Ten years ago, the URBRA Act was enacted. It was a culmination of a consultative process, in which all key sector players participated. The process also involved benchmarking and learning from countries where the pension sectors are well established, effectively regulated and thriving. Miriam Musaali was secretary to the subcommittee on regulation and liberalization, whose role was to set the agenda on the reform of the pensions sector. She reflects on how far the sector has come since then.

Since establishment, URBRA has made several gains, enabled by a robust legal framework, which was put in place with a lot of assistance from various stakeholders. At the time of developing the URBRA Act, Capital Markets Authority was already in place as a player in the non-banking financial services sector, and was therefore in position to offer technical assistance. We did a lot of benchmarking with other regulators, like in Kenya where the Retirement Benefits Authority (RBA) was a good and effective regulator. We also benchmarked with Ghana and Sweden to learn from the reforms that were happening there. We mainly focused on regulation and supervision. We needed a broad law which would enable URBRA to supervise any of the schemes in the country, set up under different Acts of Parliament.

A lot of work has been put around the pensions sector from regulation to licensing; a lot of effort has been put in the law to make it enforceable. I think the industry appreciates the framework and several gains can be enumerated.

Firstly, the regulator has done a lot in terms capacity building and training of trustees to ensure they are fit and proper to oversee people’s savings. URBRA has also become an arbitrator in the sector. As a regulator URBRA is the first point of contact when schemes need solutions to outstanding issues.  URBRA has also done well in terms of cost control. Before URBRA, no one was questioning the expenditure of schemes. URBRA should carry on with more sensitization around the laws and sector reform. The robust legal framework, has enabled URBRA to licence more sector players like administrators and fund managers, and this has contributed to greater sector awareness. Once they are licensed, these institutions help in raising awareness so that their services are better known and demanded.

URBRA’s initiatives have also led to the establishment of occupational schemes. On the HR side, retirement benefits are now becoming part of the competitive compensation package. Nowadays, when people go to negotiate salary, they want to know how much they will get for retirement benefits. Co-dependency between the capital markets sector and the retirement benefits sector has also been a key factor of progress. As one sector grows, the other one grows too. With capital markets now, the retirement benefits sector is seeing a growth in assets under management. You find that the capital markets laws and the pensions laws dovetail, especially the laws on investment. URBRA has investment guidelines which allow a pension fund to invest in collective investment schemes, hence pension funds are a key consumer of capital markets products. In many ways, the sector has benefited from the reforms in NSSF.

Being the biggest Retirement Benefits fund in the country, they have become the face of the sector. The fund has improved significantly, they have given double digit returns in the last number of years, they have reduced the turnaround time and they remain an exemplary institution. They have changed the story and improved the image of retirement benefits sector in Uganda. Despite all progress in the last ten years, only 2.8 million Ugandans covered under any pension arrangement. Over 80% of Uganda’s potential workforce is not covered. This is mainly because of formalization of pensions which means that pensions are designed for the formal labor force and not designed for the informal sector, so the growth of pensions has been inhibited by that design. Historically, pensions were always for formal workers; even the NSSF law was applicable to institutions which had at least five employees. However, URBRA is doing some work on micro-pensions to help people in the informal sector to save. Additionally, there are initiatives like voluntary saving and the process of transitioning from defined benefits to defined contributions so that people become responsible for their pensions and not just the employer. There is need for a policy around micro-pensions and this should have a different framework from other pension funds. There is need for a flexible strategy for micro-pensions which works for people especially in the informal sector.

Another way that coverage will be extended to the informal sector is through the amended NSSF Act, which provides for the removal of the cap on five employees. This will definitely increase the coverage of NSSF. However, there is need for a level playing field. Elsewhere in the world, pension reforms came with the liberalization of the sector. It is high time Uganda developed other NSSFs such that if one fails the others remain standing. Tanzania for example, has about five big pension funds that have invested in the country and are leading to economic growth and development. Stakeholders need to sit around the table and rethink ways to create a level playing field. Look at capital markets for example. If NSSF doesn’t buy a bond or if it doesn’t participate in an Initial Public Offer (IPO), what happens? The IPO can be undersubscribed. When the only big player in the market invests they cause problems of illiquidity, because they are not going to sell.

So, if we had many institutions the size of NSSF, capital markets would be more active. But right now, even the capital markets are being held at ransom by NSSF – if they play they play if they don’t play we all suffer.

How can URBRA improve as a regulator?

We need to see more collaboration, between the regulator and the industry. We need more private equity funds. We need to seat at the table together as regulators to see how we can introduce products that work; e.g a capital markets product to be consumed by a pensions fund while insurance provides cover in case anything goes wrong. So, the sector has to work together from pensions to capital markets to insurance so that we have a strong nonbanking financial sector.

We also have to work together to ensure that disputes in the nonbank financial sector are resolved, and that will call for a tribunal – because a lone regulator cannot have a tribunal. We need that cooperation to see what are our common problems and how can we resolve them quickly and have consumption.