KAMPALA (Reuters) - The Ugandan government has agreed to liberalise the pensions sector, opening up a sector hitherto monopolised by the state's National Social Security Fund (NSSF), the finance minister said on Friday.
Although the east African country has an open and thriving banking system, private sector pensions are controlled by the NSSF, a fact economists say has curbed growth and efficiency in the financial services sector.
"Cabinet took a decision to open up and stimulate competition in the pensions and we've already submitted a bill to parliament," Syda Bbumba told Reuters by phone.
"We want workers to have a choice with whom to invest their savings and the government will only retain oversight role".
Employers in the private sector are required to remit 15 percent of each worker's monthly salary to NSSF as social security savings to be redeemed upon retirement.
The employer contributes 10 percent while the employee adds the remaining 5 percent, under the terms of a 1985 law.
NSSF, with assets of about 1.1 trillion shillings at 30th June 2008, has been hit by a string of scandals over the past several years over botched and corrupt procurement deals.
The fund is also accused of paying annual interest that is often below inflation levels, diminishing workers' savings. It paid a 2.5 percent interest rate in the 2008/09 financial year.
David Chandi Jaamwa, a former managing director is in prison on charges of abuse of office and causing financial loss.
"From how NSSF has been managed, it's clear there's room for improvement in the sector," said Bill Page, a partner at Deloitte & Touche. "Competition will help bring discipline and innovation in the management of workers' savings".
Liberalisation of the pensions sector, economic analysts say, will spur the nation's fledgling stock market, through injection of much needed liquidity.
