NSSF Smartlife Product. What you need to know.

November 22, 2024

Nov 22, 2024

Friends,

Many you might have read the article titled https://kakandealex.substack.com/p/nssf-launches-voluntary-savings-smartlife. In this article, we are going to explore the differences and notable features between these two service products and the potential opportunities for you as a saver, whether you are a voluntary saver or an existing mandatory saver with NSSF.

Is NSSF now venturing into the Money Market Fund with this new product?

Whereas the newly launched NSSF Smartlife product has similar characteristics to the usual Money Market Funds regulated by The Capital Markets Authority, the product differs in comparison to other Collective Investments Fund Managers.

The NSSF Smartlife product will be wholly managed by NSSF with its full internal investment and other strategic teams to deploy the savings from their clients (like it currently is with the mandatory savers), with the plan to provide a decent competitive return to the saver.

The product is a result of the amendment of the National Social Security Fund (Amendment) Act, which opened the way for NSSF to start taking on voluntary savers but, most importantly, empowered the board of NSSF to introduce new benefits and product offerings to the market, which wasn’t the case before.

It’s from this event that the new innovative product was born. This makes it totally different from the standard Collective Investment Fund Managers who are set up and governed by the Collective Investment Schemes Act, 2003, and the Capital Markets Authority Act. This gives the product two different legal backings even when they have similar product offerings.

A Money Market Fund product?

The NSSF Smartlife product that has been introduced has some key critical features that look exactly like the usual Collective Investment Unit Trust Fund, making the product even easier to understand.

One of those key features is the lowest minimum contribution of UGX 5,000, which is actually lower than what we see in the Collective Investment Unit Trust Fund, whose minimum contributions average UGX 20,000. The Smartlife product will allow a member to contribute daily, weekly, monthly, quarterly, or at any other frequency deemed necessary and fit by the saver without any limitation, something the Collective Investment Unit Trust Fund Managers have been doing.

This is very different from the usual NSSF mandatory saving scheme where the member’s employer must remit the monthly contribution for both employees and employers to NSSF for as long as the employee is still fully and gainfully employed and attracting a salary.

This flexibility with how much and when you can save and invest with NSSF using Smartlife product, allows savers with extra income who trust the brand and investment acumen of NSSF to increase their savings into the fund beyond the statutory requirement of 15% per month while having the flexibility to contribute any time at their convenience. The key word is convenience.

Daily earning of interest rate and credited to the member's account monthly.

Similar to Collective Investment Unit Trust Funds where investors earn daily on the total amount in their account, the NSSF Smartlife product will have this amazing feature where you will be able to earn daily on your saved income, and the total amount is credited monthly to your account, allowing the compounding of your investments over time.

Your money makes money, which then makes money, and the cycle continues, exactly as in the Collective Investment Unit Trust Funds.

Liquidity as the critical offering

Lock-in period of one year. The Managing Director has stressed that this product is borne from the desire to foster the culture of saving and investment in the country. Thus, NSSF has introduced this product with a starting lock-in period of one year before you are allowed to withdraw your money. After one year, you can withdraw part or all of your investments from the fund for whatever reason, especially if you have reached your goal that drove you to save with them.

This is slightly different from Collective Investment Unit Trust Funds, where the majority of them don’t have any lock-in period for their investments. You could deposit your money today and in 10 days withdraw it wholly or in part for whatever reason deemed fit. This makes the Collective Investment Unit Trust Funds more liquid in the short term.

However, the key question for savers who would want to give the NSSF Smartlife product a chance is: Is the one-year lock-in worth it given all the other benefits that come with it?

It’s worth noting that the ability to withdraw your money from the Smartlife account anytime you need after one year is a significant shift and innovation by NSSF from the current mandatory savings, which require savers to either access their money through the mid-term regulatory guidelines or upon retirement.

This gives an advantage to even mandatory savers who are happy with NSSF and its investment service offering to open up a Smartlife account that allows them to save and invest with NSSF while also having the ability to access this money when they need it. For demonstration purposes, you can see here a mandatory saver with NSSF also has a pathway to opening up their NSSF Smartlife plan to start investing, with a clear goal of earning interest daily. Saving and investing made easy.