One of the latest attempts at setting up a fund comes from Kampala City Traders Association (KACITA) who say they are ready to open a Retirement Benefit Scheme (RBS) in less than a month’s time.
In an exclusive interview with The Sunrise at his office this week, KACITA’s General Secretary Sentamu Kaddu who is coordinating the project said the scheme will take the form of a provident fund taking contributions from Ugandans of all income groups including small traders and peasants.
According to Ritah Nansasi, the legal Services manager of the Uganda retirement Benefit Regulatory Authority (URBRA), a provident fund is a type of retirement benefits scheme (RBS) where members are given their savings in a lump sum after hitting their retirement age, compared to a regular (RBS) where savers get their savings in smaller portions on a monthly basis in form of pension.
Sentamu says that one of the main features of KACITA’s proposed RBS will be a lower retirement age compared to existing arrangements such as NSSF where the retirement age is 60 years.
“We want to make the arrangement friendly and attractive to everyone including those in the formal sector and that is why we are going to make it open to both members and non members of KACITA,” Sentamu said
“We are also considering a provision where our members can access their savings even within 10 years of contributing to the fund,” he added.
KACITA’s move has attracted praise from URBRA: “We salute KACITA’s intentions and the steps they have already taken in this cause including putting together a board of trustees. We encourage them to do the remaining part including putting their paper work together before we finally issue them our license,” Nansasi said.
On the list of trustees is Buganda’s Attorney General Apollo Makubuya, Simon Sekankya, a former banker and the proprietor of the Hardware world in Ntinda, as well as the chairperson of the Uganda Women Entrepreneurs Limited (UWEAL) Gudula Basaza.
Nansasi however clarified that KACITA does not have to be restricted to the provident fund option since the RBS arrangement could still accommodate the key peculiarities of the informal sector namely, small and irregular saving among others.
“After all the distinction between the two arrangements does not lie in the time and amount of savings members make but in the manner they discharge their pension funds after retirement,” she explained.
Earnest Kiyaga, a dealer in electric appliances at Energy Center in Nakasero is one of those who could not hide their excitement about the news of the project.
“Working for a life time and coming to retire to nothing when old age comes has always been one of our biggest concerns.” He added echoing KACITA’s spokes person Isa Sekito who has been a common voice at various forums highlighting the social dangers awaiting Ugandans in the informal sector out of reach with social security coverage.
To date, 63 retirement benefits schemes (custodians, trustees, administrators and fund managers) hold licenses compared to 52 recorded last year.
According to statistics from URBRA, about 350,000 Ugandans (3.5%) are employed in civil service and are covered by public pension schemes, compared to just over 500,000 (or 3.5%) who are contributors to the National Social Security Fund (NSSF).
Together with the public sector pension schemes, the NSSF and existing occupational schemes, total social security coverage is only about 7%, leaving out 12.4 million people, according to URBRA.
If it succeeds, KACITA’s RBS endeavor will be one of the fruits of the ongoing reform process in the pension sector whose climax will come with the passing into law of the Retirements Benefits Sector Liberalisation Bill, 2011 which is currently before Parliament.
Key among the provisions of the proposed Bill is to end the NSSF’s monopoly position as a mandatory savings scheme for all salaried workers in the private sector.