Early in March, the Government tabled before Parliament, the Public Service Pensions Fund Bill, 2023, that will see salaries of public servants deducted and kept into a special fund. Mary Karugaba and David Lumu examine the proposed law, which will make it mandatory for every public servant to contribute 5% of their gross salary to the pension fund every month.

The Government will also contribute 10% of the employee’s gross salary, unlike currently where it contributes 100% of the pension to public servants’ retirement package.

While Article 254 of the Constitution provides that a public officer shall, on retirement, receive such pension as is commensurate with their rank, salary and length of service and the payment of pension shall be prompt and regular and easily accessible to pensioners, several pensioners to date have not received their pension.

Some pensioners, MPs said, have died before receiving it.

According to Auditor General John Muwanga, the Government owes pensioners sh 442.98b

In his June 2022 audit report, Muwanga says pension liabilities increased from sh 162.3b in 2021 to sh442.9b in 2022, representing a 173% increase by sh280.6b.

With the introduction of the Bill, these liabilities will be cut by almost 90%.

The objective of the new Bill is to provide for the establishment of a public service pension fund and a public service pension scheme.

It also seeks to provide for the governance, functions organisation and management of the fund, to provide for the collection of contributions to the fund and payment of retirement benefits to pensioners and their survivors in a way similar to the National Social Security Fund (NSSF).

The Bill further seeks to provide for the investment of the monies of the fund and for related matters.

Public service minister Wilson Muruli Mukasa said currently, the public service pensions scheme under the Pensions Act, Cap .286 has presented several challenges relating to its governance, accountability and sustainability owing to its non-contributory character by public servants.

“As a result of the sustainability challenge, the current public service pension service scheme has continued to suffer shortfalls in funding which ultimately translate into accumulated pension and gratuity arrears for pensioners,” he said, noting that the Bill seeks to transform from a non-funded, non-contributory pension scheme to a funded and contributory pension scheme for public servants.

Coming at a time when pensioners are decrying delayed payment of their pension and the government battling issues of ghost pensioners on the payroll, MPs believe the proposed law is a timely legal reform of the pension sector.

AUDITOR GEENRAL’S FINDINGS

For instance, Auditor General Muwanga’s report to Parliament shows that the Ministry of Information, Communication and National Guidance had the most significant amount of sh320b, arising out of the former employees of the defunct Uganda Posts and Telecommunications Ltd.

“The continued failure to settle the pension arrears impacts on the welfare of the pensioners. I advised the Permanent Secretary and Secretary to treasury to prioritize payment of pension arrears going forward,” Muwanga said.

The Auditor General noted that a review of the payroll registers (IPPS) and IFMS payments revealed an overpayment of pensioners in 75 Local Governments.

According to the audit, a total of 270 pensioners were overpaid billions of money and 4,545 pensioners/beneficiaries were underpaid during the year--2022.

Muwanga said when he probed Local Government accounting officers, they attributed the underpayment to inadequate funds to pay all approved pension and gratuity benefits on one hand, and errors in the processing of payments for pensioners and beneficiaries, on the other.

He advised the Ministry of Public Service to ensure that IPPS accurately captures pensioners’ information and automatically computes the correct pension and gratuity obligation.

The Auditor General further noted that whereas Paragraph (L-d) (3) of the Pensions Act notice provides that a public officer has an option to receive all his or her pension as an annuity or to commute a third (1/3) of his or her pension for a 15-year period and receive it as a lump sum at retirement, a re-computation of the pension and gratuity benefits showed that 37 Local Governments did not accurately compute pension and gratuity benefits for 423 pensioners.

The accounting officers attributed this to failure by IPPS to automatically update payment figures.

“Whereas the law requires that responsible officers must initiate and complete the processing of retirement benefits within six months to the mandatory retirement date. In case of death or early retirement, the process should be initiated immediately the Letters of Administration are issued and/or the early retirement has been granted,” the Auditor General said in his report.

However, Muwanga noted that 1,019 new pensioners and beneficiaries in 65 Local Governments delayed to access pension payroll, with some delays ranging from 50 to 110 months and as a result, sh1.3b was not paid.

“Failure to access pension payroll affects pensioners’ livelihood and also leads to accumulation of pension arrears,” the Auditor General said.

Although MPs argue that there is a need for a detailed study of the proposed law to ensure that the new pension fund for public servant does not suffer NSSF-like challenges, they said the new fund will solve problems that have marred the public pension sector for a long time.

PENALTIES

The proposed law has also introduced penalties for non-remittance of pensioners’ money.

Where the responsible officer fails to remit the contributions into the fund by the end of the month, following the month for which the salaries are paid, there shall be added, until the whole sum including the penalty, is paid into the fund.

A penalty to such contribution of a sum equal to 1.5% of the amount of that contribution and on and after the 15th day of the following month, a penalty to the original amount of that contribution of a further sum equal to 1.5%.

A person who contravenes any provisions of this Act, commits an offense and is liable on conviction, to a fine not exceeding one hundred currency points (sh2m) or imprisonment for a term not exceeding three years or both.

Where a custodian, employer, trustee, administrator or fund manager of the scheme contravenes or authorizes a contravention of any provision of this Act, he or she shall be personally liable to pay a civil penalty of five hundred currency points (sh10m) in respect of each day on which the offense continues.

Any person who being a custodian, employer, trustee, administrator or fund manager of the scheme, with intent to defraud causes loss to the scheme directly or indirectly, commits an offense and is liable on conviction to a fine not exceeding one thousand currency points (sh20m) or imprisonment for term not exceeding five years or both.

A person who makes an unauthorized deduction from a salary payment to an employee, fails to pay within the time prescribed under this Act, or makes any false statement or false representation, commits an offense and is liable on conviction to a fine of not exceeding two thousand currency points (sh40m).

MPS SPEAK OUT

Aringa North MP, Godfrey Onzima (NRM), who is also the chairperson of the Parliamentary Committee on Public Service and Local Government, which was directed by the Speaker of Parliament, Anita Among, to scrutinise the proposed law said, noted that once the scheme is in place, it will resolve issues such as accumulated arrears.

Lack of resources to pay pension and the related corruption involved in accessing the pension payroll are the other challenges that Onzima said will be cured by the prosed law.

“Once the employees contribute their own money, government will not cry out on those issues of there’s no money. We also believe that things will be streamlined that there will be no more issues of corruption to enable one access his pension,” he said.

On his part, the Kashari South MP Nathan Itungo Twesigye (Independent) said the scheme is good, but just like several good policies, it will suffer from the implementation disease that has affected so many projects across the country.

“Many people are still in shock over what happened to the NSSF. If the employees’ money is not going to be misused, then the scheme will be very good for them. Secondly, it will give the pensioners opportunity to access their pension through midterm. This was not there in the old scheme,” Itungo said.

Itungo added that issues such as corruption and bureaucracy will heavily reduce with the new scheme once the processes are streamlined.

“But let’s wait and see,” he added.

Ndorwa East MP, Wilfred Niwagaba (Independent) said: “I am happy that the scheme will resolve the problems of arrears since members will be contributing their own money.”

Yet for Butambala County MP, Muhammad Muwanga Kivumbi (NUP), a careful study of the public service pension scheme should be done instead of just copying and pasting the NSSF model.

“I have moved around but I have not found a very successful and proud NSSF beneficiary who says I accumulated this because I saved with NSSF. So, before you adopt that model, you need to study it very well to ensure that it will be different,” he said.

This article appeared in Saturday Vision's The House on March 18, 2023.