On the 13th September last year 2011, an Inter-Ministerial Task force of Officers from the Ministries of Public Service, Defense, Finance Planning and Economic Development, Local Government, Justice and Constitutional Affairs and the Office of the Auditor General was commissioned by the Permanent Secretary Ministry of Public Service, who is also the Pensions Authority to synthesize and contextualize a World Bank Technical Report on Options for Reform of the Public Service and other formulations on the reform of the Public Service Pension Scheme. The Task force was also required to consider the Uganda Retirement Authority Act, 2011 and the Retirement Benefits Sector Liberation Bill, 2011 and assess the necessary reforms that were to be undertaken for the Public Service Pension Scheme (PSPS) to comply with these laws.
The 19 member Task force which was to complete the work in 90 days was interrupted by a requirement to consider the proposed introduction of the Public Service Health Insurance Scheme (PSHIS), spear headed by the Ministry of Health, and harmonize the proposals of the PSHIS with its recommendations
During its operation, the Task force consulted Senior Officers of the Ministries of Health, Education and Sports, Internal affairs Public Service, and the National Social Security Fund (NSSF). They also called for and received Memoranda from the following stakeholders:
- The Local Government Workers’ Union (ULGWU)
- Mbarara Pensioners’ SACCO.
- Kampala Pensioners’ Cooperative Society Limited
- The National Organization of Trade Unions (NOTU)
- The Uganda Medical Workers’ Union
- Mbale Area Pensioners’ Co-operative Savings and Credit Society Limited
- The Uganda Government Pensioners Cooperative Society Limited
- The Uganda Farm and Argo-Based Workers’ Union
- The Uganda Government and Allied Workers’ Union
- The Uganda National Teachers’ Union.
During the presentation of the report, at the Ministry of Public Service Boardroom on 06th February the chairperson of the Inter-ministerial Task force, Mr. Kiwanuka Kunsa was delighted to inform the Rt. Hon. 2ND DP& MOPS of how the Task force had dedicatedly worked on the assignment. As he made the presentation, he put forth the main recommendations of the Task force report which included the following.
- Create a PSPS as a separate entity with clear reporting structure and well defined responsibilities but being guided by the Minister responsible for Public Service.
- Introduce a contributory pension scheme with a 15% contribution (10% by Employer and 5% by the Employee) with effect from 1st July 2013, starting with parametric reforms of the Scheme.
- The reformed scheme should be professionally run by an independent body on principles of good corporate governance, while complying with the requirements and stipulations of the sector regulatory authority,
- Health Insurance will be an integral part of the new scheme. Therefore, 1% of the members’ contributions will be paid into the proposed National Health Insurance Scheme for the healthcare benefit of the members.
- Pension reform should be considered in the broader context of Public Service remuneration and hiring policies, and hence Government should fast track the pay reforms for members to have guaranteed reasonable contributions. A gradual phase-in of the contributions should be considered.
- Introduce a two-pillar hybrid scheme, where the first pillar is a defined benefit scheme with the following parameters:
- The accrued rights of the per-reform Scheme will be fully guaranteed by the Government. The new accrued rights start after implementation.
- The administrative cost of the Scheme should be borne by the Scheme at maximum 5% of the total contributions, or a rate to be determined by the Sector Regulatory Authority.
- There should be separation of Fund assets and management from the sponsor/employer (Government).
- The Fund should be constituted by a Board of Trustees and a Chief Executive to serve as the Secretary to the Board.
- The membership of the Board of Trustees should be representative and professional and be required to always act with utmost good faith in all matters of the Fund.
- Members of the Board of /Trustees and staff should be subject to a “fit and proper person test”.
- The Board of Trustees should appoint a risk and audit committee in accordance with best practice.
- The PSPF should develop and maintain a code of practice and conduct for the Board of Trustees and staff.
- The internal auditor of the Fund should report directly to the Board.
- The Fund’s core activities should be delineated from the non core activities.
- There should be clear delineation of functions of the organs of the Fund to avoid overlaps.
- All out-sourced noncore activities and services of the Scheme should be procured in accordance with the Public Procurement and Disposable of Public Assets Authority Act, and within the guidelines of the regulatory authority.
- The Fund should develop and implement an Information Education Communication strategy.
- Continued capacity building for the Scheme is a necessity to meet requirements and challenges of the new tasks to be performed.
- Chapter L-f of the Government Standing Orders 2010 should be amended to comply with the constitutional amendments and design of the reformed PSPF.
- Pension Act (Cap 286) should be repealed and replaced with a new Act to define the framework provisions of the reformed Public Service Pension Scheme rules (the two-pillar hybrid scheme), the Public Service Pension Fund, the Government guarantees, as well as protection of the accrued rights and pensions granted before the Reform and the transition rules.
- The Scheme should be regulated by the Uganda Retirement Benefits Authority (URBA).
- Government should meet the start up cost of the Fund for at least 3 years until it attains stability.
- Government should implement economic and financial reforms to strengthen the financial institutions and deepen the money markets to spur the reform of the Public Service Pension Scheme.
In his final remarks, Mr. Kiwanuka Kunsa thanked the Government of Uganda on behalf of the task force , the 2nd Deputy Prime Minister $ Minister for Public Service for the confidence and trust put into them individually and severally to have been accorded an opportunity to contribute to the important issue of reforming Public Service Pension Scheme.
Speaking on the same presentation, the 2nd Deputy Prime Ministerand Minister for Public Service Hon Muganwa Henry Kajura noted that since its establishment, the Public Service Pension Scheme (PSPS) has undergone several parametric reforms intended to improve the benefits and equity of the Scheme. The changes, however, gave rise to significant affordability and sustainability challenges like the problem of pension arrears and the administrative challenges that have saddled the Pension Scheme which the Government is determined to resolve.
In this respect, the Minister explained that the National Development Plan (NDP) underscores the relationship between the broader context of the development of the economy and the modules of the mandatory pension system; one of them being the Public Service Pension Scheme. Consequently, the NDP recommends reform of the Public Service Pension Scheme.
Also, Government recently enacted the Uganda Retirement Benefits Authority Act, 2011 to, among others, guide and regulate the management of the Pension Sector. At the same time, there is a Retirement Benefits Sector Liberalization Bill, 2011 which is before Parliament. The two laws have significant implications on the future form and nature of the Public Service Pension Scheme.
In his conclusion, the 2nd Deputy Prime Minister and Minister for Public Service extended his appreciation to all the members of the Task force for the good work that is a testimony of their commitment and devotion to the broader Public Service reforms. He thanked the Permanent Secretary for having guided the process of work and the Development Partners- World Bank-for the support they provided to the Ministry in this effort.He also confirmed that Government will indeed support the reform in so far as it will lead to enhanced efficiency and effectiveness in managing Public Service Pension Scheme and assured of his commitment and support towards the effective implementation of the recommendations of the report.
See details of Report......