indigenous firms will have a very limited role to play
ii.    NSSF has demonstrated steady progress in its performance. Its total assets today stand at about 9 trillion
iii.    Across all the countries in Latin America and Central Europe that that liberalized, the number of workers covered by a pension scheme declined. This was majorly because the private pension schemes were mainly interested in recruiting workers whose wages made profits for sponsors and fund managers. For example:

a)    In Uruguay coverage fell from 55% to 51% - 8 years after reform;
b)    In Argentina coverage fell from 45% to 40% - 12 years after reform;
c)    Bolivia coverage fell from 19% to 15% - 5 years after reform;
d)    Columbia coverage fell from 24% to 22%. - 5 years after reform; and
e)    In Ghana 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 percent and 5 percent respectively of employee’s monthly pay. However evidence shows that most of the private schemes concentrate in the urban regions of Accra and leave the upcountry areas uncovered. Only the Social Security and National Insurance Trust (SSNIT) covers each and every part of Ghana.
iv.    Public Sector retirement benefits schemes 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. Indeed many countries around the world have pension schemes which like NSSF perform better than may private schemes. For example none of the Top Ten Pension Schemes by size of assets is private.See Annex A
8.    Finally I would like to note that old age poverty remains a key challenge in Uganda today. Today, about 29 percent or 406,000 of the I.4 million olderpersons are considered poor. This is a challenge that we must all tackle. Tackling old age poverty starts with planning during working age life. I therefore, would like to urge all workers in the country to start planning for their retirement. The principles approved by Cabinet yesterday are a great opportunity given that they provide for voluntarysaving with NSSF for both workers in the formal and informal sector.

Annex A

Top Ten Pensions funds in the World
Rank    Scheme Name    Country    Sponsor    Type of Contribution
1    Govt. Pension Investment    Japan    State    Mandatory
2    Govt. Pension Fund    Norway    State    Non-Contributory
3    Federal Retirement Thrift     US    State    Mandatory
4    National Pension Fund     Korea Rep.    State    Mandatory
5    ABP    Netherlands    State    Mandatory
6    National Social Security    China    State    Mandatory
7    California Public Employees    US    State    Mandatory
8    Central Provident Fund    Singapore    State    Mandatory
9    Canada Pension    Canada    State    Mandatory
10    PFZW     Netherlands    Non-Profit    Mandatory
Source: Willis Towers Watson 2016
9.