Blog series 1 ‘when birthdays become scary events’ ended with the question: Is retirement viable for you?
We should extend this inquiry a little further: If the majority around you aren’t feasible in retirement, does that undermine your retirement viability, however secure?
Well, this blog poses a retirement planning dilemma, for those in formal and informal employment. We explore possible functional pathways to retirement. Perhaps, in the latter, we may have the solution that keeps the wolf from the door on your 40+ birthday
Retirement experts advise you to start saving towards your retirement in your early twenties. They also recommend that you save 10% – 15% of your income for retirement. This simple act, employed or not, saves unnecessary anxiety especially as you get closer to your retirement age.
Free counsel: especially for those of you in their 20s; if you want to enjoy your birthdays in the 40s+, start saving 10-15% or more of your income now.
In our 20s and 30s, we assume that time is on our side – we may not keep enough but still enjoy our birthdays. After all, there is every reason to postpone saving for retirement; for example, having to buy the right wardrobe to keep up with the Joneses, credit card bills to pay every month, a mortgage, car loan, expensive holidays, etc
Fast forward to your 40s and retirement and how viable your retirement plan is, are high up on your to-do list. For many, starting to save in the 40s is not a bad thing – better late than never. Experts tell us that someone aged 40 would need approximately 50% of their current income saved, to have the same standard of life in retirement. Well, can you imagine surviving on 50% of your current income, unless you have other income sources
We are Ugandans – therefore, it’s befitting to discuss retirement planning from the Ugandan context. However, the Uganda retirement plan narrative applies to many East Africa countries. The latter is not surprising since the Master created State systems in East Africa.
The soon to be liberalised pensions sector in Uganda, is monopolised by the government-run National Social Security Fund (NSSF). Those with savings in the NSSF scheme have done well with interest payments of 12.3% (2015/16).
However, NSSF runs the Western pension model – contribution to the plan is 15% (5% employee and 10% employer), and one can access their life savings at 55 years of age (gives you insight into how long we live in Uganda)
The inequity of the Western pension model:
Over 66% of Ugandans are employed in the agriculture sector – less than 5% of those employed in agriculture are on wage-paying jobs; it is mostly subsistence agriculture. In effect, 61% of Ugandans surviving on subsistence agriculture are not enrolled in a pension scheme. The services and industrial sectors in Uganda employ 28% and 7% of the total population – some employees in these two sectors are enrolled in the NSSF pension scheme, thanks to the enforcement of government policy. However, if not paid a living wage, many still face exposure in retirement.
Even those in formal employment do not always earn a living wage; without an official minimum wage, many Ugandans in formal employment are underpaid. It is not uncommon for salaries to rise slower than the national rate of inflation. All this is equivalent to not paying a living wage to those in formal employment; which in turn results into a quantum of NSSF pension contribution that is not enough to sustain employees when they retire.
To complicate matters further, Uganda boasts of a very generous youth definition – from 16 – 30 years. With 64% of the unemployed still youth, the nation is headed for a post NEETs generation that lacks viable retirement options.
Our very conservative estimate is that 70%+ of my Ugandan kin do not have a viable pension scheme.
Under the circumstances:
- How do Ugandans start to create a workable pension scheme?
- Can we at all?
- We surely cannot give up and hand matters over to African ‘omnipotent forces’.
- How can we turn our birthday’s into less scary events?
The government has started, we suspect, providing a small stipend to the elderly – we equate that to the state-pension of the Master. Is the latter enough? Is it sustainable?
The solution to the above enigma is two-pronged:
1. A policy matter for the government as the long term and sustainable solution
2. A medium term solution that once again brings to the fore, our African values and social-security a la African-style
The Effectiveness Lab recommends three foundational steps:
1. In the long-term, fundamental changes should be made to Uganda’s education system – emphasis on STEM and entrepreneurialism should be taken more seriously
2. In the medium-term, we need to stop the graduation of the youth NEETs to post-youth NEETs – and there are promising efforts by different nation-states in Africa. We need to learn from one another
3. In the short-term, we need to retrain the post-youth NEETs and moreover in Agriculture Science and entrepreneurialism; the reality is that currently, Uganda is still an agrarian society, and that is where Uganda’s immediate potential for productivity lies. A program to re-orient the post-youth NEETs towards Uganda’s natural-potential needs to be designed urgently. The sustainability of a such a program depends on the extent to which its designers acknowledge agrarian society education, employment, and training realities
The issue of jobs or the lack of, the resulting hopelessness for generations of Ugandans, is a result of many years of education policy ineffectiveness. What is not effective, shall always catch up with us!
African, Uganda in this instance, had social security systems that worked well.
The Orthodox East African extended family, usually a nucleus of ten plus individuals and additions from the African ‘clans’, gave certain guarantees to its members:
- A social safety net as provided for the parents by the children – there was no need for formal national social security schemes that we see today
- Sibling insurance was seamlessly organised and guaranteed within the family nucleus – if your brother or sister needed money for emergency medical treatment, it was the duty of the siblings to underwrite such
- Death in the family was managed and underwritten by the extended family – I never saw commercial funeral service providers in my country, till I was thirty years plus. One may assume that the modern funeral service provider is a blessing to the East Africa family until you ask how many can afford the service. We soon shall be getting bank loans to pay for funeral services.
- Materialism and mercantilism were unheard of – we lived as Africans, and in good and bad, we always afforded a smile and a wide one at that. The pressure to sustain cash flow to access supermarkets week in week out, as opposed to the local African ‘duuka’, has brought stress to our faces and into our lives. No longer can we get that credit facility from Isabirye’s ‘duuka’. The supermarket is a just-in-time cash-eating facility
- The East African family structure guaranteed old people’s care. Social services were seamlessly integrated into the family structure. The elderly were looked after till death and were never left alone. Old age wasn’t the burden and curse it is turning into today
- The Kindergarten was a family affair – there were simply too many of us growing in the East African villages that Early Childhood Development Education (ECDE) was seamlessly organised and integrated into the family structure. The Presidents of today may never have attended the modern kindergarten
- Food security management skills were seamlessly integrated into the family structure and passed on from generation to generation. East African families had traditional food silos, and food shortages were uncommon. We may choose to justify the food security challenge we witness today – i.e. that it is caused by climate change and not partly by the demise of the viable East Africa orthodox family structure.
How can we get ‘Africanism’ back into our life-cycle, albeit with a touch of modernity?
Should we not consider bringing back the African vibe into birthdays and ageing? Birthdays were a ‘non-phenomenon’ because Africans were guaranteed a robust safety net, that didn’t involve a percentage of savings with NSSF, banks, etc
How do we save my 4 year old niece Anaya from this debacle?