Cabinet approves new pension scheme for civil servants

Cabinet has approved a new pension scheme for public servants, similar to the National Social Security Fund (NSSF). If all goes according to plan, the contributory scheme will be rolled out in the next financial year, 2021/2022.

Under the new scheme, 5% of a civil servant's salary, will be deducted every month and the Government will add an equivalent of 10% of one's salary to make it a 15% monthly contribution to the scheme.

This is the same model used for workers under the NSSF savings scheme.

Catherine Bitarakwate Musingwiire, the Public Service Permanent Secretary, confirmed the development, saying: "It was approved last week on Monday."

In an interview with New Vision over the weekend, she said, the new scheme will reduce the burden on payment of pension by government.

"It is a good breakthrough. Many countries have a contributory scheme for pensioners and it has grown faster, compared to ours," she said.

In addition, she said, her ministry will submit the Contributory Pension Scheme Bill for the first Parliamentary Council.

Bitarakwate said the new scheme will guarantee availability of monies for pensioners, unlike the current system, which is determined by the prevailing economic situation.

"Due to the limited resource envelop, it relies on annual budget performance with budget cuts sometimes. However, under the contributory system, one is assured of his or her money," she said.

Current pension scheme

In the current civil service system, pension for each public servant is computed on the basis of length of service and the salary at the time of retirement. For instance, if the public servant first earned sh600,000 and at the time of retirement, he/ she was earning sh2m, the latter salary is considered to determine pension.

The current scheme, dubbed "pay-go scheme" is 100% funded by government and it has a separate budgetary allocation every financial year.

Lecturers, UPDF officers excluded

However, not all public servants will be included on the proposed scheme.

Victor Leku-Bua, the ministry's human resource management commissioner in charge of compensation, said the new scheme will cover traditional civil servants.

These will include primary, secondary and TVET teachers, health workers, the Police and prisons.

He added that it will exclude the military officers, those in judiciary, employees in the Government agencies and authorities and those employed at public universities.

Leku-Bua also added that the new scheme will exclude elected public servants, such as district chairpersons and the Resident District Commissioners (RDCs).

"The military will have a different arrangement. The Judiciary already have a separate arrangement. So, they cannot be included," he said.

Management of funds

In the first five years of the scheme, the ministry has projected that proposed pension scheme will have grown to sh1.5 trillion, through investment and government borrowing. Through government borrowing, he said, it will reduce on dependence on foreign funds, which has an impact on economy.

According to Leku-Bua, government will set up a robust management mechanism for the contributions and this will be provided for under the Public Service Pension Fund Bill 2019.

The Bill, he said, provides for the establishment of the Public Service Pension Fund, the Public Service Pension Scheme, collection of contributions and payment of retirement benefits.

In addition, he said, the bill also provides for investment of the funds for growth. According to Leku-Bua, the scheme will have an option to invest the funds and that this will enable the growth of the fund.

"Even government can borrow the funds and reduce on foreign dependence, which has an impact on the economy," he added.

Phasing out old system

There are about 315,000 active government employees on the payroll, at local government, ministries, departments and agencies.

According to projections by the public service, about 280,000 of them will be included on the new scheme.

For civil servants who are left with five years or less to retirement, Leku-Bua said they will have an option to either stay on the old pension scheme or join a contributory one.

Leku-Bua said the ministry undertook studies and established that the last pensioner on the current system will have left the system by 2075.

"We conducted an actuarial study, which established the current and future liability of the current pension scheme. At the end of 2075, we will have no body under the non-contributory scheme," he said.

Under the actuarial study, he said, they found out that when one retires at the age of 60 years, on average, they can draw pension for about 18 years.

Workers respond

Filbert Baguma, the Uganda National Teachers' Union secretary, said the teachers' salaries are lower and that it will be affected by the contributions. He also called for massive sensitisation of public servants on how the scheme will be managed.