New NSSF board ready to act professionally
Oct 14, 2009
The National Social Security Fund has been in the news for all the wrong reasons. Tax-payers are angry about the misuse of their money by the fund managers. In this article, the NSSF chairman clarifies on the issues of contention
Vincent B. Ssekkono
The National Social Security Fund has been in the news for all the wrong reasons. Tax-payers are angry about the misuse of their money by the fund managers. In this article, the NSSF chairman clarifies on the issues of contention
Since the purchase of land at Temangalo by NSSF and the judgment of the Court of Appeal in the NSSF Vs Alcon case, NSSF has dominated the electronic and print media. Many people and writers have made comments and expressed their views about the way NSSF should be managed and run in the future.
It is neither my intention to defend NSSF, nor my desire to respond to these comments because we found them very useful and helpful for our future work. However, I feel duty-bound to throw some light on some issues which seem not to have come out very well during the debate.
It is important for the public to appreciate that most of the challenges facing NSSF today are of a transient nature and should not undermine, or divert us from the purpose and importance of a social security scheme like ours.
However, we need to understand the feeling and frustration of the members of the public and contributors about the way money and investments have been handled in the fund in the last several years. The new board can only undertake to do better and improve the management of the fund by avoiding the mistakes of the past.
Background of NSSF
The NSSF is a national savings scheme mandated by the Government, through the National Social Security Fund Act to provide social security services to workers in Uganda. It covers all workers in the private sector including non-governmental organisations, who are not covered by the Uganda Government Pension Scheme. It is a scheme established to protect workers against the uncertainties and hardships of social economic nature in their retirement.
In 1967, the Government of Uganda, through an Act of Parliament established the National Social Security Fund (NSSF). The fund became operational in 1968 as the only provider of social security for workers in the private sector.
The NSSF was set up in fulfilment of the International Labour Organisation (ILO) convention which requires member countries to provide minimum standards of social security for their citizens. ILO defines social security as:-
“The protection which the Government provides for its members, through a series of public measures against economic and social distress that would otherwise be caused by the stoppage or substantial reduction of earnings resulting from sickness, maternity, employment injury, unemployment, disability, old age and death.â€
Some people have viewed NSSF as an institution where workers keep money for a rainy day or where they can go when they have serious financial problems. Some other people, in frustration and anger about the way NSSF has been managed in the recent past, have suggested that NSSF is us eless and should be scrapped altogether. This is understandable. However, to us, abolishing it is not an option in contemporary social economic life because workers have to save and invest for their old age to avoid poverty and a miserable life when they retire.
What, however, should be emphasised now is that NSSF, as a savings scheme, should be perfected and workers’ money managed with high professional and ethical standards.
Some people have suggested that access age should be lowered to 45 years. NSSF is a fund where members are required by law to contribute until they are 55 years, which is commonly referred to as Age Benefit.
This is a time when they are less productive and their chances of getting viable employment are declining. This is also the time when they should have financial resources to fall back on in order to continue living a fairly comfortable life. This money is given out in lumpsum with a hope that a member will use it well and productively in his or her retirement.
It is best practice for workers to access their money when they attain the age of 55 or when they are 50 and are unemployed. It is true that the life expectancy in Uganda is said to be at 47 years. However, statisticians and economists alike will argue that averages are sometimes misleading because, in this case, they include babies and people who are 70 years and beyond. Our experience has shown that very few contributing members die before they qualify to claim their benefits from NSSF.
Mandatory retirement age in the traditional civil service in Uganda is 60 years. However, one may opt to retire at the age of 55 with convincing reasons. It is, therefore, evident that the argument for lowering the access age is not tenable and will be inconsistent with international standards.
In NSSF Kenya and NSSF Rwanda, workers access their money at the age of 55, while in Tanzania, the Retirement Pension Benefit is paid to a person who attains the pensionable age of 60. However, early retirement benefits can be considered for people in the age bracket of 55 to 59 years. In Ghana, pension is paid when one attains the age of 60.
Current NSSF Board
The current NSSF Board of Directors was appointed by the Minister of Finance, Planning and Economic Development in April 2009 in accordance with the Act. The board represents all stakeholders, namely: Government, workers and employers. For the first time, 50% of the board members are from trade unions. This is a balanced board because all stakeholders are represented and workers have a fair say in the steering of the fund.
The priority of the new board is to put right what we think went wrong in the running and management of the Fund, to ensure that all the projects and investments which had stalled take off again, are completed and become productive.
The board was appointed in a crisis period when the fund was facing serious challenges. Most of these challenges are historical but must be decisively handled.
In the last five months, we have handled a number of issues and taken decisions mainly relating to investments which were in the pipeline. The decisions we have taken will be put in the public domain in the course of time.
Liberalisation of pension sector
Many people are calling for liberalisation of the pension sector as a solution to some of the problems facing NSSF today.
The Government has developed a Pensions and Retirement Benefits Bill which will bring other players and service providers into the pension sector and break the monopoly of NSSF.
The upcoming legislation will also introduce a regulator who will regulate the activities of the service providers including NSSF. This, in our view, is a good development because it will introduce competition and all service providers will compete for the workers’ savings. In addition, the new law will improve service delivery in the pensions sector. NSSF will be a leader pension fund once the sector is liberalised because it will have a number of advantages over the prospective players in the sector, namely:
Long experience in the business;
Large asset base and investments
New players will start from zero members whereas already the fund has over 400,000 members, many of whom will not easily switch to other players.
The problems of NSSF are temporary and largely self-inflicted. I am confident that with proper and effective management, they will disappear overtime. They will be handled decisively by the new board in order to make the fund profitable and productive. We have able professional Ugandans who can manage the Fund and produce maximum returns in terms of benefits. The focus will be put on choosing and appointing managers of high calibre in terms of training, experience and integrity. The new board of which I am a chairperson is determined and resolute to do exactly that.
Benefits
NSSF pays out five types of benefits to qualifying members as a matter of right and this is provided for in the NSSF Act namely: age benefit, survivors benefit, withdrawal benefit, emigration grant and invalidity benefit. The electronic and print media have created an impression that it is very difficult for the workers to receive their money when it is due. Some people have even gone to the extent of saying that in the last one year we have not paid more than 50 members. This is false and grossly misleading.
Currently, NSSF has over 400,000 members and on average, receives 800 benefit claims per month and pays out about sh3.5b per month in form of benefits. Last financial year, 2008/09, a total of sh36.2b was paid out to 7,861 workers.
All qualifying members are paid after a thorough verification to ensure that only the right beneficiaries are paid. The details are available for the public. However, we beg the public to appreciate that processing retirement benefits is a delicate matter that requires careful scrutiny in order to avoid paying money to wrong people and fraudsters. When claims are paid to wrong people, the money involved is more or less lost forever. The fund is determined to perfect its systems and procedures in order to expedite payments of benefits to members.
Challenges
The board is aware the fund still faces a number of challenges that must be addressed.
Improving internal capacity and discipline
The fund needs to develop its internal capacity and raise its ethical and professional standards. We shall not tolerate indiscipline and corruption tendencies in the management of the fund. We shall punish and decisively deal with staff who will be caught in acts of wrong doing.
Proposed amendments to NSSF Act
The current Act of Parliament governing the Fund was enacted in 1985. We acknowledge that some of its key provisions are out of date and are due for amendment to respond to changing conditions, circumstances and demands. The board will identify these provisions and make appropriate proposals to the Government. One of the proposals we intend to bring up is a provision which will allow contributors to access part of their savings when they are in difficult circumstances and in desperate need for money. These recommendations will eventually go to Parliament and everybody concerned will have an opportunity to make a contribution to the debate.
writer is the chairman, NSSF Board of Directors
The National Social Security Fund has been in the news for all the wrong reasons. Tax-payers are angry about the misuse of their money by the fund managers. In this article, the NSSF chairman clarifies on the issues of contention
Since the purchase of land at Temangalo by NSSF and the judgment of the Court of Appeal in the NSSF Vs Alcon case, NSSF has dominated the electronic and print media. Many people and writers have made comments and expressed their views about the way NSSF should be managed and run in the future.
It is neither my intention to defend NSSF, nor my desire to respond to these comments because we found them very useful and helpful for our future work. However, I feel duty-bound to throw some light on some issues which seem not to have come out very well during the debate.
It is important for the public to appreciate that most of the challenges facing NSSF today are of a transient nature and should not undermine, or divert us from the purpose and importance of a social security scheme like ours.
However, we need to understand the feeling and frustration of the members of the public and contributors about the way money and investments have been handled in the fund in the last several years. The new board can only undertake to do better and improve the management of the fund by avoiding the mistakes of the past.
Background of NSSF
The NSSF is a national savings scheme mandated by the Government, through the National Social Security Fund Act to provide social security services to workers in Uganda. It covers all workers in the private sector including non-governmental organisations, who are not covered by the Uganda Government Pension Scheme. It is a scheme established to protect workers against the uncertainties and hardships of social economic nature in their retirement.
In 1967, the Government of Uganda, through an Act of Parliament established the National Social Security Fund (NSSF). The fund became operational in 1968 as the only provider of social security for workers in the private sector.
The NSSF was set up in fulfilment of the International Labour Organisation (ILO) convention which requires member countries to provide minimum standards of social security for their citizens. ILO defines social security as:-
“The protection which the Government provides for its members, through a series of public measures against economic and social distress that would otherwise be caused by the stoppage or substantial reduction of earnings resulting from sickness, maternity, employment injury, unemployment, disability, old age and death.â€
Some people have viewed NSSF as an institution where workers keep money for a rainy day or where they can go when they have serious financial problems. Some other people, in frustration and anger about the way NSSF has been managed in the recent past, have suggested that NSSF is us eless and should be scrapped altogether. This is understandable. However, to us, abolishing it is not an option in contemporary social economic life because workers have to save and invest for their old age to avoid poverty and a miserable life when they retire.
What, however, should be emphasised now is that NSSF, as a savings scheme, should be perfected and workers’ money managed with high professional and ethical standards.
Some people have suggested that access age should be lowered to 45 years. NSSF is a fund where members are required by law to contribute until they are 55 years, which is commonly referred to as Age Benefit.
This is a time when they are less productive and their chances of getting viable employment are declining. This is also the time when they should have financial resources to fall back on in order to continue living a fairly comfortable life. This money is given out in lumpsum with a hope that a member will use it well and productively in his or her retirement.
It is best practice for workers to access their money when they attain the age of 55 or when they are 50 and are unemployed. It is true that the life expectancy in Uganda is said to be at 47 years. However, statisticians and economists alike will argue that averages are sometimes misleading because, in this case, they include babies and people who are 70 years and beyond. Our experience has shown that very few contributing members die before they qualify to claim their benefits from NSSF.
Mandatory retirement age in the traditional civil service in Uganda is 60 years. However, one may opt to retire at the age of 55 with convincing reasons. It is, therefore, evident that the argument for lowering the access age is not tenable and will be inconsistent with international standards.
In NSSF Kenya and NSSF Rwanda, workers access their money at the age of 55, while in Tanzania, the Retirement Pension Benefit is paid to a person who attains the pensionable age of 60. However, early retirement benefits can be considered for people in the age bracket of 55 to 59 years. In Ghana, pension is paid when one attains the age of 60.
Current NSSF Board
The current NSSF Board of Directors was appointed by the Minister of Finance, Planning and Economic Development in April 2009 in accordance with the Act. The board represents all stakeholders, namely: Government, workers and employers. For the first time, 50% of the board members are from trade unions. This is a balanced board because all stakeholders are represented and workers have a fair say in the steering of the fund.
The priority of the new board is to put right what we think went wrong in the running and management of the Fund, to ensure that all the projects and investments which had stalled take off again, are completed and become productive.
The board was appointed in a crisis period when the fund was facing serious challenges. Most of these challenges are historical but must be decisively handled.
In the last five months, we have handled a number of issues and taken decisions mainly relating to investments which were in the pipeline. The decisions we have taken will be put in the public domain in the course of time.
Liberalisation of pension sector
Many people are calling for liberalisation of the pension sector as a solution to some of the problems facing NSSF today.
The Government has developed a Pensions and Retirement Benefits Bill which will bring other players and service providers into the pension sector and break the monopoly of NSSF.
The upcoming legislation will also introduce a regulator who will regulate the activities of the service providers including NSSF. This, in our view, is a good development because it will introduce competition and all service providers will compete for the workers’ savings. In addition, the new law will improve service delivery in the pensions sector. NSSF will be a leader pension fund once the sector is liberalised because it will have a number of advantages over the prospective players in the sector, namely:
Long experience in the business;
Large asset base and investments
New players will start from zero members whereas already the fund has over 400,000 members, many of whom will not easily switch to other players.
The problems of NSSF are temporary and largely self-inflicted. I am confident that with proper and effective management, they will disappear overtime. They will be handled decisively by the new board in order to make the fund profitable and productive. We have able professional Ugandans who can manage the Fund and produce maximum returns in terms of benefits. The focus will be put on choosing and appointing managers of high calibre in terms of training, experience and integrity. The new board of which I am a chairperson is determined and resolute to do exactly that.
Benefits
NSSF pays out five types of benefits to qualifying members as a matter of right and this is provided for in the NSSF Act namely: age benefit, survivors benefit, withdrawal benefit, emigration grant and invalidity benefit. The electronic and print media have created an impression that it is very difficult for the workers to receive their money when it is due. Some people have even gone to the extent of saying that in the last one year we have not paid more than 50 members. This is false and grossly misleading.
Currently, NSSF has over 400,000 members and on average, receives 800 benefit claims per month and pays out about sh3.5b per month in form of benefits. Last financial year, 2008/09, a total of sh36.2b was paid out to 7,861 workers.
All qualifying members are paid after a thorough verification to ensure that only the right beneficiaries are paid. The details are available for the public. However, we beg the public to appreciate that processing retirement benefits is a delicate matter that requires careful scrutiny in order to avoid paying money to wrong people and fraudsters. When claims are paid to wrong people, the money involved is more or less lost forever. The fund is determined to perfect its systems and procedures in order to expedite payments of benefits to members.
Challenges
The board is aware the fund still faces a number of challenges that must be addressed.
Improving internal capacity and discipline
The fund needs to develop its internal capacity and raise its ethical and professional standards. We shall not tolerate indiscipline and corruption tendencies in the management of the fund. We shall punish and decisively deal with staff who will be caught in acts of wrong doing.
Proposed amendments to NSSF Act
The current Act of Parliament governing the Fund was enacted in 1985. We acknowledge that some of its key provisions are out of date and are due for amendment to respond to changing conditions, circumstances and demands. The board will identify these provisions and make appropriate proposals to the Government. One of the proposals we intend to bring up is a provision which will allow contributors to access part of their savings when they are in difficult circumstances and in desperate need for money. These recommendations will eventually go to Parliament and everybody concerned will have an opportunity to make a contribution to the debate.
writer is the chairman, NSSF Board of Directors