Faisal Sebaggala Market Development Officer at IRA
Enjoying a decent retirement, cushioned with regular and guaranteed income is every Retiree’s dream. After decades of sensitizing the population about the importance of saving for retirement, Ugandans are gradually starting to save by investing in different saving vehicles in the financial market. Despite this, retirement insecurity still remains a very big challenge among many Ugandans.
This is mainly because of a missing link in the equation – turning lifetime savings into lifelong retirement income. With life expectancy in Uganda steadily increasing, many Retirees face a vivid risk of outliving their savings, and thus living in poverty for extended periods.
The NSSF Midterm Access Performance Report 2023 highlights that 66.8% of beneficiaries do not seek financial advice before withdrawing their savings, which in turn continues to lead to poor investment decisions. Additionally, 60% of beneficiaries receive payouts below UGX 10 million, making retirement planning difficult. As a result, 45% of pensioners continue working post-retirement to sustain themselves, underscoring the need for structured retirement income solutions, one such as annuities.
The solution to this challenge is simple: Investing in annuities- a product that converts an individual’s pension pot into a regular guaranteed income for the rest of their life, or for a fixed term.
Having an annuity product offers a reliable and forward-thinking way to ensure a steady income during your golden years. Annuities provide a dependable solution to this challenge by guaranteeing a steady income, alleviating the worry of fluctuating investment returns or unexpected financial emergencies.
Transitioning from formal employment can be challenging and worrisome, even with savings or retirement benefits like NSSF or a pension. The discipline required to manage these funds or make sound investments that have guaranteed returns can be overwhelming, especially for corporate employment Retirees. Annuities ensure peace of mind and financial stability during this transition allowing one to enjoy retirement.
How it works
Anuities can either work in a flexible approach, allowing one to make regular contributions to their preferred insurance company or even making a lump sum payment should they find it more convenient.
The insurance company will then invest the funds, ensuring that they grow on a tax-deferred basis – grows and earns interest without being taxed.
Upon retirement or maturity of the policy, the insurer will start to remit to the policyholder steady income in a manner most convenient and agreed upon. This can be monthly, quartely or bi-annually.
Income can be guaranteed throughout one’s life-time if the payment mode chosen at the start is life-only payments or paid for a set time frame if the payment mode chosen was the life with period certain mode. The set payment period may be 5, 10, or 20 years. If one dies prior to the end of the contract, the remaining payments go to the stated beneficiaries.
Income can also be guaranteed to a surviving spouse if the contract was for a joint and survivor product, which is designed for couples. This ensures payments continue as long as one partner is alive, although at a reduced rate after the first death.
Everyone, irrespective of the level of income, can plan and invest in annuities and secure their retirement income and reduce the burden on their beneficiaries and extended families.
To guarantee future income, visit your prefered life insurance company or insurance intermediary for futher guidance.
The writer is a Market Development Officer at the Insurance Regulatory Authority of Uganda
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