Why NSSF declared 10% interest rate to its members

by MMC
0 comment

The National Social Security Fund (NSSF) on Tuesday declared a 10 per cent interest rate to its members because their contribution increased from Sh1.5 trillion in the 2021/2022 financial year to Sh1.7 trillion during the 2022/2023 financial year.

NSSF also said its investment income increased in the 2022/2023 financial year. Its turnover increased from 1.9 trillion shillings to 2.2 trillion shillings for the financial year ended June 30.

The assets of the Fund stand at 18.6 trillion shillings.

The Minister of Finance, Planning and Economic Development, Mr. Matia Kasiajja, declared the 10 percent interest yesterday at the 11th annual NSSF members meeting in Kampala.

The interest, which translates to a total amount of Sh1.6 trillion, has garnered positive reactions from the public, with some saying it is good news for savers as it indicates growth of their savings with the Fund.

In the 2022/2023 financial year, the 9.5 percent interest rate resulted in Sh1.6 trillion being credited to members’ accounts in the last financial year.

Mr. Kasaija congratulated the NSSF for releasing what he described as remarkable performance indicators despite a difficult environment characterized by unrest in Europe due to the war between Russia and Ukraine, the flight of investors from the most developing markets to the United States and a reduction in value across all East African stock markets. and the increased scrutiny that the Fund received in the third quarter of the recently concluded financial year.

“The reported interest rate is 5.8 percent above the 10-year average inflation rate, meaning the Fund has once again delivered on its promise and exceeded it by almost more than three percent. As provided for in the NSSF law as amended, this new rate will be calculated and credited to the unpaid balance of members’ accounts as of July 1, 2022,” he said.

“The second KPI (Key Performance Indicators) that interests me is the money you generated during the year because it shows the productivity of the investment that I approved during the year. I am therefore happy that the total revenue earned increased by 15 percent from Sh1.9 trillion in the 2021/2022 financial year to Sh2.2 trillion in the 2022/2023 financial year,” he said. added Mr. Kasaija.

NSSF data indicates that 83 percent of NSSF members hold about Sh10 million or less in savings, while 12 percent hold between Sh10 million and Sh50 million.

At least three percent hold between Sh50 million and Sh100 million, while only two percent hold Sh100 million and above.

Development economist Professor Augustus Nuwagaba told the Daily Monitor yesterday that the 10 percent interest was a sign that members’ savings were increasing.

“The interest rate reflects good progress in the economy, which means there has been an improvement in the economy which has supported various private sector investments,” he said.

He added: “People have great confidence in the Fund, which is good for savers, the country and the economy. »

The NSSF said last week that it expected the size of the Fund to reach Sh20 trillion by June 2024, a year earlier than expected.

The Fund had planned to achieve this expansion by 2025, but achieving it by June 2024 remains a strategic objective.

The projected increase means that the NSSF will, in the medium term, increase by at least Sh1.5 trillion, from Sh18.56 trillion in the period ending June 2023 to Sh20 trillion.

The NSSF holds a number of assets and investments in Uganda and abroad, including 12.51 percent in equities, 9.01 percent in real estate and 78.48 percent in fixed income securities.

Mr. Usher Willison Owere, General President of the National Organization of Trade Unions (NOTU), told Daily Monitor in a telephone interview that the 10 percent was an improvement and a welcome development, given that there was had many problems before and after Covid. 19.

“What I would like the NSSF to do is ensure that employers remit workers’ money to the Fund. This can improve the number of savers and increase the revenue of the NSSF,” he said.

Various investigations by Parliament and the Government Inspectorate into the affairs of the NSSF have revealed a number of problems which analysts say would impact on the confidence of members and investors.

Gender Minister Betty Amongi, whose mandate falls partly under the supervision of the Fund, challenged the NSSF to create more solutions that will further address social protection in line with the International Labor Organization.

She said she would expedite and issue regulations to operationalize several products to enable the Fund to innovate and deliver more value to members beyond interest and benefit payments.

Mr. Patrick Ayota, Managing Director of the NSSF, said despite a challenging operating environment, the Fund remained resilient, increasing its asset size by 8 percent to Sh18.6 trillion, which was consistent with combined investment growth, driven by both contributions and income.

Mr Ayota said in the period ended June, Sh1.2 trillion had been paid to over 46,000 members.

On economic challenges, Ayota said the global economy remains in a valuable state amid the effects of lingering shocks from the pandemic, the Russian-Ukrainian invasion and the global tightening of monetary policy to contain high inflation. The global economy is expected to grow 2.1 percent, down from last year’s rate of 3.1 percent.

“Regional economies are also struggling, major challenges remain, particularly with the EAC’s largest economy, tighter financial conditions, drought and global increases in public spending cuts weighing on production and production. consumption of Kenya,” he said.

He said the Kenyan shilling has depreciated by 30 percent against the US dollar over the past 18 months.

However, Mr. Ayota said the Fund would not stop investing in the Kenyan market as it offers better rates, especially in government securities, the Kenya Eurobond, which has an interest rate of 12 percent.

Mr. Martin A Nsubuga, Managing Director of the Uganda Pension Benefits Regulatory Authority, said benefit schemes today hold about Sh21.6 trillion in assets under management, of which Sh18.5 trillion is under management. the NSSF, while other occupational schemes hold Sh3 trillion.

However, he added, although the NSSF has existed since 1985, its growth has accelerated especially in the last ten years.

“Similarly, the growth we are seeing in occupational schemes has greatly accelerated over the last nine years. This not only reflects compliance with regulatory requirements, but also indicates great market potential, if maintained and well supervised,” he said.

Mr. Nsubuga further said that the sector has recorded an average growth rate of 16 percent over the past seven years.

“However, during the period ending June 2023, we experienced a slowdown, with an average growth of 9.2 percent in the investment portfolio,” he said.

You may also like

Leave a Comment

The news website dedicated to showcasing Africa news is a valuable platform that offers a diverse and comprehensive look into the continent’s latest developments. Covering everything from politics and economics to culture and wildlife conservation

u00a92022 All Right Reserved. Designed and Developed by PenciDesign