Pension Sector to Be Liberalised Next Year

By Martin Luther Oketch, The Daily Monitor

September 18, 2008

Uganda

The Minister of Finance, Planning and Economic Development has said that Uganda will have a pension regulator as well as having the pension sector liberalised next year.

Having a regulator of the pension sector in place will lead to better regulation of the sector while liberlising the pension sector will provide the avenue for the required long-term funds to develop capital markets in Uganda.

Private sector analysts also argue that if liberalisation of the sector is achieved, it will encourage a domestic savings culture thus enhance local investments. During question time after the signing of a credit agreement with the World Bank on September 15, Finance Minister Dr Ezra Suruma said that the Pension Regulatory Framework has been approved by cabinet paving way for the country to have a pension regulator. 

Dr Suruma said that the Pension Sector Parliamentary Council consisting of all the stakeholders in the pension sector has completed drafting the pension reform bill. “This bill is going to be presented to the stakeholders to go through it again. We then hope that we shall be able to have a Pension Regulator in place early next year,” he said. Dr Suruma also disclosed that the liberalisation of the pension sector would take place mid next year. 

One of the foremost reasons why Uganda’s financial sector is still shallow is that pension sector reform programmes in Uganda have taken long, while the process of the sector getting sector liberalised have also been very sluggish prompting a cross section of the private sector to think that the government is not doing enough to have the sector openup for better regulation and competition for better investment returns. 

However, Dr Suruma said that pension reform liberalisation process is quite complicated and that is the reason why it has taken has government a long time to liberlise the sector. 
Dr Suruma said: “We have made policy regarding pension reforms in Uganda. The pension sector will be reformed and liberalised.”

Government plans on providing sufficient funding to clear pension arrears and transform the current system into a contributory scheme. The medium and long term objectives of the reforms is for the pension sector to protect funds of pensioners and retirees, while at the same time utilising these resources for mobilising domestic investment capital.

These developments come at a time when the country’s National Social Security Fund is mired in a number of questionable deals that have cast doubts of prudent corporate governance on the management of the fund.

In a telephone interview with Daily Monitor the Chief Executive Officer of Uganda Securities Exchange, Mr Simon Rutega described the Minister of Finance’s decision as a welcome initiative that the private sector have been looking forward to because it will lead to better regulation of the sector.

Mr Rutega said that it would be critical for the pension regulator to ensure that there are good regulatory conditions for different pension funds in the hands of fund managers; some thing that is still lacking in Uganda. 

“Among the positive impacts of having a liberalised pension sector is the fact that it will give people opportunities to invest their savings in the stock exchange. We shall have more investors/contributors in our capital markets, because there will be retirement funds in the hands of the public,” he said.

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