URBRA: Retire at your own risk?

Along Clemet Hill Road on Nakasero Hill, one is graced by the site of a big establishment on the roadside. The Madhvani towers; the home of the Uganda Retirement Benefits Regulatory Authority (URBRA), only supervisory authority of all retirement benefit funds including the Public Service Pension Scheme, Parliamentary Pension Fund, NSSF, Occupational schemes and Informal Sector Schemes.

However, the establishment has not been in existence for so long. Six years ago, following an Act of Parliament of Uganda, the body was founded. The body is monitored by the Ministry of Finance and Economic Development, currently under the leadership of Hon. Matia Kasaija.

URBRA is mandated to license and supervise retirement benefit schemes. Since inception, there were the Public Service pension scheme, the parliamentary pension scheme, NSSF, Voluntary Occupational schemes (e.g. BOU, URA, Nile Breweries, etc). URBRA has licensed many more schemes including two for the informal sector – MAZIMA Voluntary Benefits Scheme and KACITA Provident Retirement Plan. Currently, URBRA has licensed 63 retirement benefits schemes including NSSF.

Why URBRA’s formation?

According to some analysts this magazine spoke to say it’s for

only insured pensioners, others noted it’s cross platform. Nonetheless, URBRA is a state-owned agency responsible for licensing, supervising, regulating and controlling the comprehensive retirement sector of Uganda, which was ailing at the time. [ The core objective of URBRA is set out in Section 4 of URBRA Act, 2011 which is to supervise and regulate the establishment, management and operation of retirement benefits schemes, and to protect the interests of members and beneficiaries of retirement benefits schemes. The functions of URBRA are clearly set out in section 5 of URBRA Act.

Who is behind URBRA?

URBRA is chaired by the Board of Directors appointed by the Minister of Finance Planning and Economic Development, Hon. Matia Kasaija. Within the Board, the Chairman is the former president; Uganda Law Society and Vice President of East Africa Law Society, Mr. Andrew Kasirye, a prominent name in the legal sector of Uganda. He is currently a managing partner at Kasirye, Byaruhanga & Co. Advocates. You can recall his name in both the UNRA commission of enquiry and the more infamous commission of enquiry on mismanagement of Global Fund for Malaria, TB and HIV/AIDS.

Other Board members are Martin Wandera, the Director of Labour, Employment and Occupational Safety and Health at the Ministry of Gender, Labour and Social Development; Moses Bekabye, who was previously the CEO at URBRA from December 2012 to February 2015. He is currently the Technical Advisor for Economic Affairs in the Ministry of Finance, Planning and Economic Development; Adah K. Muwanga, the Director Human Resource Management in the Ministry of Public Service; Rosemary Ssenabulya, Executive Director Federation of Uganda’s Employers and Avur Jane

Pacuto currently a senior manager administration and operation in MIFUMI. Also, private sector expert Dr. Robert Okello is part of the board as a respectable person in Uganda’s private sector having previously held prestigious and influential positions in the sector in different countries.

Finally, the board only contains one executive board member, falling short of the King IV’s criteria on Corporate Governance that requires more than one representative of the executive. This is current CEO David Nyakundi Bonyi. The Board structure is in compliance with section 8 of URBRA Act. Certainly written much before the King IV report was written.

The Board is satisfactorily balanced with at least 37.5 percent representation of female board members, one of the major necessities in the Parliament’s directive when establishing the constitution of URBRA. SB hopes for further inclusion of the feminine populace in the board to at least 44 percent and ideally 50 percent of the entire board.

In the first quarter of 2015¸URBRA appointed David Nyakundi Bonyi, as the first Chief Executive Officer of the body.

Backed by his experience, having worked for an already successful retirement benefits authority in Kenya, he was evaluated the best candidate for the position. However, we would expect Uganda’s regulatory authorities to be managed by Ugandans and promote inclusivity like other authorities have been. In our editorial in the Summit Business October 2017 issue; “the betrayal of citizens”, we underlined the benefits Kenya is reaping from the patriotic moves in employment of the locals. Moses Bekabye who previously held the post from 2012-2015 was a positive move for the authority to empower Ugandans with the necessary skills in driving the pension sector. Experience shouldn’t be the reason for Ugandans’ exclusion from the top managerial positions. Unless otherwise, pure Ugandan retirement benefits liberalization will only be implemented if a Ugandan holds the top management job in URBRA. For skills transfer, a foreigner in the position as a caretaker should be given clear targets to nurture local talent to take over the top honcho role say within five (5) years.

Beneath him are financial economist, Martin A. Nsubuga, the Director Supervision and Compliance; Hajji Hassan Nakabaale, Director of Communication and Public Affairs, Dan N. Badeye, Director of Finance and Administration.

This is the team driving performance at the URBRA which SB intelligence took due diligence to investigate and analyze.

 Major milestones in URBRA’s regulation

Over its grace period, URBRA has achieved a host of milestones within the retirement benefits sector. Qualitatively, the section subscribed to URBRA has increased from just two major retirement benefits plans to at least four. Public Employees Retirement Plan for Publics Service, NSSF, KACITA Retirement Fund and Mazima Retirement Plan make the list. About 55 voluntary schemes and 7 umbrella schemes have also added themselves to the portfolio.

Likewise, more retirement benefits schemes have been licensed by the authority. URBRA has licensed and supervises 63 Schemes. 55 are voluntary occupational schemes, 7 are umbrella schemes with 92 participating employers, NSSF, the Parliamentary Pension Scheme and the Public Service Pension Scheme.

In 2016, URBRA reported an upsurge in contributions by over 16.2 percent to Ugx. 963 billion from Ugx. 829 billion. This was a recovery from the 0.1 percent reduction from the previous year on year reports.

Benefits paid out to the populaces also hit a massive 43.2 percent growth to Ugx. 348 billion in 2016 from the Ugx. 243 billion recorded in 2015. This subsequently sparked its benefits to contributions levels to 36.1 percent from the 29.3 percent in 2015. We hope for continued increase in benefits to contributions ratios as they are key performance indicators.

More so, the asset base in this sector has augmented tremendously following a 16.9 percent upsurge on the year on year reports of 2015, 2016 basis to Ugx. 6.5 trillion. This has been attributed to the massive investments the sector has embarked on with over Ugx. 7.4 trillion being invested by various players in the sector URBRA regulates. More so, Investments to Asset ratio has also gained by 0.4 percentage points to 97.4 percent.

Status of Uganda’s bedridden pension sector

Over the years, the pension sector of Uganda has caught many a critique. This arises from issues of unpaid pensions, delayed benefits and/or infuriating staff. Others worry about where their employment benefits go.

They overlook things like a persistent upsurge in asset base. As of 2016, assets hit an upsurge of 16.9% to Ugx. 7.6 trillion from Ugx. 6.5 trillion in 2015 following an increment in investment of more than 17% from Ugx. 6.3 trillion to Ugx. 7.4 trillion in the same period (see chart). However, even though URBRA diverts our attention by recording significant asset bases, the inclusion in pensions still lags significantly behind.

Summit Business intelligence analysed URBRA’s performance irrespective of asset base. Just about 10% of Ugandans were covered by retirement benefits as of 2016.

The massive remainder have no old age safety nets or retirement benefit arrangements. Worrying, isn’t it? Many can blame this upsetting figure on the unemployment rate. But based on statistics from the World Bank survey, including informal employment, over

83% of the population above 15 years (See chart) is involved in a job or two. Meaning only about 17% of the remaining population would be excused for not having retirement benefits. Is URBRA stepping up efforts in curbing the deficit? May be yes.

The challenge is the legal framework and the policy behind the framework relating to Uganda pension sector were designed to cater only for formal salaried workers. That means the informal (or unsalaried workers) had no platform on which to save for their retirement. As such, the current coverage for retirement benefits is the 11% who are in formal employment. URBRA, in its effort to find a legal basis for informal sector schemes assisted both MAZIMA and KACITA schemes to craft a trust deed to enable informal sector workers start saving for retirement. On that basis, URBRA licensed MAZIMA and KACITA and is engaging and guiding other organized groups across the country to establish retirement benefits schemes to enable more people in the labour force start saving for retirement.

Another worrying statistic is of the types of benefits paid. A 43% upsurge in benefits paid to Ugx. 348 billion in 2016 seemed to be a convincing figure to the masses. However, only 3% of this massive figure went to payment of pensions. The bulk of this money was paid out as “lump sum” by provident funds like NSSF and other occupational Funds to members who qualified (either having reached retirement age or incapacity or medical grounds, etc). Pensions which one would think dominate the retirement benefits scheme are lagging way behind. It’s a retirement benefits section, you would think Ugandan pensioners would be the biggest priority.

Pension sector continues to breed complaint among the many retired heroes of the nation for not having cleared their obligations. For instance, Chief Justice Bart Katureebe said that the deceased former Deputy Chief Justice Emeritus Leatitia Kikonyogo passed on without receiving her obligatory retirement benefits despite having served the government for over 39 years. The president himself had given a directive that she is paid the benefits after he found her confined in a wheel chair.

“It’s surprising that up to now that the promise was never fulfilled,” said a saddened Katureebe at the High Court grounds in a special event that was made to honour the late Deputy Chief Justice. If a former Chief Justice can fail to get these benefits, what are the chances that an ordinary citizen would get theirs?

In her response, “URBRA is aware of some complaints for non-payment of pensions from the Public Pensions Scheme. The complaints received by URBRA for non-payment of entitlements from the provident funds like NSSF and other voluntary occupational schemes have been dealt with expeditiously and there is no member whose money is still unpaid.

The Government of Uganda is undertaking an exercise to clean up the roll of pensioners on the Public Service Pension Scheme and once this is done, we should expect smooth and expeditious settlement of pension (as the budget allows). The case relating to the later former Deputy Chief Justice has never come to the attention of URBRA.”

In 2016, another milestone in pension sector contributions was attained. Over Ugx. 963 billion was collected in that period, a 43.2 percent year on year upsurge in numbers. In the same period, benefits paid also took a meagre 16.2% increase in 2016, recovering from the 0.1 percent drop the previous year (see chart). The sector continues to struggle in payment of retirement benefits, not that the revenue is not available as we can see, but it seems the bodies regulated by URBRA make it complicated for the elders of the nation, to receive their bounty. SB interviewed a senior citizen who preferred to remain anonymous for fear of being further undermined in his fruitless hunt for retirement benefits.

“I worked for public service for over 40 years, 10 in the low ranks and 30 as senior staff,” he said. He added that he had also been exceptional showcasing many a certificate of acknowledgement he received on his duties. “However, they are yet to pay my retirement benefits for more than five years in spite of the fact that I presented them need for payment due to my contemporary illness.”

The ‘pensioner’ revealed he had been battling with his kidneys and had undergone two kidney transplants. More so, these were not easy to come by as he is still paying the hefty loans he used to clear the kidney bills. His retirement benefits are enough to clear these bills but he cannot sustain his health with the prevailing conditions of delayed pay. “I don’t know if it’s bureaucracy or just a way to keep us waiting. When I finish a process they send a file to another ministry, and make me follow it up. It’s as if it’s not my money I’m chasing. I have lost it.” This is what our heroes are going through after tireless years of civil service. Other elders say the delay is a deliberate ploy to wait them die of poverty so that the government may feast on their sweat after their death.

He nonetheless praised what National Social Security fund had done. “For NSSF, I got my proceeds in the first year. The process was slightly long but at least they came through.

In 2014, a 33.1 percent increment in investment caused a reduction in operating expenses of about 0.3 percent. This was a sign of positive things to come in the retirement benefits industry. It showed more investment led to reduced operating cost. In fact, the expense to investment ratio fell to 9 percent from 16.4 percent (see chart). However, you would wonder why the sector reduced investment the subsequent year to Ugx. 760 billion from Ugx. 908 billion in 2015. This resulted in a correlated 0.12 percent increase in operating expenses. SB intelligence wonders why the sector decided to reduce on investing forcing an increase in operating expense. This is a lose-lose situation. If, however operating expense was increased with investment, we would understand the dilemma. However, everything is clear. The expense to investment ratio of 2016 also hit a 36.96 percent upsurge to 12.4, a worrying number in the industry. We can only hope for URBRA to take this investment issue serious and inform sector players to diagnose the persistent situation.

Many say NSSF is driving the pension sector for it accounts for 86% of the asset base. Why aren’t other players in the sector contributing as much?

May 23rd, 2018 | by

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