URBRA introduces risk-based supervision to lower high operation cost

To avoid the misuse of members’ money in the several retirement benefits schemes, Uganda Retirement Benefits Regulatory Authority (URBRA) has introduced risk-based supervision for the retirement benefits schemes with the view of bringing down high operational costs to realize value for money of their members.
The new move by URBRA undertakes review of fees payable for managing fixed income instruments and underperforming fund managers, as well as promotion of industry-wide consolidation of schemes to enhance performance.
This regulatory and supervisory development by URBRA comes at a time when some schemes' operational costs are extremely high resulting in members' loss of money in form of low interest declarations.   
URBRA revealed in their annual retirement benefits sector performance 2020 that the total operational expenditure increased to Shs180 billion in 2020, registering a 9.1 per cent growth in Sector Operational Expenditure as compared to Shs165 billion in 2019, mainly due increments in costs relating to staff, consultancies and provisions.
Currently there are 68 retirement benefit schemes that have been licensed by URBRA.
Speaking to during the release of the annual retirement benefits sector performance for 2020, on Thursday, the chief executive officer of Uganda Retirement Benefits Regulatory Authority, Mr Martin Nsubuga, said: “We have observed that costs are one of the most important determinants of the long-run efficiency.”
“Our projections show that, if the sector continues to run at an annual cost equivalent to 1.2 per cent of assets with an expected return gross costs of 9 per cent savers will lose about 40 per cent of their assets over an investment horizon of 35 years,” he further explained.
Mr Nsubuga said this investment horizon is typically the time a worker will participate in a plan contributing and accumulating assets.
He revealed that URBRA is putting emphasis on reducing the sector’s operational expenditure and transparency of scheme operating costs to permit value for money comparison, under take promotion of industry wide-consolidation of schemes.
On the levies that URBRA is administering, Mr Nsubuga said levies and license fees collected by the authority are justified regulatory and supervisory principles of any authority world over. He said statutory fees account for 0.03 of the total asset operational expenditure, spelling out that these levies include 0.0005 and 0.00025 of total asset value of mandatory and voluntary schemes respectively.
He further pointed out that funds collected are remitted to the Uganda Consolidated Fund (UCF) and allocations to the authority are through appropriation by Parliament to support effective execution of its statutory functions.
“In the period under review our supervisory actions led to the recovery of Shs8.8 billion compared to Shs6.7 billion in 2018/19 that comprised of misappropriated funds and under-remitted contributions. Funds recovered were credited to the affected scheme account. I would like to therefore reiterate our resolve to hold all persons and entities who were supervised accountable for their actions and decisions,” he said.            
The annual sector report reveals that during 2020, the sector delivered a solid performance in both its operational and financial results despite the Covid-19 pandemic and related restrictions on economic activity.
Total assets of the Sector increased by 16.4 per cent during the year 2020 from Shs13.2 trillion in 2019 to Shs15.4 trillion, accounting for 11.1% of the Gross Domestic Product compared to 10.3 % in 2019.
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