11.5%: NSSF pays higher interest rate

KAMPALA - Ugandan workers who save with the National Social Security Fund (NSSF) have received a slight increment in interest payment on their savings.

 

Aston Kajara, the state minister for finance, on Wednesday announced that NSSF would pay its members an interest rate of 11.5% for the financial year 2013/14.

 

The announcement was made at the NSSF head offices in Kampala.

 

The new rate marks an increase from 11.23% the fund paid in the financial year 2012/13. In monetary terms, the fund will pay out sh366b for the financial year 2013/14 compared to sh278b for the financial year 2012/13.

 

Kajara said: “The new interest rate means that for every sh1m a member held with the fund at the end of June, they will receive sh115,000 extra on their account. The interest rate is above the 9.23% 10-year average rate of inflation, meaning that NSSF is growing the value of its members’ savings.”

 

He added that the selection process of the new managing director and deputy were underway.

 

Kajara noted that the Government was doing its best to have good management in place and secure the fund and members savings.

 

Analysing the announcement, Busani Ngwenya, the managing director, Alexander Forbes Financial Services Uganda Ltd, said: “NSSF could have paid its members higher interest rates if all their investments, especially those in properties, were performing well and earning returns.

 

“We have similar funds we have invested in Uganda and our interest payments are up to 20%.”

 

He observed that the NSSF payment showed a good performance because it was above the June 2013 inflation.

 

Inflation in June 2013 stood at 3.6%. Ngwenya said the performance of NSSF was judged on the inflation levels.

 

Acting NSSF managing director Geraldine Ssali said the fund size increased by 26% to sh4.38b todate from sh3.5 trillion in June 2013.

 

She said the growth was due to the increase in member’s contributions and investment income. In 2013/14, member contributions grew to sh638.2b up from sh558b the previous year and the total income increased by 14.1% to sh478.9b.

 

“Our performance has improved because of our aggressive but prudent investment strategy, cost management strategies that kept our cost-income ratio at 15%, better than industry average and expense ratio at 1.5% better than funds of similar size.

 

“Our focus remains to provide a reasonable return to members without compromising the safety of their savings.”

 

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She explained that some of their investments that were not performing well included stocks with Uganda Clays Ltd, Housing Finance Company of Uganda and New Vision Printing and Publishing Company.

 

Ssali also expressed caution at investigations by the Inspector General of Government, ‘whistleblowers’ and Parliament, which tend to delay investment activities.

 

Wilson Owere, the chairman of the National Organisation of Trade Unions, said he was happy with the interest payments and that it would give confidence to the workers, especially on the safety of their savings.

 

“There should be no external or internal interference with the fund,” Owere said.

 

NSSF has 458,000 active members with an asset base of sh4.38 trillion compared to the country’s 30 private retirement benefits funds, which have 15,000 members and an asset base of sh350b.

 

Improving social security

Rachel Sebudde, a senior economist at the World Bank, said a comprehensive social protection system, which covers all individuals at old age takes time to build and pensions was one of the key elements of the system.

 

Sebudde said pensions raise savings, develop financial markets and support broader macroeconomic goals.

 

She said Uganda’s current pension system only covers 10% of the working population of over 15 million people and only 2% of the elderly receive pension compared to other countries.

 

“The current issues with the pension system are low returns to savers, high cost of administration, governance problems in the past and mismanagement of assets,” she said.

 

Sebudde added that a lot of money was spent by the Government on the public service pensions on public servants who constitute 2% of the working population.

 

She said to improve the pension system, coverage should be expanded, it should adequately meet the needs of savers, sustainability of funds should be developed, the savings should be secure, efficiently managed and the regulators should ensure good governance in the sector.

 

NSSF board chairman Ivan Kyayonka said although the limited investment opportunities presented challenges, the fund was able to register progress.

 

“We will continue to seek opportunities in equities as the stock market recovery continues. The envisaged liberalisation of the sector presents the fund with an opportunity for flexibility in the region and diversification,” he said.

 

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NSSF board chairman Ivan Kyayonka

 

Kyayonka said NSSF missed a lucrative investment opportunity in Tanzania because of the stringent approval process for investing, which requires approvals from the Solicitor General and the Minister of Finance.

 

The Minister of Finance is also required to approve interest payments.

 

“We are trying an investment in forestry, but in Uganda we do not have competent people to value forestry. Forestry is an investment of 20 to 30 years,” Kyayonka said.

 

He said in the market, there are few long-term opportunities for investment that spring up and because of dilly dallying, the opportunity is lost.

 

Kyayonka said all funds in the region are hungry and ready to take up such investments.

 

 Moustapha Ndiaye, the country manager of the World Bank in Uganda, said a person who has worked and lived a good life while in employment deserves to lead a comfortable life. He said a good pension system and social protection framework can prevent people living in poverty after retiring. 

 

 

Accessing your statement online begins with an email request to customerservice@nssf.org. A password is sent to your email. You can then go to NSSF’s website, fill in your NSSF number and password on the e-statement feature and view your statement. Alternatively, send an email to NSSF, put ‘statement’ in the subject and your valid NSSF number and you will receive the statement instantly. You can also access the statement via SMS by sending the word NSSF to 6773 and following instructions. 

 

Qualifying for your benefits 

 

The type of benefits NSSF pays out to its contributors include age, invalidity, survivors, withdrawal, exempted employment and emigration grant benefits.

 

Age: This is given at the age of 55 years, but can also be given earlier at 50 years if one has retired by that time.

 

Invalidity: This is paid to a contributing member who has lost his earning capacity due to physical or mental incapacitation.

 

Survivors: This is paid to the next of kin of a contributor who has died in the course of employment.

 

Exempted member: This is paid to an individual switching employment to an organisation that is NSSF-exempted.

 

Withdraw: These accrue when a member has attained the age of 50 years and has not been in employment or under contract for the past one year.

 

Emigration Grant: This is paid to an employee who has been working in Uganda and is leaving the country permanently.