This week two momentous announcements were reported.
This New Vision quoting informed sources reported that a
January 3, 2022 opening for schools is being considered at the education
ministry.
Hot on the heels of this was parliament passing of the new
law governing the National Social Security Fund (NSSF). The new law’s major
amendment, or at least the one that has captured the most attention is the
allowing members mid-term access to their savings.
According to the new law, savers will be able to withdraw up
to 20 percent of their savings when they attain the age of 45 and have saved
for at least 10 years.
The bill still has to be assented to by the president and
the finance minister will agree with the NSSF board how this new amendment will
be executed. The commitment by government is that they will start paying out
after two months from the passing of the bill.
Simple arithmetic suggests the money will not be available
for Christmas merry making or paying school fees in January.
But therein lies the challenge.
The supporters of the
amendment argue that they should be given access to their savings to set up
some investments before they grow too old – 55, to set them up and run them.
That is the reason we told everybody and ourselves to justify the raid on our
savings.
The truth, which will soon become apparent, is that we
really want the money to consume. We are not unlike the man who has been on a
long journey and just wants to lay his luggage down, rest and look back on far
we have come even when they are just steps from completing the journey.
"We will buy cars, start or finish the construction of our home, take a holiday to places far and wide and god forbid, go and work up a tab at the bar to validate our place in society...
For the vast majority of us, our NSSF savings are the
biggest asset on our balance sheets. It is so because government dragged you
kicking and screaming to save, were it not for that, we would not have two
shillings of our own to rub together.
The management of NSSF’s argument that this move, which
could cost about a trillion shillings would hinder their ability to continue
paying out double digit interest rates into the future. Not in those exact words
but the sh1.8trillion pay out this year, which includes money to those who due
their payment at retirement, means either they have to liquidate some of their
investments and hence forgo those profits or borrow the money, lowering their
profitability and hence the interest they can afford to pay.
NSSF has grown into the biggest fund of its kind in the
region, a lot of this is due to better compliance from employers but also
because they have been allowed to retain most of their profits, which they
reinvested. Under the new scenario NSSF will have less to play with and it can
be argued then, that Richard Byarugaba and his troops will have to really earn
their keep now, because crazy as it sounds while hobbling NSSF we will still
expect the stellar returns of the last few years.
For the rest of us, if we do invest, I can guarantee we will
not find investments that net us more than 10 percent a year and hence we would
have been better off leaving our money in NSSF. But of course we will take
comfort from the fact that we have our money close to ourselves – even if its
dwindling to nothingness, rather than have it managed by a faceless
institution.
Think about it, if mid-term access never came up and NSSF
managed ten percent interest for the next ten years, the money you have now in
your account will have more than doubled – would have grown 2.594 times to be
more precise. So if you have a sh100m in your account today and never added a
cent of your or employer’s money in the ten years, when you are retiring at 55
you will have sh259m to take home.
But we argue that what if something happens to NSSF in that
time and we lose all our money?
Well I remember someone who collected his sh100m in 2006.
While NSSF has not managed double digit interest since then, let us assume they
averaged eight percent during the period, my friend would be looking at more
than sh300m in his account now, assuming he never contributed a cent since.
"Obviously it’s a case of better a bird in the hand than two in the bush....
Give us our money we eat it and the future shall take care
of itself.
