the role of the capital markets authority in retirement …

THE ROLE OF THE CAPITAL MARKETS AUTHORITY INRETIREMENT PLANNING

BYDICKSON SSEMBUYA

11/18/20191

Outline

i. Introductionii. Key Achievementsiii. Challenges in Uganda’s

Pension Sectoriv. Growing Uganda’s

pension sector

Introduction:Context

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Pension &Provident

Funds

InsuranceAssurance

Reinsurance

EquityDebt

Unit Trusts

Structure of Uganda’s Financial Market

CENTRAL BANK (Ugx 24.37 trillion M365% of this being domestic credit)

MonetaryPolicy MGT,

ForeignExchange

MGT

CAPITALMARKETS

AUTHORITY(1.3 trillion free

float)

INSURANCEREGULATORYAUTHORITY(Ugx 856 b)

UGANDARETIREMENT

BENEFITSREGULATORY

AUTHORITY (Ugx14.1 trillion incl.

NSSF)+ Commercial Banks Trade Finance Asset & Lease

Finance Development

Finance+ Development Banks+ Credit Institutions+ Micro-Deposit Taking

Institutions (MDIs)+ Forex Bureaus

+ Commercial Banks Trade Finance Asset & Lease

Finance Development

Finance+ Development Banks+ Credit Institutions+ Micro-Deposit Taking

Institutions (MDIs)+ Forex Bureaus

+ Securities Exchange(2)

+ Broker/Dealers (7)+ Investment Advisors

(9)+ Fund Managers (8)+ Unit Trust Managers

(4)

+ Securities Exchange(2)

+ Broker/Dealers (7)+ Investment Advisors

(9)+ Fund Managers (8)+ Unit Trust Managers

(4)

+ InsuranceCompanies

+ Insurance Brokers+ Loss Assessors,

Adjustors &Surveyors

+ InsuranceCompanies

+ Insurance Brokers+ Loss Assessors,

Adjustors &Surveyors

+ Fund Managers+ Trustees+ Custodians+ Administrators

+ Fund Managers+ Trustees+ Custodians+ Administrators

Private Equity Funds, Investment Clubs, Contractual & Voluntary SavingsMicro-Finance Institutions/Savings & Credit Co-operative Organizations e.t.c

Private Equity Funds, Investment Clubs, Contractual & Voluntary SavingsMicro-Finance Institutions/Savings & Credit Co-operative Organizations e.t.c

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Capital Markets Authority –Who are we?

• CMA is a semi autonomous body established in 1996,by the CMA Act, Cap 84.

• CMA is responsible for promoting, developing andregulating the capital markets industry in Uganda,with the overall objectives of investor protectionand market efficiency.

• It is notable that the nexus between capital marketsand the pension sector is brought about by:

a. Pension savings being invested in capital marketsproducts

b. Managers of funds being licensed by both URBRAand CMA

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Capital Markets and thePension Sector

PensionschemesPensionschemes

FundManagers

Guided by anIPS

FundManagers

Guided by anIPS

BrokersBrokers

Collectiveinvestment

schemes

Collectiveinvestment

schemes

• REITs• Shares• Corporate

bonds

• REITs• Shares• Corporate

bonds

CIS FundsCIS Funds

Capital markets industryRegulated by CMA

Capital markets industryRegulated by CMA

DiversificationInflationInvestment optionsRisk and return

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The Role of Capital MarketsAuthority in Protecting

Pension SavingsCMA plays a role in protecting and growing pension savings through:

a. Providing a regulatory framework that ensure uniform treatment forall players and a level playing field

b. Licensing players such as Fund Managers and Brokersc. Ensuring transparency and disclosure are fulfilled by those who issue

investable securitiesd. Ensuring better corporate governance practices by issuers of

investable securitiese. Capacity building for players to encourage innovation and improve

on the quality of advise

KeyAchievements

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Achievements: ProductsProduct NumberListed Equities/ Shares 17Corporate bonds 15Collective Investment SchemeFunds

14

Real Estate Investment Trusts Regulations enactedTreasury Bonds 36

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Equities/Shares

BritishAmericanTobaccoUganda

Bank ofBarodaUganda

DevelopmentFinance

Company ofUganda Ltd

New VisionPrinting andPublishing

Company LtdStanbicUgandaHoldingsLimited

Uganda ClaysLimited

NationalInsurance

Corporation

UMEMELIMITED

Cipla QualityChemicalsIndustriesLimited

A share is a unit of ownership in a company. Essentially a partownership of a company. If you own shares of a company, then you area part owner of that company. A total of 9 domestic companies haveshares listed at the Uganda Securities Exchange.

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Corporate Bonds IssuedThese are investment products issued by companies that wish toborrow a stated amount of money from the public, for a fixed period oftime at a stated rate of interest.

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Collective Investment Schemes

UAP Old MutualFinancial

Services UgandaLimited

ICEA AssetManagement

Uganda Limited

XENOInvestment

ManagementLimited

Britam AssetManagersCompany

Uganda Limited

STANLIB UgandaLimited

This is an investment product that allows many different investors to pooltheir money together, generating a large pool of funds managed byprofessional investment managers.

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Advantages and Disadvantages ofInvesting in CIS

Disadvantages

Loss of ControlFees / Charges

Advantages

Risk Diversification Professional

Management Access to a wider

variety of investments Affordability Tax benefit Liquidity Compounding benefits

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AUM by CIS Managers

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AchievementsIndicatorNumber of Fund Managers 8Assets Under Management by Fund Managers Ugx 2.96 trillion

Number of CIS Managers 5Assets Under Management by CIS Managers Ugx 173.52 billion

Number of brokers 7Regulatory framework • 3 Acts (CMA, CIS

and SCD)• 15 Regulations• 6 Guidelines

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Assets under Management in thePension Sector

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AUM by CMA licensed Fund Managers

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Challenges inUganda’s Pension

Sector

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Challenges facing Uganda’sPension Sector

Strides have been made in growing Uganda’s pension sector. However, key

challenges include:

a. Single dominant player-NSSF which has virtually no competition

b. Taxes-a taxation system that doesn’t favour the pension sector….TTE

c. Limited supply of financial securities

d. Slow pace of reforming the sector – reforms have been on-going for more than

a decade now with no clear timelines for conclusion

e. Low coverage – the coverage is currently estimated at 11.4% of the total labour

force

f. Knowledge gaps – the need to enhance the knowledge of key players such as

trustees to build their capacity in playing their fiduciary role

g. A non-contributory government pension scheme – this creates fiscal

unsustainability and creates uncertainty for beneficiaries

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GrowingUganda’s

Pension Sector

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Recommendations

• Building the capacity of key players such as

trustees CFA Institutes investments

fundamentals course, CISI courses

• Diversification through alternative

investments – private equity, real estate

• IPS – ensuring constant review to capture

changes in circumstances, investment

environment etc

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RecommendationsPush towards reforming the pension sector. Key areas for reform:

a. Introducing private sector schemes to compete in the pension space. Thiscould be mandatory or voluntary

b. Reforming the public sector pension scheme to transform it into a definedcontribution scheme – this is in progress and will provide enhancedfinancial security for Ugandan civil servants while minimizing fiscalunsustainability

c. Portability of contributions to occupational schemes, where on change ofjobs, only the employee’s contribution can be withdrawn with theemployer’s contribution being portable

d. Employees should be given the option to reduce the proportion of incomethat they save with NSSF in order to free up additional funds to be savedwith another contractual saving fund

e. Upon retirement, employees should receive no more than a third of theirfinal savings as a lump-sum and the other two thirds through monthlypension payments. This will go a long way in dealing with old age poverty

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Tel : +256 702 736 237, +256786 891 300

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Email:info@cmauganda.co.ug

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