A NEED FOR A LIBERALIZED RETIREMENT BENEFITS SECTOR

              

The Retirement Benefits Sector Liberalization Bill 2011 is likely to turn into a still birth if not brought back on the floor of Parliament. The Minister of Finance withdrew the Bill amidst incessant pressure from National Organization of Trade Unions (NOTU) and the minister of Public Service.

This Bill which seeks to provide for fair competition, portability and transfer of accrued benefits, innovation of new products and services, repeal the NSSF Act Cap 222 and among other objectives will drastically reform the pension sector, assuming it gets passed into an Act. The calls by NOTU to ditch the Bill and instead amend the NSSF Act are spurious, limited in scope and analysis. To assert that a private company would close shop and vanish with savings of workers money is not only shallow but also lacks insight. It is also contemptuous of the supervisory oversight provided by the competent authorities mandated to regulate the pension market operations and ensuring that the workers savings are safe. Is NOTU purporting that the government lacks the capacity to protect the pension contributions in a liberalized sector? Before NOTU casts doubt on whether a liberalized pension sector is possible, it is more rewarding to focus on the merits of the Bill before prophesying doom.

Competition in the pension sector is long overdue. The workers stand to benefit from having many players on the market in terms of more choice of products and services, better returns and growth of the retirement benefits contributions. Having a monopoly encourages complacency within the service provider, little or no innovation in product development is also bound to happen.

The continuous expansion of the informal sector means more people are getting engaged in productive work to earn a living. Under the Bill, those in the informal sector will have an opportunity to save with any scheme of their retirement. It not only promotes a savings culture but also offers cushion against possible risks for this class of people.

It will be possible for a member under a scheme to acquire a mortgage from a financial institutions using the accumulated contributions as collateral.  In addition, a person will enjoy the flexibility of transferring his or contributions to any other retirement contribution scheme. Meaning that a contributing member will entrust his savings with a scheme which attracts more returns. The bill also provides other optional benefits like medical and education.

To allay the fears of NOTU and others with similar opinions, in order to protect the workers’ savings, the licensed players will be required to have strong risk management framework, prescribed minimum reserve balance and government intervention will be necessary in circumstances where the afore mentioned are inadequate.  There is also a provision for a Schemes Depository Fund where the fund managers will have to deposit money to offset liabilities.

It is counterproductive by NOTU to block this Bill. Having a liberalized pension sector will facilitate growth of the capital market and more jobs created. Those opposing the proposed Bill should reconsider their position.