Africa Needs to Reform Retirement Benefits to Protect Retirees, Says CMA CEO

CEO of Uganda's Capital Markets Authority Calls for Reform of Retirement Benefits

CMA Kalegira
Keith Kalyegira, CEO of the Capital Markets Authority Uganda
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Keith Kalyegira, CEO of the Capital Markets Authority Uganda (CMA), has called for government intervention to reform the payment of retirement benefits in Africa. He argues that the widespread practice of paying out benefits in lump sums is unsustainable and leads to financial instability for retirees.

In a speech at the 2023 CEO’s, CFO’s, and CS’s Investment Forum, Kalyegira cited statistics that indicate 97% of retirees who receive lump-sum payments misuse the funds rather than making prudent investments. He compared this to a 2020 report by the Consumer Financial Protection Bureau, which found that retirees with pension income, paid regularly, were far more likely to remain financially stable than those who had opted for a lump-sum payout.

Kalyegira proposed a reform that restricts the lump-sum payment to one-third of the savings, with the remaining two-thirds disbursed as monthly payments, continuing until the recipient’s demise. He argued that this would help to protect retirees from themselves and ensure their financial well-being in the long term.

Uganda is currently the only African country that pays lump-sum retirement savings. Kalyegira has already engaged the National Social Security Fund (NSSF) to explore the possibility of banning such payments after the age of 55.

The debate surrounding lump-sum versus regular pension payments is multifaceted. Some individuals may prefer upfront capital for various reasons, but Kalyegira emphasizes the importance of adopting a long-term perspective when managing retirement funds. He also recommends that investors seek advice from a financial advisor to determine the most suitable strategy for their individual needs.

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Paul Bwiso, CEO of Uganda Securities Exchange, echoed Kalyegira’s sentiment, stressing the need for financial education to empower investors to make informed decisions regarding their retirement benefits.

As investors grapple with the challenges posed by an ever-evolving financial landscape, it is clear that adaptability and informed decision-making are vital components of ensuring long-term financial resilience and stability.

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