The leadership of National Social Security Fund says that there is no legal basis for the Fund to release partial payments to savers to enable them to cope with the burden of COVID-19 pandemic, as a sizeable number of Ugandans had requested via social media platforms.
Mr Richard Byarugaba, the Fund’s managing director says that NSSF is a social security scheme, created to provide a safety net for members in case of old age, permanent incapacitation, or for dependents in the event of death of a member and the current pandemic does not meet any of the above criteria.
According to Mr Byarugaba, partial payments would be discriminatory.
“The Fund has 1.5 million members. If these were given relief from the Fund, the vast majority of the 19 million working population would be left out,” he said
In a letter dated May 06, 2020 addressed to the Minister of Finance, Mr Byarugaba outlined the implications of the proposal to pay twenty percent to the NSSF members
2.1. LIQUIDITY
The immediate impact of the proposed payout will be an increased need for liquidity. At a member’s fund value near UGX 13.OT, a 20% payout would represent UGX 2.6T. In addition, the normal benefits payout for the financial year 2020/2021 I projected at UGX 800B. As a result, total benefits payout in the next one year would translate into UGX 3.4T. After a sustained period of good return performance, some retired members have been electing to leave their savings with the NSSF. Accordingly, it can be assumed that some members may not withdraw their 20% rendering the UGX 2.6T estimate exaggerated. However, we maintain the UGX 2.6T estimate and instead raise the normal benefits payout to UGX 1.1T from UGX 800B. This is because retired members who maintained their savings with NSSF could choose to take their money if the fund’s financial performance falters. Members above 55 years have a current balance of UGX 562B. With a bad performance, there could be a run on the Fund similar to how banks bleed to death if savers learn that the bank’s financial position has weakened. Therefore, we raise the estimate for the next year’s total benefits payout to UGX 3.7T. We estimate member contributions for the next year at UGX 1.2T, leaving the Fund with a liquidity requirement of UGX 2.5T excluding operating costs and contractual obligations. This extra requirement of UGX 2.5T would have […]
