Accessing contributions from Uganda’s National Social Security Fund before retirement age has disrupted activities of the pension fund.

The pension fund’s books show lower interest rates were declared as NSSF allocated a chunk of its revenues to settle payments to savers.

This week, NSSF said savers will earn 9.65 percent on their savings for 2021/2022, a drop from 12.15 percent in the previous year.

Following amendments to the NSSF Act and supporting regulations, access to mid-term benefits became a reality earlier this year for several contributors caught between hostile economic conditions and limited financial options triggered by tough, Covid-19 lockdown measures.

The amendments meant that contributors above 45 and who have consistently saved money with the fund for more than 10 years are eligible for a single 20 percent payout against their savings. NSSF said some 22,258 mid-term benefits applications were received by the fund, to Ush459 billion ($118 million). NSSF had projected to pay out Ush800 billion ($206 million).

So far, Ush440 billion ($113.5 million) has been paid out to mid-term access beneficiaries. This means that NSSF used some 80 percent of total monthly collections in 2021/22 to settle mid-term benefits.

And the fund blamed the drop on economic challenges associated with post- Covid-19 pandemic recovery and other global crises hurting the Ugandan economy. This interest rate offer amounts to a total payout of Ush1.38 trillion ($356 million) available to National Social Security Fund (NSSF) contributors for the period 2021/22. In 2020/21, it was Ush1.2 trillion ($309.6 million).

Richard Byarugaba, managing director at NSSF Uganda, said general low economic growth in Uganda, in spite of full reopening of the economy in January this year meant most contributors also reduced their savings or stopped doing so, due to job losses or pay cuts. “Surging inflation has fed into our suppliers and contractors’ budgets and this has triggered additional costs in our procurement operations,” he added at an investor briefing on Wednesday in Kampala.

“The extra costs incurred will be absorbed by the fund in the current financial year in line with government procurement rules that allow agencies to vary supply contracts by less than 25 percent of their total cost after 12 months depending on changing market circumstances.”

There was, however, a general decline in NSSF’s traditional hunting grounds: earnings on Treasury bills and bonds. Yields earned on some treasury bonds dropped to about 12 percent while yields recorded on treasury bills fell to a range of between 8 and 10 percent during the same period, according to financial market reports. Market analysts say NSSF investment habits have less risks, however.