Savers get 9.65 percent interest

The National Social Security Fund (NSSF) has adjusted the interest for each saver for the first time in fifteen years to a rate below 10 percent.

The new interest rate is based on the implementation of the Mid-Term Access to Funds project that was introduced earlier this year and is for the year ended June 2022.  

The Fund paid 10.75 percent and 12.15 percent for the financial years 2019/20 and 2020/21 respectively.

The NSSF Managing Director, Richard Byarugaba, said a total of 1.7 trillion was paid out in midterm access benefits to members.

Byarugaba, however, added that despite these challenges, the fund remains sustainable, at a total asset value of UGX17.2 trillion, while the members’ funds or claims amount to UGX16.96 trillion. This means that even if all the savers demanded all their benefits, they would be paid in full by liquidating the assets of the fund.

Savers get 9.65 percent interest

Following the passing of the Mid-Term Access, the NSSF decided to invest more in short-term assets and less in the longer-term assets, which are otherwise more profitable, and that these and the loss of value in investments on stocks in the region, meant a lower interest payout.  

On the losses particularly arising from the mid-term access payouts, Byarugaba explained that the Fund lost an opportunity to earn UGX92 billion.

The total membership of the Fund currently stands at 1.33 million while, according to the figures, only 630,000 are active, meaning that more than half of the total number of accounts are dormant.

NSSF is by policy supposed to pay an interest that is two percentage points above the average rate of inflation over 10 years.  But over the last 10 years, inflation has averaged 3.79 percent and this sharp increase in the average was due to the spiralling in inflation in the second half of the year as the global commodity prices started rising sharply.  

The Fund says that the high inflation rate is also affecting its performance, on top of the reduction in the projected assets due to the mid-term access.