Fight over mid-term access to NSSF savings heads to court

NSSF Managing Director Richard Byarugaba. A Bill to have Ugandan savers access 20 per cent of their NSSF contributions has ignited heated parliamentary and public debate. PHOTO COURTESY

A Bill to have Ugandan savers access 20 per cent of their contributions to the National Social Security Fund (NSSF) to see them through the economic hardships of the Covid-19 pandemic, has ignited heated parliamentary and public debate, and ended in court after opposition from the fund.

Activist Morrison Rwakakamba and Agency for National Transformation Organisation went to the Constitutional Court last week seeking an interpretation of the NSSF Act which they say “is in contravention of the provisions of the constitution of Uganda on fundamental rights and freedoms guaranteed under the Uganda constitution’’.

The court battle has been occasioned by a May 6 letter to the country’s Finance Minister by NSSF Managing Director Richard Byarugaba, that says that the proposal, if adopted, would not only collapse the fund but also have wider negative implications on the economy.

The immediate challenge, he said, would be raising liquidity of up to Ush2.5 trillion ($655 million) needed within the next one year to fulfill this obligation and circumventing the current law which doesn’t provide for the much needed midterm access to the funds.

Mr Byarugaba’s letter stirred up an uproar with proponents of the midterm access, saying that in citing dire negative economic consequences, NSSF was technically avoiding its natural responsibility, the purpose and cause on which it was formed and forgetting the justification of its existence which is to provide a social security safety net for its members whenever their social security is under threat.

Mr Rwakakamba and his organisation now want a court order directing NSSF “to pay out at least 20 per cent to each of its members whose lives have been affected by the current Covid-19 pandemic; and declare various provisions of Section 19 of the NSSF Act unconstitutional especially those that impose restrictions on mid-term access by contributors contrary to the obligations as regards to the rights guaranteed under the international human rights instruments ratified by Uganda.”

They contend that allowing members to access 20 per cent of their contributions will justify the purpose and relevance of the fund since it is a social security fund whose sole purpose is to help its members in such times when many have lost income, employment and source of livelihood due to the pandemic.

But in another turn of events, Mr Byarugaba has this week written to Fund members informing them that the Fund wasn’t opposed to the proposal but is being constrained by the law. 

“We shared with our line minister our understanding of the worst case scenario of the economic implications of the proposal to pay out an unplanned 20 per cent of the funds to its members. We must clarify that the current legislation, NSSF Act Cap 222, that governs the Fund’s operations does not provide for mid-term benefits and regrettably has limited our ability to offer you new benefits,” he wrote.

The proposed Bill seeking to amend certain provisions of the NSSF Act is before parliament and has received support from legislators across the political divide and House Speaker Rebecca Kadaga has ordered for it to be fast-tracked.

Social security coverage

The Bill seeks to expand social security coverage by making contributions to the NSSF mandatory for all workers in the formal sector and also allowing workers in both the formal and informal sectors to make voluntary contributions to the Fund.

If passed into law, it will provide for midterm benefits to members during their working life that cover short-term to long-term needs such as unemployment/income replacement, education, medical and housing.

The NSSF is a statutory savings scheme that provides social security services to private sector employees in the country and is funded by contributions from employees and employers of five per cent and 10 per cent respectively of the employee’s gross monthly wage.

This is paid to members who have reached the retirement age of 55.

Parliament, the public and activists have in recent weeks piled pressure on NSSF to give its members midterm access to 20 per cent of their current savings to cushion them from the effects of the corona virus lockdown and pandemic.