Pooled individual savings managed by Stanlib Uganda’s retail umbrella pension scheme registered a 15.05 per cent return on investment after the first 10 months of operation.
This achievement was supported by high returns from investments made in debt securities despite low growth of innovative pension products.
Umbrella pension products refer to pension schemes that mobilise savings from a pool of individuals or companies that are short of resources required to maintain independent retirement benefits schemes. These products are mainly targeted at specific sectors and communities with relatively small incomes.
Stanlib Uganda, a leading fund manager, currently operates retail and corporate umbrella pension schemes alongside management of private pension schemes belonging to large corporate clients.
The retail umbrella pension scheme was launched last year and commenced operations in February 2014. Financial results for the period ending December 2014 show returns on members’ funds stood at 15.05 per cent against annual averaged inflation of 3.8 per cent.
READ: Stanlib Uganda rolls out umbrella pension schemes
In comparison, return on members’ funds stood at 11.11 per cent after six months of operation. Relatively high interest rates earned on corporate bonds and government securities largely steered this performance amid solid returns from fixed income assets.
These assets include funds invested in the $30 million Kakira Ltd corporate bond that bears a 13 per cent fixed interest rate over a seven-year duration and a considerable portfolio of Treasury bills and bonds.
Yields earned on the 364-day Treasury bill increased from an average of 10 per cent in early February 2014 to around 12 per cent at the beginning of this year, financial trading reports show.
Management costs accounted for three per cent of assets compared with an industry average estimated at 0.5 per cent-0.8 per cent.
The scheme’s assets were valued at Us53 million ($106,414) at the end of December 2014, with corporate bonds accounting for 69 per cent, equivalent to Ush244 million ($73,633).
Treasury bills and bonds accounted for 29 per cent of assets equivalent to Ush103 million ($31,282). Cash and cash equivalents represented roughly one per cent of assets, valued at Ush4 million ($1,499) in the period under review.
No investments were made in equities, fixed deposits or property — a situation that reflects highly conservative risk attitudes held by the fund manager and serious concerns over financial risk and volume of funds available for deployment.
Savers are required to contribute at least Ush100,000 ($30) per month to the umbrella scheme while the “lock in” period is set at a minimum two years to sustain membership before members can choose to withdraw their savings based on personal circumstances.
The scheme membership grew to 406 at the end of last year, with contributors mainly drawn from the formal sector.