the role of the capital markets authority in retirement …
TRANSCRIPT
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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Email : [email protected] : www.enwealth.co.ug
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Email:[email protected]
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