THE NSSF STRUGGLE POINTS TO A FUNDAMENTAL PROBLEM

All hell broke loose earlier this week, when it was reported that finance minister Matia Kasaija had said he would advise President Yoweri Museveni not to assent to the NSSF Amendment Bill in its current form.

Kasaija said the mid- term access close would disrupt the Fund’s operations and do more harm than good.

The mid-term access clause provides that people who have attained 45 years or saved for 10 years will qualify to withdraw up to 20 percent of their savings.

The minister said the provision would cost the fund sh2.9 trillion but the critics argue that is a wrong calculation of a cost to the fund as only about 300,000 will be eligible.

"Officials familiar with the discussion say they are not averse to mid-term access but the way it is proposed in the current bill. The original intention as they understood it, was that the eligible people would be savers who had made 45 years and saved for more than 10 years, which would have kept the pool of beneficiaries small and manageable....

As it is now even savers under the age of 45 but who have saved for 10 years are eligible ballooning the numbers out of control.

Pushed to the wall NSSF can mobilise the funds required, but at what cost?

They could on one hand, sell off some assets to meet the bill. But given that almost three quarters of their assets are Treasury Bonds, selling them would come at discount – a loss, as it is with all bonds sold before they have matured.

Or they could borrow the money, so that they leave their asset base intact.

In both cases it is very likely

it would cost all members the double digit interest we have enjoyed over the last seven or so years.

As it is now if you are an NSSF member and you never saved another cent with the Fund, your savings would double every seven years. That stops, if the NSSF now stops being able to pay above 10 percent interest as has been the practice.

But even for the members who qualify and take advantage of the mid-term access the reduction in their final package will be more than 20 percent, assuming they keep saving till retirement.

For many members they would never have saved these sums on their own, not only because their employer doubles their contribution but also because the vast majority of do not have the discipline to keep their hands off the money once they have saved it.

The situation is so bad that NSSF reports that they have found that eight in every ten retirees fall into poverty barely two years after receiving their lump sum. It is often not for lack of energy to follow up projects but because they don’t know what to do with the huge sums they receive.

If it was up to me I would change NSSF into a pension fund – with people getting monthly payments till death rather than the lump sum on retirement. This would be at the risk of being run out of this town. We all want our lump sums.

What is popular is not always right and what is right is not always popular.

The minister is right to ask that the president stay assenting of the bill until there issue of who is eligible for the medium term access is clarified.

Just a thought, what if we amended the act to allow a portion of our savings to be ring fenced for midterm access. In that way NSSF can invest those monies differently, from the larger pool of long term savings, which would allow for their release when a member reaches 45 and has saved for 10 years without disrupting the Fund’s operations?