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Finance Minister announces 11.5% interest rate for savers

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NSSF interest rate

The National Social Security Fund (NSSF) will pay its members an interest rate of 11.5% for the Financial Year 2013/14. This is about Shs366 billion in monetary terms, the Minister of State (Privatisation), Ministry of Finance, Planning and Economic Development Hon. Aston Kajara announced at a press conference held at the NSSF Workers House in Kampala today.

The new rate marks an increase from 11.23% (or Ushs 278 billion) the Fund paid last year. It also means that members of the Fund will earn Ushs 88 billion more this year, in line with the Fund’s commitment to pay a competitive return to its members. The Fund currently has over 1.45 million registered members of whom 458,000 members are active.

Kajara explained that the new interest rate means that for every shs1 million a member held with the Fund at the end of June, he or she will receive Shs115, 000 extra on his or her account.

“I would like commend NSSF for living up to its promise of delivering competitive returns to its members. The interest rate I have declared is above the 9.23% 10-year average rate of inflation, meaning that NSSF is growing the value of its members’ savings. The rate will be calculated and credited on the balance on the members’ accounts as at 1st July 2013,” he said.

He attributed the increase in member’s interest rate to the Fund’s strategic exploitation of the investment environment, despite the modest growth in the economy over the same period.

Commenting on NSSF’s performance for the financial year 2013/14, the Acting Managing Director Geraldine Ssali Busuulwa said the Fund size increased by 26% to Shs 4.38 trillion, from Shs3.5 trillion in June 2013.

She said the impressive growth is due to the continued growth in both member contributions and investment income. In 2013/14, member contributions grew to Shs638.2 billion up from shs558 billion the previous year, and total income also increased by 14.1% to Shs 478.9 billion.

“Overall, our performance has improved because of our aggressive but prudent investment strategy, cost management strategies that kept our cost income ratio at 15%, better than industry average, and expense ratio at 1.5%, better that most Funds of similar size. Our focus remains to provide a reasonable return to members, without compromising the safety of their savings,” Ssali added.

The Proposed 11.5% interest rate is above the average 11.2% BoU rates for the 364-Day Treasury Bill which is a good benchmark for the price of money held for a year.

It also above the average 11.3% interest rate offered on the 7-12 months fixed deposits by commercial banks. It is also way higher than the average 3.3% interest rate offered by commercial banks on savings deposits.

NSSF Board Chairman Ivan Kyayonka said that although the limited investment opportunities presented a challenge, the Fund was able to register significant progress and attain commendable results.

He added that looking forward; the Fund will focus more on high yielding longer term maturities, mainly because interest rates are continuing to decline across all maturities as the economy recovers from the soaring inflation of 2 years ago.

“We will also continue to seek for opportunities and undertake strategic investments in equities as the stock market recovery continues. The envisaged liberalisation of the sector presents the Fund with an opportunity for flexibility in response to market dynamism. The URBRA investment guidelines already allow the Fund to invest in any of the East African countries. This provides an opportunity for diversification that we shall seek to exploit”.

“The Fund is strong, stable and secure. The Board is committed to fulfilling our cardinal responsibility, which is to ensure that there is a secure, profitable and effective financial management of the Fund for the benefit of the workers in particular and the country at large. We shall not be diverted from this mandate,” he added.

Summary of NSSF Performance for Financial Year 2013/2014
  • Assets grew from by 26% from UGX 3.5 trillion in Financial Year 2012/2013 to UGX 4.4 trillion in Financial Year 2013/14.
  • Contributions grew by 14% from UGX558 billion in Financial Year 2012/2013 to UGX. 638.2 billion in 2013/2014, powered by compliance level of 77%. The average rate of monthly contributions collected is UGX 53 billion, which some months registering as high as UGX 60 Billion collected.
  • Amount of interest credited on members’ accounts has increased by 33% from UGX 278 billion in Financial Year 2012/2013 to UGX 366 billion in the Financial Year 2013/2014.
  • NSSF 2013 rate of 11.5% is above the 10 year inflation rate of 9.23% plus 2%.
  • Benefits paid to members grew by 18.5% from UGX 140 billion in the Financial Year 2012/2013 to UGX 165.9 Billion Financial Year 2013/14.
  • The speed at which the Fund pays a claim to a retiring member or any other claimants under the NSSF Act is now as low as 10 days for Financial Year 2013/14. There is a target to reach 5 days going forward.
  • The cost to income ratio is now at 15%, better than 55% of the banking industry average
  • Cost of administration is at 1.5% better than most global funds of similar size
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