NSSF TO BE CONSTRAINED TO PAY MEMBERS ACCORDING TO CURRENT PARLIAMENTARY AMENDMENT BILL

By our reporter

www.mknewslink.com

In Kampala

If Parliament passes the proposed National Social Security Fund (NSSF) amendment Bill on mid-term access to savings, the NSSF may have to sell assets to raise the Shs2.9 trillion required to pay 320,000 members who currently would qualify for 20 per cent payment of their pension contributions.

“Over 180,000 members are aged 46 and above, and a further 140,000 have contributed for more than 10 years. That means over 320,000 members would qualify for mid-term access,” the NSSF managing director, Mr Richard Byarugaba, told Daily Monitor on Thursday.

Currently, Parliament is debating an amendment in the NSSF Act to allow members aged 46 or above or who have contributed for more than 10 years to access 20 per cent of their savings.
 If the amendment is passed, NSSF members under this category will have mid-term access to 20 per cent of their savings in the private pension Fund before the retirement age at 55.    
However, Mr Byarugaba said NSSF would be constrained to pay the staggering amount in cash since most of its money is in assets. 

He cited the challenges and hazards the Fund will face if the amendment is passed and all the 320,000 members qualifying for mid-term access came knocking at NSSF to get their savings.  

He told Daily Monitor that the Fund projects is to collect Shs1.35 trillion in contributions this year and a further Shs1.3 trillion from investments.
“This total of Shs2.65 trillion is short of Shs2.96 trillion payout required. This is before considering other administration expenses, statutory payments like taxes,” Mr Byarugaba noted.

He said in paying more than 320,000 members 20 percent of their midterm savings, NSSF would not be able to make any investment and would be forced to sell or liquidate some of its investments to cover the shortfall.
He further reasoned that the above projected payments will hurt NSSF liquidity. 
He said this payment would also affect staying members’ balances and the Fund would not declare any interest to the remaining members.

“Based on our computations the Fund would within the first year pay out over Shs2.96 trillion, broken down as follows: Shs1.88 trillion to members aged 51 or above as there would have no motivation of staying in the Fund, the 20 per cent payout to the 90,504 members aged 46 to 50 translates into Shs483.9b, which amounts to an average payout of Shs5.3m per person. The 20 per cent payout to 141,777 members aged 41 to 45 translates into Shs589.9b, which amounts to an average payout of Shs4.2m per person,” Mr Byarugaba said.
He further explained that last year NSSF paid out Shs134.9b to 8,043 members in other benefit types other than age and withdrawal benefits for members aged 51 and above.