End of Year 2020 – Press Release

INTRODUCTION

Throughout 2020, the Uganda economy has taken quite a pounding from Covid-19. The pandemic has significantly disrupted economic activity, resulting in loss of jobs and incomes. The country is yet to know the full extent of the economic impact of Covid-19. The retirement benefits sector has equally suffered the effects of the pandemic, but many savers will be happy to note that their schemes have so far weathered the storm, remained fairly stable and continue to perform relatively well in terms of Investment and Governance.

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i. Assets under management: The total sector portfolio (AUM) has grown by 8.5% from UGX14.56 Trillion in March 2020 to UGX 15.8 Trillion.

ii. On a Year-on-year basis, the sector portfolio grew by 16.8%, from UGX 13.5 Trillion in September 2019 to UGX 15.8 Trillion as at September 2020.

iii. There was an increase in investment income from UGX 375 Billion in June 2020 to UGX 421 Billion in September 2020.

This positive trend is attributed to prudent investment and improved scheme Governance with a strong oversight of the Regulator.

1. Schemes: We licensed 3 new retirement schemes but lost one scheme, bringing the number of licensed Retirement Benefits Scheme to 68 schemes.

1. Umbrella Schemes: We have also seen a growth in the number participating employers under licensed Umbrella schemes, growing from 142 since December 2019 to 175 of December 2020

2020. We have licensed more Trustees since December 2019, with the number of Trustees increasing from 146 to 234 as of December 2020. This reflects confidence in the supervisory framework and growth in scheme’s stewardship. We aspire to further enhance the competencies of these trustees through our Trustees’ Certification Program

ADVERSE EFFECTS OF COVID-19 ON THE SECTOR PERFORMANCE

The sector has however faced a number challenges as a result of Covid-19

10. Contributions continued on a downward trend with a 10.2% drop from UGX 394 Billion in June 2020 to UGX 353 billion in September 2020 and also witnessed delays in contributions remittances by some schemes particularly in the Education, Recreation/Accommodation and Manufacturing sectors as the Employers/Sponsors struggle to meet their operational costs.

2020. Additionally, there was an increase in outflows (benefits paid) from UGX 60 Billion in June 2020 to UGX 122 Billion in September 2020.

• BoU suspended distribution of dividends by financial institutions. This affected the income streams of many schemes that have invested in financial services equities (Bank of Baroda, DFCU, Equity Bank, KCB and Stanbic Bank equities).  Notwithstanding, 51.7 % of quoted equities invested in Financial Sector equities in have registered slight recovery from the effects of Covid-19.

1. UMEME, one of our largest local equity (accounting for 15% of the equities) did not declare any dividends

28. Kenyan equities market (accounting for 70% of the quoted equities for our Scheme) that experienced a consistent downward trend during the early months of Covid-19 are beginning to recover, though marginally. Notwithstanding the low performance in the Kenyan Equities, Safaricom, which accounts for a significant share (28.9%) of the equities is still growing strong amidst the current economic environment in the region.

1. As a response to the effects of Covid-19 pandemic, schemes have strategically reallocated their investment assets with a bias to government securities, to hedge against the overall negative performance of equities.

• Government Securities, which account for over 75% of the schemes’ assets continue to provide a reliable safety net amidst the Covid-19 uncertainties. The yields on the Government securities are rising. Given that most schemes hold these securities to maturity, we envisage more certainty to members’ returns even in the medium term.

OTHER EFFECTS OF COVID-19 ON RETIREMENT BENEFITS SCHEMES

1. Taking cognizance of the effects of Covid-19 on employers’ business, we handled two scheme requests to defer / delay remittance of contribution and one scheme request to suspend contributions given that the institution had also suspended salaries for the period the staff were not working. To-date, all schemes have since cleared all contribution arrears and are up-to-date with monthly contribution remittances.

1. One retirement benefits scheme notified URBRA of its intention to wind up, owing to the effects of Covid-19 on the sponsors’ operations. The Authority while adhering to the URBRA (Winding up and Merger of Retirement Benefits Schemes) Regulations, 2020, continues to guide the scheme through a seamless winding up process.

19. URBRA also recorded a loss of three licensed trustees. This was due to the decision by the employer to migrate their scheme to a licensed umbrella scheme, a move occasioned by effects of Covid-19.

URBRA’S REGULATORY AND SUPERVISORY RESPONSE TO COVID-19

Extension of deadline for Submission of Financial Statements

Covid-19 Lockdown that started in March 2020, came at the peak of scheme audit season. For the schemes that ended their Financial Year on 31^st December 2019, the Authority varied the deadline for submission of scheme Audited Financial Statements from 30^th April 2020 to 31^st May 2020. This allowed the trustees to complete the scheme Audits and all schemes that were required to submit their annual audit and trustee reports, submitted their Financial Statements by 31^st May 2020.  We have seen full compliance to this directive.

Guidance on virtual meetings

To facilitate continuity in handling the business of retirement benefits schemes, URBRA issued guidance on scheduling and conducting virtual meetings, including scheme AGMs, and trustee quarterly meetings. From the virtual engagement, there has been a notable increase in attendance of scheme AGMs, with schemes registering on average 90%-member attendance and participation.

Onsite inspection

Like many other businesses, the Authority has had to rely on technology to facilitate continuity of its operations, especially the regulatory and supervisory functions.  In order to maintain the Authority’s oversight role, in the face of the pandemic, the Authority developed a virtual onsite inspection guide, to facilitate the conduct of virtual onsite inspections. The guide provides the inspection teams with the opportunity to conduct onsite inspections virtually, in the same way as would be conducted with the team physically present at the licensee’s premises. While employing the virtual onsite inspection model, the Authority continues to add protection to its system so as to guarantee data safety.

Addressing challenges to Contributions

Continue to provide guidance on case by case

1. Contributions Deferral/ Amnesty;
2. Contributions temporary waivers; and
3. Contributions cancellation – as a result of salary cancellations

GOING FORWARD

1. The authority continues to monitor the performance of sector assets to ensure prudence in management, protection of members’ benefits as well as any effects of Covid-19 that may affect the sector investment portfolio.

1. To strengthen our sector oversight, the authority continues to enhance its risk-based supervision capabilities to identify and prevent scheme risks in real time during our offsite surveillance.

• With changes in employers’ businesses, URBRA maintains a keen eye on scheme governance, monitoring the movement of trustees and engaging them to ensure they all understand the need to support good governance in schemes.

1. To ensure stakeholder understanding and appreciation of the regulations that govern the sector, URBRA has embarked on dissemination of all the regulations through publication of simplified pullouts.

1. At the national level, in the context of the National Development Plan (NDPIII) URBRA will contribute towards long term savings mobilization and expansion of pension coverage to include the informal sector. In that regard, URBRA will develop an inclusive, secure, affordable and sustainable micro-pension scheme for Uganda; develop and implement a specialized awareness programme for informal sector workers; and support initiatives to enable informal sector workers to make voluntary contributions as a means to facilitate extension of sector coverage.

CONCLUDING REMARKS

• Thanks to the media fraternity who have supported our cause and reported correctly on matters issued by the authority;

• I commend the sector players who have always complied to our directives to improves the governance and investment prudence

• Finally, I commend all the sector players and the public at large who have adhered to the Covid-19 preventive guideline.

Merry Xmas and a Blessed new year

Wear a mask to live and enjoy your retirement savings!!!