THE UGANDA RETIREMENT BENEFITS REGULATORY AUTHORITY

1. THE UGANDA RETIREMENT BENEFITS REGULATORY AUTHORITY Progress in Implementation of the URBRA Act 2011 Iceland, 27 February 2014. By Moses Bekabye Interim CEO, Uganda Retirement Benefits Regulatory Authority (URBRA)

2. Introduction • Objectives of the reform • The reform context • Key elements of the reform process • Key elements of the URBRA Act 2011 • Progress in implementation of the URBRA Act 2011 • Highlights of the Proposed Retirement Benefits Sector Liberalization Bill • Conclusion

3. Overall Objectives of the Reform • The overriding objective of the on-going reforms in the retirement benefits/pension sector is to create a robust and efficient pension system that will ensure that: • all Ugandans are protected from old age poverty, i.e ensuring a minimum social safety net for the elderly; • Encourages retirement savings by building trust and confidence.

4. Uganda Pension reform Context • Uganda has a working population of approximately 14 million people most of whom are in the informal sector and agriculture . • The current pension system comprising of NSSF , the Public Service Pension Scheme and occupational voluntary savings cover less than 5% of Uganda’s workforce. • The reforms therefore will expand coverage not only to those in the formal sector, but also to those who are self employed and in the informal sector who are the majority workers in Uganda. • The reform process in Uganda is in fact a very broad reform agenda. • Also aimed at protecting pensioners under the PSPS and improving how the system of currently being administered • Providing a policy, legal and oversight framework for investment of voluntary contributions • Expanding coverage to those in the informal sector and also those in the formal sector who currently have no social protection • Ultimately, building a comprehensive social protection system for all Ugandans. This is why the Government is piloting the Senior Citizens Grant to funding options and affordability.

5. Key Elements of the reform process • There are 3 pillars in the reform of the Retirement Benefits (Pension) Sector, namely: • Establishing the regulatory framework for the establishment and operation of retirement benefits schemes in the country; • Opening up the sector and introducing competition through the proposed Retirement Benefits Sector Liberalization Bill, aimed at improving governance, increasing coverage to more than 5% covered now, achieving long term fiscal sustainability and overall build trust and confidence in the pension industry; • Reforming the Public Service Pension Scheme to: • improve Governance by creating a new Public Service Pension Fund (including local government) and separating it from the Ministry of Public Service. • protect pensioners savings through transparent systems, reporting, and accountability i.e create checks and balances. • introducing parametric changes to the existing arrangement for long term fiscal sustainability.

6. Key Elements of the URBRA Act 2011 Objectives • Establishment of an independent and effective regulatory authority with the objective to oversee and regulate the establishment, management and operation of retirement benefits schemes, and to protect the interests of members and beneficiaries of all schemes.

7. Key functions of URBRA • Key functions include: • Regulate and supervise the establishment, management and operation of RBS, both public and private; • Licence RBS, trustees, administrators, fund managers, and custodians • Protect the interests of members and beneficiaries of RBS, including promotion of transparency and accountability; • Improve understanding and promote the development of the Retirement Benefits Sector, and creating awareness • Promote the stability and integrity of the financial sector • Ensure sustainability of the RB Sector

8. Funds of the Authority • The funding structure of URBRA is aimed at ensuring its independence over the long term (Section 7 of the URBRA Act); • The funds of URBRA shall consist of: • Compulsory levies; • License fees; • Money appropriated by Parliament for the purposes of the Authority • Grants, gifts or donations from Govt or other sources made with the approval of the Minister; • Any other fees charged for services and activities rendered by the Authority e.g application fees.

9. Progress on the Implementation of the URBRA Act 2011 since December 2012 • The Authority has been established and is now operational. • The institutional setting up of the Authority is in progress, housed on Plot 1, Clement Hill Road. • The administrative structures have been created and now the Authority is recruiting staff and senior management, • The organizational structure, and detailed job descriptions are ready and are basis for recruitment. • Financial management systems, including for procurement have been established and are fully operational • Equipment has been procured for full functioning of the Authority. • The position of CEO of the Authority was advertised internationally and the processing is on-going.

10. Progress on Implementation of the URBRA Act 2011 • The regulations under the URBRA Act 2011 on licensing of schemes, trustees, administrators, fund managers and custodians were published in the Uganda Gazette. • The amendments to these regulations are in the process of being gazetted, already at the UPPC for this purpose. • The investment regulations are also at the UPPC for gazeting after approval by stakeholders, the Office of the Attorney General, and were signed by the Hon. MoFPED. • The formulation of the Corporate Governance and Financial Statements Regulations are in progress, consultations with stakeholders will be soon. • URBRA will also be expediting the regulations for the establishment and operation of Umbrella schemes—constituting the technical teams is in progress.

11. Progress on Implementation of the URBRA Act 2011 • The licensing of schemes, trustees, administrators, fund managers and custodians covered by Section 96 of the URBRA Act started on 21st December 2012 and is currently on-going. • 190 Applications for licenses have been received as of 30th June 2013 from RBS, Administrators, Trustees, Fund managers, and Custodians • Those existing schemes which do not have Trust Deeds at the moment have been and will be given time to prepare their respective Trust Deeds. • Existing schemes are automatically licensed once they meet the basic requirements of the law and regulations and those which do not meet all the requirements are being given time to implement a remedial or compliance plan. • URBRA is expediting detailed guidelines to simplify licensing and regulation of service providers in the pension sector.

12. Progress on Implementation of the URBRA Act 2011 • The Authority is organizing a baseline survey to collect data and key information about the schemes, including their liabilities and assets, key officers with fiduciary responsibility, scheme investments, governance arrangements, among others. • The Authority is implementing an outreach program to explain the licensing requirements, provide information, respond to concerns, and build trust and confidence, among others. • There have been complaints and petitions which URBRA is addressing. • Training—This is going to be a key function of the Authority, including introducing accreditation. • The Communication Policy and Strategy are being developed and implemented. • A robust ICT infrastructure is being developed; for Risk-based supervision, financial management and HR administration. • URBRA is now a Member of the International Organization of Pension Supervisors (IOPS); which supports pension regulators on Good governance codes and standards, and undertakes research.

13. What are the shortcomings of the current pension system? • Poor governance of the entire retirement benefits sector to be addressed by • Putting in place checks and balances through implementing a rigorous regulatory and oversight framework • Introducing competitive pressure in the sector—this brings about innovation into more efficient methods including collection, new products, and diversification of investment vehicles which support economic development. • Introducing transparency and accountability in management of contributions and investment made out of these contributions. • Introducing choice of where to save in order to build trust and confidence • Portability of employee savings and accrued benefits. • Putting savers in full control of their savings i.e Irrevocable Trusts and Boards of Trustees. • Lack of trust and confidence by the general public in the current pension system • Primarily due to long history of mismanagement of the sector • Low or no return on employee savings. • Inadequate pensions or no pensions at all • Low coverage • The current retirement benefit system covers only 4.9% of the workforce; of which NSSF is 3.5% and the Public Service Pension Scheme is about 3.2%. • Lack of fiscal sustainability— • Particularly of the Public Service Pension Scheme • This translates into low savings in the country i.e poor savings culture

14. What are the objectives of Retirement Benefits Sector Liberalization? • Restore trust and confidence in the retirement benefits sector to encourage savings by undertaking reforms. This is important for the promise to be realised and to change the negative perceptions. • To ensure protection of workers’ savings and better returns to the savings in the form of benefits. • Introduce competitive pressure in order to improve governance in the entire sector. • Increase coverage: • to all those in the formal sector employment by removing the current threshold of 5+ employees for companies contributing to the NSSF—mandatory requirement • to those who are self-employed—voluntary • to the informal sector—voluntary • Make the system fully funded for fiscal sustainability particularly the Public Service Pension Scheme (PSPS). • Separating the PSPS from the Ministry of Public Service and creating a Fund to be managed professionally and independently • Undertaking parametric reforms to ensure long term sustainability • Implementing system reforms to ensure efficiency • Providing choice to savers, to be able to put their savings schemes where they have trust and confidence. • Over the medium to long term and as the economy grows towards a middle income status, ensuring that those who save for their retirement have adequate income.

15. Conclusion • The on-going pension reforms are aimed at harnessing the savings and growth potential of the country. • The reforms in the pension sector aimed at unlocking the untapped potential of individual savers (i.e Uganda’s workforce) and for the economy as a whole. • Government will have unlimited access to increased volume of resources to finance its priority investment projects through transparency instruments e.g infrastructure bonds and Treasury Bills. • Liberalization is aimed at opening up the sector to more players, improve governance of the sector as a whole, and build trust and confidence to encourage savings. • Providing choice is a key and critical element of building trust and confidence in developing a robust and sustainable pension system given that benefits accrue in the long term. • The reforms are also aimed at improving the way pension funds are invested to give adequate return to savers.