How to ensure adequacy and preservation of retirement benefits

A story is told of a man who withdrew his savings from NSSF as soon as he clocked 55. He had accumulated a hefty sum in savings, following a long and illustrious career in an international NGO. Once his package hit the bank account, he sought investment ideas from “trusted” friends. The most appealing idea, in his judgement, was to invest in “black dollars” which, through some process of “cleaning”, would magically multiply and bring him supernormal profits in a matter of days. He invested his lifelong savings there. The result was a deeply depressed and sometimes schizophrenic man, well over fifty and not quite employable. He returned to his village in a rural district, where he spent a truly miserable retirement barely keeping his head above water.

Uganda is awash with such cases of poor investment choices and squandering of retirement benefits. Currently, about 90% of retirement benefits are accessed as lumpsum, and often squandered in a short period upon receipt. Moreover, owing to improvement in medical care and living conditions, there’s an increase in life expectancy and many people live for at least 17 years after retirement. The big question, therefore, is how people can preserve their retirement benefits for the longest time possible, and ensure that the benefits are adequate to guarantee sufficient lifetime income during retirement.

That was the key topic of discussion on March 4th 2020, when the Uganda Retirement Benefits Regulatory Authority (URBRA) hosted a stakeholders’ breakfast meeting at Imperial Royale Hotel in Kampala, under the theme: Care for your Future: Think Preservation and Adequacy of Benefits”. The meeting attracted about 100 sector stakeholders. Opening the meeting, the URBRA Chief Executive Officer, Mr. Martin Nsubuga observed that while there are several initiatives and product innovations in the retirement benefits sector, there are unending calls for easy access to retirement savings. Some trade unions are calling for a reduction in the contributions towards retirement savings. For those informal employment, employers are contributing to their savings through NSSF. However, people are not taking any personal initiative to save with other licensed schemes, and now they want to withdraw even what they have saved with NSSF.

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