The Government of Uganda is working on a new National Social Security Fund (NSSF) bill that majorly targets to tax members’ benefits at the point of withdrawal rather than from the payrolls as it is.
NSSF Managing Director Richard Byarugaba talked to East African Business Week’s PAUL TENTENA about the details of the new proposed bill. Below are the Excerpts:
Is the Government of Uganda through Uganda Revenue Authority going to tax NSSF benefits/savings?
The proposed NSSF Amendment Bill 2019 proposes changing the tax regime. When it becomes law, the tax regime will change to an EET (Exempt, Exempt, Tax) from TTE (Tax, Tax, Exempt). Here, member contributions will not be taxed, and NSSF income earned will not be taxed. However, member benefits will be taxed at the point of withdrawal. Should a member attain the age of 60 years, their Age Benefit will not be taxed. Other benefits that will not attract tax also include the Invalidity and Survivors Benefits.
What has been happening before and how are the contributors going to benefit if the new bill is passed into law?
Uganda’s current tax regime with respect to pensions and retirement benefits is a TTE (Tax, Tax, Exempt). This means that a member’s contribution is taxed at the deduction of payroll, NSSF income is taxed when earned and the members’ Benefits are exempted from tax. So all member accrued benefits will have been taxed by the time they are paid.
Under the new tax regime, a member will have more money compared to the current tax regime. The Government too will have earned more tax revenues under the new tax regime than it would have collected under the current one.
What is this Bill intending to cure? Or what necessitated the Amendment of the old Act?
Policy-wise, the Bill will;
- Lead to an expansion of social security coverage, efficiency and effectiveness in investments and introduction of new benefits.
- Lead to improved governance of the Fund as well as streamlining appointment of staff to key positions – the Managing Director, the Deputy Managing Director and the Corporation Secretary.
- The proposed amendments are also meant to correct the defects in the existing law- the NSSF Act, which was enacted in 1985. Since then, the labour market, the country’s demographics, the standard of living, members’ social security needs, and even the country’s social-economic development needs have all changed.
- The Fund and the country need to keep pace with the rest of the world. For instance, the current Act does not address new developments in the management of the Fund especially regarding governance, the need for innovation around products and other benefits. The need for a review of the benefits tax regime, easier recovery of social security contributions arrears, among others is also addressed by the Bill.
How is this bill going to encourage or discourage savers?
It encourages contribution in 3 ways;
- It removes a tax on member contributions, hence members can save more
- It removes the threshold of 5 employees or more for an employer to qualify to contribute for their employees to the Fund to just 1. Even self-employed people will be able to save
- It exempts tax up to 30% of individual contributions. This is an incentive which will encourage people to save over and above 15% in the current law.
Who is it targeting?
The Bill targets all individuals who earn an income by enabling them to save with the Fund.
What will happen to the URBRA ACT that intends to liberalize the pension sector?
The URBRA Act is a law that set up a Regulator for the retirement benefits sector. It is not meant to liberalize the sector.
Take us through the processes one goes undergoes before accessing his/her benefits?
A qualifying member of the Fund fills up a NSSF Benefits Claim form. And submits that form at any of the Fund’s branches across the country.
A claimant is obliged to provide full proof of identity and where necessary, an investigation to this effect shall be conducted by the fund. Claimants are also advised to submit the claim in person to the nearest office.
A contributing member can qualify under the following benefits:
- Age Benefit: The objective is to replace income security to the elderly through payment of their savings accumulated over the years during the period they were employed.
- Invalidity Benefit: Paid to a contributing member who has lost his/ her earning capacity due to physical or mental incapacitation as will be certified by a medical doctor
- Survivor’s Benefit: This is paid when a contributing member dies while working, spouses and children are the immediate beneficiaries. In case at the time of death the deceased had neither, the parents qualify.
- Exempted Employment: Paid to a contributing member who joins employment categories that are exempted i.e. have their social protection schemes that are recognised under the existing law and are exempted from contributing to NSSF .e.g. the army, police, prison, civil service and government teaching service employees or members of any scheme who have received exemption from the Minister responsible for Social Security in writing.
- Withdrawal Benefit: Paid to a member who attains the age of 50 years if he or she has not been employed under a contract of service for a period of one year immediately preceding his or her claim.
- Emigration Grant: This is paid to a contributing member who has been working in Uganda and is leaving the country permanently. It is paid to both Ugandans and non-Ugandans
Once a claim has been received, the Fund undertakes verification to ascertain that the member indeed qualifies and once that is confirmed, the claim is processed and the member is paid. Currently, a member receives their money on average in about 8 working days.
How far is the NSSF Housing projects and the off-taker Concept?
Most of the Fund’s housing projects are on course, including the off-taker project.
- Lubowa Housing Project – first phase has been completed and we are now embarking on phase 2
- Mbuya housing project has been completed and will be launched in September 2019
- Off taker – Kyanja project construction has started and will take about 18 months to complete
