The Pension Scheme Bill that is currently before Parliament will stimulate growth of the local bourse besides enhancing efficiency in management of pension funds, Celestin Rwabukumba, the Rwanda Stock Exchange chief executive officer, has said.
Rwabukumba said the scheme will make it possible for insurance companies to design pension products and instruments similar to bonds that can be traded on the stock exchange.
He added that though firms can sell paper instruments presently, they are not regulated.
“It is one of the most important regulations that will streamline the financial sector and make it competitive,” he explained.
He argued that private pensions would complement Rwanda Social Security Board’s products, leading to product diversification and higher demand for insurance products.
The Bill seeks to fully liberalise the pension sector when passed into law to replace that of 1974 that players say is outdated.
It will also meet the social objective of facilitating the retirement savings scheme, according to the National Bank of Rwanda’s monetary policy statement for the last half of 2013 released last month.
Elizabeth Nailantei, senior portfolio manager at British-American Insurance Company (Britam), said the new law when approved by Parliament, will encourage people to save for their retirement, and will create more funds for investments by fund managers.
“The vesting period is long and hence the funds can be used to undertake long-term projects in the country, including investing in bonds on the capital market.”
Nailantei said the money could be used by the government for infrastructure development instead of going to the global markets. She said the proposed structure of the pension industry opens up the sector to independent players which will create competition in the sector and ensure good returns on investment for members.
The insurance sector grew by 21 per cent in assets from Rwf333.8b in 2012 to Rwf404.6b last year, while members’ contributions increased by 23 per cent from Rwf47.1b to Rwf58.1b over the same period.
The sector also witnessed a 22 per cent increment in benefits paid from Rwf8.8b to Rwf10.7b year-on-year, and a 16 per cent growth in investment income from Rwf14.3b to Rwf16.6b over the same period.