Africa-Press – Uganda. Did you know that you don’t have to be 45 years or older to access some percentage of your hard earned savings?
Did you also know that you don’t have to save with National Social Security Fund (NSSF) for 10 years or more to be entitled to a mid-term access?
According to the vice chairperson, Committee on Gender, Labour and Social Development in Parliament, Ms Agnes Kunihira, the National Social Security Fund (Amendment) Bill, 2019 which was passed recently into law allows for a saver who is 45 years and above or a member who has contributed to NSSF for at least 10 years to be eligible for mid-term access.
The new law, presently awaiting Presidential assent, restricts the mid-term access to below 20 per cent of the contributor’s total savings with the Fund.
When contacted last week Ms Kunihira, whose committee was heavily involved in scrutinising the Bill, noted that any contributor who has saved with the Fund for 10 years or more irrespective of their age qualifies for a mid-term access not exceeding 20 per cent of their total savings. The same principle applies to a member of the Fund who is 45 years but has been contributing to the Fund for less than 10 years.
“Whichever comes first is what applies. You don’t need to have both requirements. One of the two entitles you to a mid-term access,” Ms Kunihira who is also the workers representative in Parliament said.
Ms Kunihira is not alone in her interpretation of the passed legislation which until now appeared to be misunderstood by many workers saving with the Fund. Many thought that to be eligible for the 20 per cent mid-term access, you needed to fulfill both requirements—attaining age of 45 or more and saving with the Fund for at least 10 years.
But that is not the case as demonstrated by another Workers Representatives Mr Charles Bakkabulindi in a separate interview.
He said: “We are the architects of this Bill. We looked at two options—age and time a member would have saved with the fund. This law is clear on who is entitled and who is not. For example, you could be 45 years but have saved with the Fund for seven years. So by the virtue of your age, you are entitled to the mid-term access if you so wish.”
He continued: “And the second option is you could be 30 years but you have been contributing to the Fund for 10 years and few months, that makes you entitled as well to the mid-term access. So it is not about having both requirements at the same time, no!”
The National Social Security Fund (NSSF Uganda) is a national saving scheme mandated by government through the NSSF Act, Cap 222 (Laws of Uganda) to provide social security services to employees in Uganda .
Missed memo?
It seems not all the stakeholders got the memo. The chairman of the National Organisation of Trade Unions, Mr Usher Wilson Owere is not convinced that the law awaiting the President’s assent stipulates what the two Workers MPs are stating.
When contacted for this article last week, he dismissed the notion that the requirement provided for in the NSSF legislation entitles a saver who is below 45 years and has not contributed to the Fund for a period of 10 years to mid-term access.
According to Mr Owere, the mid-term access is tagged to 45 years and above because it is at that age that you begin to need the money more and as such social security benefits come in handy. Even with the mid-term access now being supported by law, thanks to the backing of the Union he notes that the intention of NSSF, created to help in old age should not be overlooked.
However, just like the two Workers Representatives, Mr Owere notes that the NSSF law will open up to all workers including those in the informal sector. If properly implemented, he foresees the membership of the Fund increasing from 2 million to over 10 million in the next three to five years.
Covid-19 effects
There was also consensus about motivation of the mid-term access which became clear that it is not necessarily as a result of the impact of Covid-19 pandemic on the livelihoods of the workers. The Covid-19 pandemic simply provided a fertile ground to expedite the passing of the Bill into law, following years of demands by workers to have some access to their savings before they eventually retire and are too senile to invest their savings to generate meaningful return on investment.
However, of the two million Ugandans who regularly save with the Fund, 100,000 dropped off last year because their employers were either going through financial distress or had closed business altogether as a result of the Covid-19 pandemic.
According to Economic Policy Research Centre (EPRC) report examining the effect of the risk presented by Covid-19 pandemic on Uganda’s businesses, indicates that labour, which is a key factor of production, should brace for hard times until such a period that a prescription for the pandemic is found.
Results from the EPRC report project that in the event that pandemic persists for the next six months, which has since passed by additional six months, about 3.8 million workers would lose their jobs temporarily while 0.6 million would lose their employment permanently.
Over 75 per cent of employees projected to lose their jobs permanently are from the services sector.
Earlier NSSF had said it could not pay out a portion of accumulated contributions to its members struggling with the effects of the pandemic on their livelihoods.
But now that legislation (NSSF Act Cap 222,) has been amended, the Fund has the mandate to provide for mid-term benefits and also offer new benefits that would provide relief to members as per the NSSF Amendment Bill that has since been passed into law by Parliament.
NSSF by its own admission has indicated that the money to pay members if Parliament passed mid-term access, will be made available.
“Yes, the Fund has money to pay members. The Fund also has the infrastructure required to make such payments as soon as the Bill is passed into law,” reads responses to the most frequently asked question on the NSSF website.
Once this operationalisation of the law is due, the Fund will be able to among others: extend social security coverage to more Ugandans. Improve the adequacy or value of benefits to members and provide mid-term benefits to members during their working life that cover short-term to long-term needs such as unemployment/income replacement, education, medical and housing.
Analysts have their say
NSSF managing director Richard Byarugaba declined to comment saying the legislation still awaits presidential assent. Until then, they are in favour of the legislation.
But for the leadership of the private sector apex body in the country, the passing of the NSSF legislation into law calls for celebration.
According to the executive director of the Private Sector Foundation (PSFU), Mr Gideon Badagawa, the legislation will help the country increase the level of savings and in turn pave way for the private sector’s long term access to capital at affordable rates.
“While there has been excitement about mid-term access, this was not our cardinal focus as private sector. Although it may also help to increase purchasing power and levels of investment. Just imagine that there are about 0.8 active accounts with NSSF yielding Shs11 trillion in savings. If we had 5million Ugandans saving, we would have more than Shs60 trillion. That would help stimulate the secondary markets and deepen our financial sector,” Mr Badagawa said.
As for the research fellow with the Economic Policy Research Centre (EPRC), Corti Paul Lakuma, the passing of the Bill is a welcome relief especially now with Covid-19 pandemic accounting for loss of jobs, businesses and livelihoods. The only question is the sustainability of mid-term withdrawal!
Researcher Lakuma fears that it could constrain the Fund to invest in only liquid assets as a buffer against demand on pool of funds.
Businesses closed
Of the two million Ugandans who regularly save with the Fund, 100,000 dropped off last year because their employers were either going through financial distress or had closed business as a result of the Covid-19 pandemic.
Earlier NSSF has said it could not pay out a portion of accumulated contributions to its members struggling with the effects of the pandemic on their livelihoods
Now that NSSF Act Cap 222 has been amended, the Fund has the mandate to provide for mid-term benefits and also offer new benefits that would provide relief to members as per the NSSF Amendment Bill that has since been passed into law by Parliament.
