UGANDA - General outlays will drive future liabilities of the Ugandan Public Service Pensions Fund (PSPF) beyond sustainability if the fund is not rebalanced.
This was according to social protection specialists Tatyana Bogomolova and Montserrat Pallares-Miralles, and senior financial economist Gregorio Impavido all of the World Bank.
The three outlined the need for a reform of the PSPF and called for a hybrid (two-pillar) reform option. This would be composed of a small defined benefit scheme and a complementary defined contribution scheme.
The authors questioned the pure DC option discussed by policymakers in the country, and said hybrid and pure defined contribution reforms would have the same impact on reducing pension expenditure.
“In addition, everything else being equal, the hybrid reform is likely to produce higher average replacement rates due to the redistributive and pooling properties of the small defined benefit pillar,” the three specialists said.
In both reforms, however the new scheme will include a 15% contribution rate - 5% paid by employees and 10% paid by the employer. The rate was said to have been calculated in a way to “maximise the fiscal impact of the reforms while providing adequate benefits in the vast majority of the scenarios presented and at the same time be sustainable in the long run.”
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