World Bank Report Calls for Reforms to Public Service Pension

1875 Views Kampala, Uganda

In short
The proposal by the report is to make this scheme contributory, in order to “reduce the fiscal pressure that may arise as the number of recipients of the public pensions grows.” At the moment only those saving with the National Social Security Fund- NSSF, among other private schemes contribute money, which they can access, with a profit, when they retire.

The current structure of the Public Service Pension scheme is “extremely expensive and unsustainable” a new report, the fourth series of the Uganda Economic Update, by the World Bank indicates.

Civil servants do not directly contribute towards the gratuity they get; instead the government allocates funding through the budget to facilitate the public service pension scheme. At least Ugx 350billion is set aside each year for the payment of gratuity to retired civil servants.

But according to the report, each year this amount will keep increasing as there will be more people retiring. It further reads that, Uganda must “seize the opportunity to build up its pension funds now before its elderly population swells.” 

The proposal by the report is to make this scheme contributory, in order to “reduce the fiscal pressure that may arise as the number of recipients of the public pensions grows.” At the moment only those saving withhe National Social Security Fund- NSSF, among other private schemes contribute money, which they can access, with a profit, when they retire.  

Rachael Sebudde, A Senior Economist at the World Bank-Uganda Country Office, and co-author of the report said trouble with the current Public Service Pension is that it is unfunded and faces challenges like ghost pensioners.

//Cue in: The Public Sector pension…
Cue out: …as the public service grows//

Maria Kiwanuka, the Finance Minister also admitted that the current structure of the public service scheme doesn’t provide timely access to benefits and “erroneously extends to so-called ghost workers.”

Currently the Ministry of Finance Planning and Economic Development is pushing for the passing of a bill that opens up the pensions sector. Additionally, it is also proposing that scheme becomes contributory because it is more sustainable and in line with the global shift from state funded schemes, to contributory schemes.

//Cue in: Our immediate…
Cue out: …especially as people are living longer//

However, John Baptist Kakooza, a Lawyer and Specialist in Pension and Social Security is opposed to making the government scheme contributory, insisting that all there needs to be is efficiency. He said that the entire overhaul of the scheme at the moment could prove to be more expensive.

//Cue in: Every financial year…
Cue out: …three times more expensive for the next 35years//

In the proposed reforms, government will deduct a percentage of money from workers salaries. The money is remitted to a fund, which in-turn is given the responsibility to manage and invest the money until a civil servant retires.

The debate around liberalization of the entire pension sector in Uganda is a protracted, pitting experts on different sides against each other. Those opposed to the reforms, like Kakooza, insist that the liberalization will open Uganda to profit driven fund managers, which essentially takes away the social protection that NSSF and Public Service Pension Scheme provide.