NSSF Managing Director Richard Byarugaba, is credited with growing the fund.

The Managing Director of the National Social Security Fund (NSSF) has defended the recent decision in which the Fund in August raised interest rate of 15 percent to be paid to its members in financial year 2017/18.

“I recently heard of a subtle but quite vigorous debate regarding the Fund’s recently announced record interest rate to members of 15 per cent. Specifically, the debate has been centered around the sustainability of the interest rate declared. I believe these are pertinent matters where, unfortunately, facts may either get twisted or misplaced,” he says.

The interest rate for the year equates to Shs1.1 trillion shillings paid out in interest to members of the Fund. This is the very first time in the Fund’s history that the Fund has declared 15 per cent interest rate to its members.

Byarugaba’s defence of the hike of interest comes following accusations by top administrators of the National Organisation of Trade Unions (NOTU) who alleged that the rise in interest from 13.5 percent to 15 percent was meant to benefit a few individuals only.

The contestation was made by NOTU’s chairman General Br. Owere Wilson Usher and Secretary Peter Christopher Werikhe who say they were not consulted on the matter.

However, Workers’ Member of Parliament Dr Sam Lyomoki supports the 15 percent interest increment to workers, urging Owere and Werikhe to celebrate, saying that all workers who save with the NSSF had been waiting for the rise given the recent good performance of the Fund now worth Shs10 trillion.

According to Byarugaba, the NSSF Act empowers the Minister of Finance to declare an interest rate credited on the members’ accounts following the end of every financial year…“The interest rate decision depends on the financial performance of the Fund. The financial performance in turn relies on the return generated from the various investments of the Fund in the period,” he says.

Byarugaba says the Fund made money in dividends, capital appreciation and currency movements, which are all sources of income that led to the rise in 15 percent interest to members who usually spend over 20 years on average saving with the Fund.

“The Fund’s members usually spend over 20 years saving with the Fund. This means that their savings are invested over a long-term horizon. As a result, the Fund tends to invest in long-term assets to match its membership profile,” he says.

For example, he says the Fund bought Safaricom shares in 2008 at an IPO price of KES 5.0. Today, the price of these Safaricom shares is about KES 24. “This represents a gain of KES 19 per share over the last 10 years. This is alongside the annual dividends that the Fund has been able to receive from the company,” he says.

The capital gain component of return is typical in equities and real estate investments and in many such cases the largest source of return. “The third component of return is on currency movements. This applies when the Fund invests in assets denominated in currencies other than the Uganda Shilling. Extending the Safaricom example, the Fund made the initial investment when the KESUGX rate was 24.7. Today it is averaging 37.2. The difference represents a currency gain,” he says.

“Now, some people argue that interest declared by the minister should not include unrealized gains. That is, that only cash returns should be declared, and the unrealized gains be hived off until they are converted into cash. However, this reasoning has two major limitations. First, some leaving members would not fully benefit from investments made from their savings. For instance, a retiring member who was saving with the Fund in 2008 whose savings were used to make Safaricom investment would not benefit if capital gains made in that period are not distributed”.

Second, he says, such an interest distribution approach would also undermine the Fund’s number one role in the economy; being a source of long-term capital. By their nature and name, long-term investments generate less cash and more capital gains. It is for this reason that pension funds money is also labelled patient capital. “If the Fund were to ignore this cardinal role, it would have to resort to continuous selling of its assets or limit its investments to short-term assets. This would not only create volatility in the market but also push the Fund out of long-term investments resulting in a mismatch with its liabilities,” he says.

He says it is for the reasons above that “the Minister has taken a very measured approach in the Fund’s interest declaration process but obviously after reviewing the performance achieved in the period. The goal is for the Fund to maintain a premium of 2 per cent above the average 10-year inflation. This has been built in the Fund’s investment strategy”.

Pension funds all over the world, he says, have preserving members value against inflation as a key investment objective. The Fund has achieved this over the last 8 years making it one of the best performing pension funds on the African continent.

And that the Fund’s investment strategy has become a benchmark for many regional institutional investors and in return the Fund has received several global accolades. Consequently, the Fund is committed to maintaining this performance and in doing so continue to raise the Ugandan flag globally in terms of pension fund management.

The Fund had an impressive performance on key financial indicators for the Financial Year 2017/2018, with total income hitting a record Shs1.6 trillion before interest to members and taxes with the fund’s total Assets Under Management (AUM) hitting a record Shs9.98 Trillion as at June 30, 2018, a 26 per cent increase from Shs7.92 Trillion the previous Financial Year.


The 15 performance interest rate is attributed to the Fund’s improved performance on all financial and investment indicators, arising out of strategic exploitation of the investment environment within the region, despite modest growth in the economy over the same period.

The Fund’s performance shows total member contributions increased by 14 performance to Shs1.05 trillion in 2017/2018 compared to Shs917 billion in the previous Financial Year, the most ever collected by the Fund in a single year and total Income increased by 77 percent to Shs1.6 Trillion in 2018 from Shs912 Billion in 2017.

Member contributions also grew by 14 percent to Shs1.05 Trillion in 2018 from Shs917 Billion in 2017 and benefits paid out to qualifying members increased by 29 performance to Shs360 Billion in 2018 from Shs278 Billion in 2017.

“These milestones can be attributed to a steady rise in compliance levels now at 81 percent as more members continue to trust us with their money. There was also a drive towards innovations that saw us introduce new products like the Voluntary savers scheme which attracted even more members,” said Byarugaba, Managing Director.

Summary of the Fund’s 2017/2018 Performance

• The Assets Under Management (AUM) increased by 26 per cent from Shs7.92 Trillion in 2017 to Shs9.98 Trillion in 2018

• Total Income increased by 77 performance to Shs1.6 Trillion in 2018 from Shs912 Billion in 2017

• Member contributions grew by 14 performance to Shs1.05 Trillion in 2018 from Shs917 Billion in 2017

• Benefits paid out to qualifying members increased by 29 performance to Shs360 Billion in 2018 from Shs278 Billion in 2017

• Compliance Level rose to 81 performance in 2018 from 80 performance in 2017 leading to improved contributions

• Cost of Administration stayed flat at about 1.3 performance

• Cost to income ratio declined by 1 performance to 12.6 performance in 2018 from to 13.4 performance in 2017

The Fund has consistently paid a real and competitive return to its members over the last 6 years:

Year NSSF Interest

2012 10.00 per cent

2013 11.23 per cent

2014 11.50 per cent

2015 13.00 per cent

2016 12.30 per cent

2017 11.23 per cent

2018 15 per cent