NSSF Managing Director, Richard Byarugaba As lawmakers prepare to amend the National Social Security Fund (NSSF) Act to allow members access a portion of their savings amidst the Coronavirus pandemic, the Fund’s Managing Director Richard Byarugaba has written to the Minister of Finance, Planning and Economic Development, explaining the effects of the move.
In a May 6 letter, Byarugaba explains how the unprecedented initiative would not only ruin the Fund but also exert severe ramifications on the economy.
In the recent past, many Ugandans have wondered why it’s not possible to cash in part of their savings with the NSSF, considering the financial pain the coronavirus has subjected them to.
“Isn’t this what ‘social security’, a safety net, is about?” Kizza Besigye, the four-time presidential contender, recently tweeted.
In response to Besigye’s tweet, Byarugaba listed a number of limitations, including legal ones.
“… the Fund has no legal basis upon which to make ad hoc payments as being suggested,” he said.
Parliament has given the Committee on Finance and that of Gender and Labour 10 days (starting May 8) to examine the proposed amendments.
Below is the explanation Byarugaba offered to the finance ministry:
BACKGROUND
Following the recent outbreak of COVID-19 in Uganda and its impacts on the economy, there are growing calls for NSSF to pay its members 20% of their accumulated balances.
It is reported that the recent closure of businesses to combat the spread of the virus is increasing unemployment and failure to service loan obligations. Consequently, several commentators and some politicians have advocated for a 20% NSSF partial payment.
We believe this proposal has implications that will distress the sustainability of NSSF as a retirement scheme and the economy as a whole.We discuss these implications:
LIQUIDITY The immediate impact of the proposed payout will be an increased need for liquidity. At a member’s fund value near UGX 13.0T, a 20% payout would represent UGX 2.6T. In addition, the normal benefits payout for the financial year 2020/2021 is 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 […]