East African Community partner states are working on guidelines that will allow employees from the formal sector to transfer their pension contributions and benefits to other schemes across the region.
Countries have completed and adopted a feasibility study on the portability of pension contributions and benefits.
They are seeking to promote the free movement of labour in line with the Common Market Protocol, and boost pension coverage in the region, which is currently estimated at less than 10 per cent of the total labour force.
The six EAC member states are also working to ensure that fund managers can invest retirees’ money in any country in the region.
The countries have allocated a budget of $670,000 for research, consultancy and changing relevant laws.
The transferability of pension benefits has only been realised between Rwanda and Burundi, largely due to the reciprocal arrangements the two countries have between their mandatory pension schemes.
According to the EAC Retirement Benefits Policy which was adopted by the EAC Council of Ministers of Finance in May last year, each partner state is required to put in place a legal and regulatory framework to allow portability of accrued pension benefits across the region.
The policy document dated May 2017 notes that EAC member states should agree on common standards for legislation and regulation.
The policy also provides that member countries allow pension funds to be invested outside their jurisdictions.
Currently, in Burundi, fund mangers cannot invest retirees money outside the country.
According to Kenya’s Ministry of EAC Affairs, Tanzania has liberalised its capital accounts allow investments across the region but still imposes restrictions in certain areas.
In Kenya the law provides for investment of pension funds within the EAC, and there are treated as local investments.
In Rwanda, the issue of investing pension funds across the borders still remains unresolved.
The EAC member states have varied pension systems mainly dominated by mandatory schemes.
In Tanzania the government has merged its seven social security funds into two schemes — the Public Service Social Security Fund and the National Social Security Fund — with the aim of boosting service delivery after signing into law the Public Service Social Security Act, 2018 in June this year.
In Uganda, liberalisation of the country’s pension sector has been in the pipeline for more than 10 years.
In 2011 the government tabled a Retirement Benefits Sector Liberalisation Bill in Parliament.
But early this year Kampala dropped the plan to liberalise its pension industry arguing the move would give foreign firms an undue advantage over their local counterparts.
In Rwanda, the monopoly enjoyed by the Rwanda Social Security Board came to an end after the government gazetted a new law allowing registration of voluntary pension schemes and licensing of pension scheme service providers.
In June this year the Rwandan pension sector welcomed the first private pension scheme called “Ituze” — the brainchild of the Liaison Group, in partnership with KCB Bank Rwanda.
In Kenya the New NSSF Act which was assented to by President Uhuru Kenyatta on December 24, 2013 was to be implemented on May 31, 2014. But numerous legal issues have held it back.
The New NSSF Act transforms the current NSSF from a provident fund to a pension and provident fund.
The pension fund covers individuals 18-years-old or above in the formal sector and the provident fund will be for self-employed persons who voluntarily register to be members of the fund.