Retired people carried home Rwf9.9 billion between June 2012 and June this year – the largest payment ever received by senior citizens from their retirement savings.

Figures released by the central bank, the regulator of all financial institutions in the country, show 18 per cent increase from Rwf8.4 billion in benefits paid to retired workers by the sector dominated by the public social security provider, the Rwanda Social Security Board (RSSB) by end of June 2012.

There are 53 other private pension schemes managed by insurance companies, but the regulator has been pushing for the enactment of a new law to open the sector to private operators without much success. After failing to have a new pension law passed by the outgoing Parliament, the central bank now says it will fast-tract parliamentary approval of the bill that promises more benefits to savers, in the next parliament. Election of members of the Lower Chamber of the House, the deputies, takes place on September 26.

The draft legislation, that has been before the outgoing deputies for the greater part of their five-year terms, is also intended to provide choices to savers as one way of mobilising more savings for national development.

Like in many developing coun¬tries, the saving culture in Rwan¬da is low at 4.2 per cent of GDP – one of the lowest in sub-Saharan Africa.

Nonetheless, the pension sector is showing signs of improvement having grown its assets by 20 per cent during the twelve months ending June 2013. Monthly contributions by members have also gone up by 20 per cent, according to figures seen by this writer.

The Governor National Bank of Rwanda, John Rwangombwa says more Rwandans will be encouraged to save if the draft bill is passed into law. "The sector stands to develop further with the enactment of the draft law on pension that is currently before parliament,” he said.

The draft law, to govern the func¬tioning and supervision of man¬datory and voluntary pension schemes, seeks to introduce voluntary savings such as occu¬pational pension scheme and per-sonal retirement saving accounts.

The new law also proposes to cap insurable earnings to about Rwf400,000 and introduce a new platform called a provident fund – a form of savings account into which a member’s contributions above the insured earnings are kept.

By limiting insurable earnings (the contributions that accrue basic pension), policymakers want to ensure sustainability of the RSSB after a study by actuaries identified loopholes in the current system that would render the business unsustainable beyond 2030.

The current arrangement allows insurable earnings beyond 100 per cent of gross salary. It is feared that with the contribution rate of 6 per cent (the lowest in Africa) the system exposes the fund to the risk of collapse because there will be many people seeking lump sum retirement packages against lower savings.

In a liberalised setup, work¬ers will be free to save with other schemes (for example personal re¬tirement saving accounts) operated by private operators such as commer¬cial banks, insurance companies, collective investment schemes and private pension funds alongside the mandatory scheme with RSSB. The private operators must be li¬censed by the regulator, BNR.

The new law gives savers flexi¬bility to move their savings to any private operator which they think guarantees better returns.

"With the exception of manda¬tory pension schemes, an account¬holder may transfer assets from an account he or she has established to any other pension scheme in which he or she is a participant,” the draft bill states.

According to the draft law, sav¬ings by individuals kept in the provident fund under the man-datory scheme can be accessed by members as they wish to cater for pre-retirement benefits such as buying/building houses or pay¬ing school fees.

The new law also proposes a strict regulatory framework to safeguard workers’ savings in a liberalised setup.

"We want to develop a compre¬hensive system with more ben¬efits to members and at the same time meet national needs. A sys¬tem that increases national sav¬ings; because when savings in-crease, investment takes place and increased investment leads to economic development,” Emman¬uel Kayitare, the RSSB director of pension and pre-retirement bene¬fits, told the media last year.