As Uganda and other African nations confront the realities of aging populations and widespread informal employment, the pension sector finds itself at a pivotal moment.
With fewer than 20 percent of older persons in Sub-Saharan Africa receiving any form of pension, the urgency for reform is clear.
The solution may lie in a powerful but underutilised partner: the insurance industry. Across Sub-Saharan Africa, pension coverage remains alarmingly low.
According to the International Labour Organisation, only 19.8 percent of persons above retirement age receive a pension, compared to the global average of 77.5 percent.
In Uganda, the situation is similarly dire. Of the 17.2 million-strong labour force, only 1.97 million are covered by any pension scheme-just 12.6 percent of the active workforce.
This gap is largely due to the dominance of informal employment, which accounts for over 80 percent of Uganda’s workforce. These workers-boda boda riders, market vendors, domestic workers, and artisans are excluded from formal pension arrangements, leaving them vulnerable to poverty in old age.
The implications are profound.
With life expectancy in Uganda rising from 47 to 63 years the past two decades, and retirement years stretching from under 10 to nearly 17 years, lack of pension savings poses a growing fiscal and social risk.
As the population ages, the burden on families and the state increases, unless sustainable retirement solutions are put in place.
The current pension system is fragmented. Uganda has multiple schemes, including the National Social Security Fund (NSSF), the Public Service Pension Scheme, and a few private and occupational schemes.
However, these are largely limited to formal sector employees, leaving the vast majority of Ugandans without any form of retirement income.
Insurance companies are uniquely positioned to strengthen and expand pension systems. Their role can be transformative in several key areas such as mobilising long-term capital. Africa’s pension and insurance sectors collectively manage over $777 billion in assets. Yet, much of this capital remains locked in short-term, low-risk instruments such as government securities.
Redirecting even a portion toward infrastructure, housing, and industrial development could significantly boost economic growth. In Uganda where infrastructure financing needs are estimated at over $1.4 billion annually, tapping into these domestic resources could reduce reliance on foreign aid and borrowing.
Insurance companies, with their long-term investment horizon, are natural partners in financing roads, energy projects, and affordable housing. Countries like Ghana and Nigeria have already begun exploring frameworks that allow pension and insurance funds to invest in infrastructure through public-private partnerships. U
ganda can follow suit by creating investment vehicles that meet both regulatory requirements and development needs.
Secondly, insurance firms can develop hybrid products that combine life insurance with retirement savings, offering protection and income security. These products can be tailored to the needs of informal workers, who often have irregular incomes and limited financial literacy. Kenya’s Mbao pension plan is a successful example.
It allows informal workers to contribute as little as Kshs20 (Shs600) per day via mobile money. Rwanda’s Ejo-Heza long-term savings scheme offers government top-ups for low-income savers, incentivising participation. Uganda has begun similar efforts.
However, these remain underutilised due to limited awareness, incentives and weak distribution channels. One of the greatest challenges in retirement planning is ensuring that individuals do not outlive their savings.
Lastly, low levels of financial literacy and mistrust in formal institutions hinder pension uptake and this is something that requires building trust and financial literacy. Many Ugandans are unaware of the benefits of saving for retirement or fear losing their money in poorly managed schemes.
Insurance companies can lead public education campaigns to promote a culture of savings and build confidence in financial systems. This is vital in Uganda, where 50 percent of eligible NSSF contributors are non-compliant, limiting fund growth and sustainability. Community outreach, radio programs, and partnerships with religious and cultural leaders can help demystify pensions and insurance. Uganda is at a strategic inflection point.
The public service pension fund Bill 2024 proposes a shift from a non-contributory to a contributory scheme, with public servants contributing five percent of their salary, topped up by 10 percent from the employer.
This reform aligns with the broader goals of the National Development Plan IV, which emphasizes inclusive growth and social protection.