Uganda, like many African nations, faces the challenge of a low pension penetration rate. According to the Uganda Retirement Benefits Regulatory Authority, one of the key issues contributing to this is that the labor market is largely informal. The regulator reckons that with this significant portion of the working population not covered by any form of retirement savings, it leaves many financially and socially vulnerable in their retirement years.
Significant growth in the pensions sector assets has been seen in recent years. The last Annual Sector Performance Report issued by URBRA shows sector assets grew from UGX17.8 trillion in FY 2020/21 to UGX19.9 trillion, accounting for 12.2% of Uganda’s Gross Domestic Product (GDP). However, only 2.95 million employees out of the 15 million working population were enrolled in a retirement benefits fund.
Increasing the number of people enrolled in pension plans is therefore crucial for ensuring a more secure financial future for Ugandan citizens. Technology offers a powerful solution to bridge this gap and bring the population closer to financial security in their old age.
First, there is a need to deploy digital platforms for pension enrollment. One of the key barriers to pension penetration is the lack of access to formal financial services. Many individuals, especially those in rural areas, do not have easy access to pension schemes. Digital platforms can help overcome this barrier by enabling individuals to enroll in pension schemes using their mobile phones. These platforms can also facilitate contributions and provide information about pension benefits, making it easier for people to participate in pension schemes.
This goes hand in hand with integrating mobile money. We have a high mobile phone penetration rate, with many people using mobile money for transactions. Integrating pension schemes with mobile money platforms can make it easier for people to make contributions to their pension accounts which can also reduce the cost of pension schemes administration, thus ensuring sustainability in the long run.Many Ugandans lack awareness of the benefits of pensions and may struggle with long-term financial planning. Pension sector service providers and regulatory bodies can also utilize technology to extend financial literacy and education about pensions. Mobile apps and online platforms can provide information about the importance of saving for retirement, how pensions
work, and the benefits of participating in pension schemes. This can help raise awareness and encourage more people to enroll in Individual pension schemes even where their employers do not have a scheme.
In this, data analytics for targeted outreach can be used to identify potential participants for pension schemes. By analyzing demographic and financial data, pension providers can target their outreach efforts more effectively, reaching out to those who are most likely to benefit from enrolling in a pension scheme. This can help increase the uptake of pension schemes and deepen pension penetration in Uganda.
The regulator notes that the challenge of scheme operation costs and transparency persists in the sector. Utilization of technology such as biometric identification such as fingerprint or facial recognition technology can provide a reliable way to verify the identity of contributors, reducing the risk of fraud and ensuring that contributions are credited to the correct individuals.
A secure working population is less likely to rely on government support during retirement, easing the strain on social security systems. Utilizing technology can be the pathway to simplifying enrollment processes and contributions for individuals. On the other hand, for pension providers, it is a way to increase access to information, reduce administrative costs, and ensure transparency in funds management which builds trust and confidence among pension scheme members.
Mr. Bongomin is the Manager Business Development & Operations, Enwealth Financial Services
Limited. Email: bbongomin@enwealth.co.ug