Africa-Press – Uganda. The government is drafting a Bill to grant National Social Security Fund (NSSF) members mid-term access to 20 percent of their savings even if they have not saved for 10 years so long as they are aged 45 or older.
Gender and Labour Minister, Ms Betty Amongi, revealed yesterday that the draft law will be ready in two months to address complaints by savers “frustrated” by their exclusion for not having remitted contributions for at least 120 months.
Under Section 24A of the current NSSF (Amendment) Act, mid-term beneficiaries must be 45 years or older and saved for 120 months.
“Many members have been complaining that the mid-term [cash] access, which they had hoped to [get] when they reached 45 years, the law was framed in such way that you must have saved continuously for at least 10 years,” Ms Amongi said.
She added: “We consulted with the Attorney General (the government’s principal legal advisor) and he has already given us the go-ahead to draft a Bill for us to amend that to support those who have reached 45 [years to] access their NSSF savings.”
Workers last night welcomed the development, with Mr Usher Owere, the chairman-general of the National Organisation of Trade Unions (Notu), describing it as overdue”.
“That clause that was closing off [NSSF] members from accessing midterm [benefits] was unnecessary,” he said, revealing that they subsequently petitioned different government offices and also engaged with the Attorney General.
According to Mr Owere, the government’s principal legal advisor agreed with them and their concerns were later tabled for consideration by the Cabinet and that they had hoped the amendment to the law would by now already have been concluded.
The condition of a consecutive 10-year savings crowded out 180,000 potential beneficiaries, NSSF management and labour rights groups said during debate on the impugned clause, leaving only 120,000 members eligible.
The Fund’s past management led by ex-managing director Richard Byarugaba previously argued that it would require Shs2.9 trillion to pay a combined 320,000 qualifying members if it had to disburse mid-term payments to all members aged 45 or older, irrespective of the duration they had saved for.
NSSF is a statutory body under which every private sector worker contributes 5 percent of their monthly gross salary, with the employer topping it with 10 percent, which collections a member under the original law would only access after reaching the retirement age (60 years).
However, financial distresses caused by Covid-19 disruptions from 2020 prompted workers to seek an early access to their benefits, leading lawmakers to revise the Act and cap such pay-out at 20 percent of individual savings of a beneficiary.
Savers with disabilities will, under the proposed changes, get up to half of their savings if aged 40 irrespective of the number of years of their savings.
Notu’s Owere yesterday dismissed claims initially made by Mr Byarugaba, which the Private Sector Foundation of Uganda Executive Director Stephen Asiimwe repeated yesterday, that an increased number of mid-term beneficiaries would haemorrhage the workers’ Fund and jeopardise its investment portfolio.
“That is just an excuse … they are trying to run away from paying people. Even fewer of the currently eligible savers came to withdraw their money,” Mr Owere said, adding, “What we need to do now is to intensify campaign so that employers remit NSSF contributions of members. There will this way be more money for the Fund.”
Mr Asiimwe had earlier said “on a macroeconomic side, [the proposed Bill] has serious implications for NSSF’s investment undertakings. Broadly speaking, it will bring a situation of less cash in the NSSF pool and that means a reduced business investment…”
Like Mr Owere, the Central Organisation of Free Trade Unions (Coftu) Secretary General, Dr Mr Sam Lyomoki, who sits on the Fund Board, dismissed commentary about mid-term access depleting cash flows as exaggerated.
“Most of the members realised that when they get the money when they are 55 or 60 [years-old], within three years, they have wasted all the money they have saved. If we couple mid-term access with financial literacy, it will bear significant impact, but without doing that, there will be challenges,” he noted.
Paying up savers as required by law is the “critical” role of NSSF management, and any denial or deferrals of disbursements violate the spirt of the savings and could potentially discourage contribution mobilisation, he added.
We were unable to establish the number of mid-term claimants, and the amount of cash they took out or the impact on NSSF investment and liquidity portfolion.
Ms Barbra Arimi, the Fund’s head of marketing and corporate affairs, said they would require time to compute how much the Fund would pay the mid-term access beneficiaries.
Last year, the Fund earmarked Shs1 trillion for mid-term benefits payout on the back of a stronger performance.
By January 2023, its collections from monthly contributions and realised income had grown by 22 percent and 17 percent, respectively, for half a year as of the end of December 2022.
The remittances by savers within the six months grossed Shs786 billion, up from Shs643 billion for similar period in the previous year. This bump in earnings followed registration of 2,078 employers and 67,277 new contributors, officials said.
Data from the Fund showed that it has paid Shs712 billion over six months (between July and December 2022), compared to Shs364 billion over the same period in 2021/2022, but it was unclear how much of the payout went to midterm beneficiaries.
NSSF’s asset size as of December stood at Shs17.8 trillion.
Speaking at the Northern Gateway Hotel in Kamdini Town Council in her native Oyam District, Minister Amongi yesterday rallied district labour inspectors and local government leaders to turbo-charge the drive for employers to register their staff for NSSF and timely remit monthly contributions on their behalf.
She revealed that they are in the process of making regulations to stipulate how voluntary savings with NSSF can be made, and accessed, in line with provisions of the NSSF (Amendment) Act.
17% Collections
By January 2023, NSSF collections from monthly contributions and realised income had grown by 22 percent and 17 percent, respectively, for half a year as of the end of December 2022.
Issue
“Many members have been complaining that the mid-term [cash] access, which they had hoped to [get] when they reached 45 years, the law was framed in such way that you must have saved continuously for at least 10 years,” Ms Betty Amongi, Gender and Labour Minister.
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