Government has passed a decision to have the law establishing NSSF, the biggest pension Fund in the country reviewed to make contributions mandatory for all workers.
The proposed changes that now await Parliament approval were passed by during a Cabinet sitting on Monday at State House Entebbe.
The new development was announced by Minister of Gender, Labour and Social Development, Janat Mukwaya during a press conference on Tuesday.
According to the Cabinet resolution, Section 7 of the NSSF Act should be amended “to provide for mandatory contribution of all workers regardless of the size of their enterprise”.
The position by Cabinet therefore renders the Retirement Benefits Sector Liberalization Bill 2011 before Parliament, which had met intense criticism from the workers unionists, irrelevant.
Mukwaya revealed that the Cabinet decision to make NSSF sole recipient of mandatory contributions of workers was informed by the fact that opening up workers’ contributions to competition “would complete the surrender of both the banking and non-banking financial sector to foreign capital because indigenous firms will have a very limited role to play”.
She further said that in cases where pension sector has been liberalized else where in the world, the number of workers covered by a pension scheme subsequently declined. She cited Uraguay, Argentina, Bolivia and Columbia.
Furthermore, provision should be made for voluntary contribution by workers over and above their mandatory contribution and voluntary contributions by self-employed persons.
The implication of the new law would be that all employers registered under the Companies Act, Partnership Act or any other law for the time being in force governing the establishment of business entities should be specified as persons who shall register as contributing employers.
“Cabinet authorized me to issue drafting instructions to the First Parliamentary Counsel to draft the National Social Security Fund Amendment Bill, 2018 in accordance with the approved Principles,” Minister Mukwaya said.
The other key proposed amendment in the NSSF Act is for the provision for mid-term access of voluntary benefits on such terms and conditions that may be set by the Board. This follows numerous concerns raised by NSSF members regarding the lower age cap at which one is allowed to access their benefits.
If the proposed amendments are passed by legislators, NSSF will henceforth be allowed to lend worker’s savings to government especially long term financing for capital intensive projects. Many have previously rooted for this as an alternative for external borrowing which has increased Uganda’s debt burden.
Minister Mukwaya in addition said that the new law also seeks to provide that an employer who fails or refuses to remit contributions within the prescribed time may have the business managed by a third party.
“Recovery of NSSF contributions shall have priority or ranked pari passu in any instance where property of an employer is seized or sold or otherwise realized in pursuance of an order of attachment in execution of a decree issued by a competent Court”.
Persons over the age of 60 years shall not pay tax on their benefits and, fines provided for in Sections 44 and 45 of the Act will be revised to increase the fines for offences under the Act from ten thousand shillings to fifty currency points or imprisonment for a period not exceeding six months or both.
According to Minister Mukwaya, the changes proposed by Cabinet were largely aimed at expanding social security coverage, enhancing efficiency and effectiveness in investment, providing for introduction of new benefits and improving governance.
