Uganda’s retirement benefits system has undergone substantial changes in the last ten years, key among them, significant shifts in the size and scope of the Public Service.
For decades, public servants were covered by an unfunded, non-contributory pension scheme under the Pensions Act, Cap 89, in which government paid lumpsum gratuities and monthly pensions directly from the national treasury. This arrangement guaranteed income for retirees but did not accumulate assets, creating large unfunded liabilities that led to payment delays and arrears.
According a 2022 actuarial study, Uganda had 334,146 civil servants and 64,855 pensioners. In the 2021/2022 financial year, the total annual pensionable emoluments amounted to UGX2.8trillion while annual pension payments totalled UGX3.1trillion, as posted on the website of the Parliament of Uganda.
A 2007 World Bank Policy Research Working Paper titled “An Assessment of Reform Options for the Public Service Pension Fund in Uganda”, discussed the results of simulations conducted to project future Government liabilities stemming from the provision of the Pensions Act, (CAP 286). The paper assessed reform options for Uganda’s Public Service Pensions Fund and concluded that a hybrid two-pillar system, combining a small defined-benefit (DB) scheme with a complementary defined-contribution (DC) scheme, would reduce government expenditure while providing higher replacement rates due to redistributive and pooling properties.
Recognizing the need for sustainability, Parliament enacted the Public Service Pension Fund (PSPF) Act, 2025, marking the end of an era and the beginning of a modern, contributory retirement system.
This transformed the non-funded, non-contributory system into a funded, contributory scheme. The Act establishes the PSPF and outlines a mandatory pension scheme for eligible public servants. Key features include:
a) Governance: The Act establishes a Board of Trustees to manage the Fund. The Board is autonomous and accountable to the Minister of Public Service for policy direction. The PSPF fund will work with administrators, custodians and fund managers, licenced by URBRA.
b) Contributions: Public servants contribute 5% of their salaries and government as an employer contributes 10% providing a sustainable inflow of funds. The responsible officer, for instance, the Chief Administrative Officer (CAO) or the Principal Human Resource Officer (PHRO) must deduct and remit both portions monthly; failure to remit incurs penalties amounting to 1.5% of the remittance. If the contribution is delayed beyond the 15th day of the following month a higher penalty applies.
c) Eligibility and Benefits: To qualify for a pension, members must generally serve at least ten (10) years. A pension is payable at age 60 or after 20 years of service; benefits may also be granted for retrenchment, abolition of office or medical grounds. Employees dismissed from service are entitled to withdraw their contributions plus accrued returns. Contributions cannot be attached for debt or taxes except for government debts. Retirees receive a lifetime annuity, while short-service gratuities and commuted lumpsums are available in certain cases.
d) Transitional Arrangements: Existing pensioners under the old scheme continue to receive benefits from the Consolidated Fund. Civil servants aged 55 or above may elect to remain in the old scheme, while younger employees must join the new contributory scheme. Accrued benefits from past service are recognized through a “retirement bond.”
Expected Impact and Future Directions
The shift to a contributory pension system is expected to produce multiple benefits including:
- Reduce the fiscal burden on government by accumulating assets to finance future benefits.
- Deepen national savings and provide a source of long-term capital for investment in infrastructure and other development projects.
- Improve equity by ensuring that benefits are commensurate with contributions, while still providing a social safety net through defined-benefit elements.
- Foster transparency and accountability by instituting penalties for late remittances and identifying members using National Identification Numbers (NINs).
- Employers will need to upgrade payroll systems to deduct and remit contributions accurately. The introduction of digital pension administration platforms will support efficient registration, contribution tracking, and benefits processing.
Conclusion
The Public Service Pension Fund Act, 2025, marks a pivotal reform to a sustainable, contributory system. This aligns with international best practices. The new system is expected to reduce fiscal pressures, mobilise domestic savings, and provide reliable retirement income for public servants. As the Attorney General, Hon. Kiryowa Kiwanuka guided, the idea of this scheme is that there should not be a public servant who is not saving.