Buy annuities to safeguard retirement - URBRA boss

By Alfred Wandera and David Mugabe

The new chief executive officer of Uganda Retirement Benefits Regulatory Authority (URBRA), David Nyakundi Bonyi, has urged employees to consider purchasing annuities so that their retirement benefits are paid to them monthly instead of picking them once in lump sum.

An annuity is an insurance product that pays out income, and can be used as part of a retirement strategy. Annuities are a popular choice for investors who want to receive a steady income stream in retirement.

This would be the product of choice in a fully liberalized market as opposed to the current lumpsum provision of the mandatory National Social Security Fund (NSSF) scheme and a few private schemes.

Bonyi said NSSF, Uganda’s only mandatory savings body, is a provident fund where upon retirement, a person is paid their full savings once, which poses a risk of misuse and render the retiree to slip into poverty thereafter.

“In Uganda we have a provident fund where you save and when you retire you are given all your money at once. Some people save very well but spend their savings badly when they retire. We encourage them to buy annuity which is a form of pension rather than a lump sum payment. Some people end up misusing their savings and collapse into poverty,” noted Bonyi.

He was speaking yesterday during a breakfast meeting with journalists at Imperial Royale Hotel in Kampala. Bonyi, a Kenyan is the first chief executive taking over from the interim chief Moses Bekabye who acted in the position for several years overseeing the establishment of the URBRA institution.

Bonyi added that the purchase of annuity is the only sure way of retirees protecting themselves from outliving their savings.

He further called on the Uganda Revenue Authority to consider providing tax incentives to the employees and employers so as to boost the workers’ savings to make bigger investments that will raise URA’s revenue base.

“A mandatory scheme which is dominant makes it hard for one to make a voluntary contribution especially in Uganda where one’s savings to NSSF forms a significant portion of their earnings.

In Kenya the mandatory contribution is low, only Ksh200 (sh6,000), which leaves one to save in the voluntary scheme that is employer based and closely monitored than the mandatory scheme that is national,” noted Bonyi.

Bonyi said in the next three years, URBRA will procure and install an integrated risk based supervision scheme to help monitor the operations of the licensed retirement benefits schemes.

He called for expeditious passing of the Retirement Benefits Sector Liberalization Bill 2011, to deal with the monopoly currently enjoyed by NSSF, and ensure efficient management of the employees’ savings.

The pensions reform process picked pace after the establishment of the regulator-URBRA about four years ago.

But the process of passing the liberalisation law which would create several competing firms and not make it mandatory for one to contribute to NSSF or just a small portion has stalled for almost five years. The law is before Parliament pending several reviews.
 
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