Pensions scheme to Give Loans to MPs

Legislators have backed a proposal to allow the Parliamentary Pension Scheme advance loans to its members.


The Parliamentary Pension Scheme was established in 2007 by the Parliamentary Pensions Act, 2007 for the payment or granting of pensions or retirement benefits to MPs and staff of Parliament.

The Act was also intended to make provision for a contributory pension scheme for MPs and staff of Parliament.

The Act, which was amended in 2010, however did not grant powers to the Scheme to advance loans to its members.

It has come back to the House for further amendment, to provide for additional powers to the Board of Trustees; provide continuity of the Board membership and to change the pensionable period of service from five to 10 years.

Former Parliament Commissioner, Hon. Emmanuel Dombo however proposed that the Scheme be granted powers to lend to its members in order for them to benefit from their savings.

He said that Scheme would charge lower interest rates than commercial banks on loans and argued that the Board of Trustees will have the responsibility to set guidelines and guarantees for safe borrowing.

He said despite negotiations, commercial banks had refused to lower their interest rates, because MPs had no alternative source of borrowing.

“When we get this source of borrowing, they will be forced to offer favourable interest rates,” said Hon. Dombo.

Members said borrowing from the Scheme will save them from the embarrassment suffered when they borrow and fail to pay back to commercial banks and money lenders, whose interest rates keep fluctuating pushing them into hiding or ending up in prison.

They also argued that funds lent by the Scheme will be easy to recover from members through ‘deductions at source.’

The Committee on Legal and Parliamentary Affairs, which considered the Bill, rejected the proposal observing that “the best pension governance practices worldwide require that any Act, rules, regulation or deed document establishing a pension scheme must put in place restrictions on the use of scheme funds.”

The Chairperson of the Committee, Hon. Stephen Tashobya said that “The fundamental restriction is that the scheme funds should not be lent to any person.”

Hon. Tashobya said government needed to consider the bigger problem of high interest rates in the country.

He also said that it is wrong and illegal to turn the Pension Scheme, which was established as a pension fund to benefit members when they leave the House, into a commercial institution.

The Speaker of Parliament, Rt. Hon. Rebecca Kadaga deferred consideration of the Bill to Thursday to allow Members scrutinise all the related laws and for the Attorney General to address gaps in the existing laws on pension.

The Parliamentary Pensions (Amendment) Bill, 2014 was moved by Parliament Commissioner, Hon. Rose Akol Okullu, as a Private Members Bill.