By Mitchelle Mugyeni
A few weeks ago, NSSF gave Ugandan savers good news. The Fund declared an interest rate of 22.53 percent for the year ended June 2026. That is the highest rate in its history and a big jump from 13.5 percent last year. Total income almost doubled from Shs3.5 trillion to Shs6.51 trillion.
Many clients now ask me the same thing. If NSSF is paying this well, do I still need a unit trust? My answer is yes, because the two do different jobs. And I will emphasise this, diversify.
How a pension fund works
NSSF is a long term savings plan. Every month you save 5 percent of your salary and your employer adds 10 percent. The Fund then invests in long term instruments like bonds, equities and real estate. At the end of each year, it pays you interest on your balance from what it earned.
The strength of NSSF is discipline. Your money is locked so you cannot spend it on impulse. It is also important to note that NSSF funds are locked for a longer period, which gives the Fund opportunity to invest well in the equities market. If you check its reports you will realise that this high rate was driven by regional equities. Remember, equities are riskier than bonds and are long term. They are not advisable for unit trust investments where clients do not want to hear about potential losses. Think about one good year then five not so good ones.
The weakness is access. You mainly get your money at retirement. Members aged 45 who have saved for at least 10 years can take 20 percent early under midterm access.
Here is an example. If you had Shs10 million on your NSSF account on 1st July 2025, you will earn about Shs2.25 million in interest this year.
How a unit trust works
A unit trust pools money from many people. A professional fund manager then invests on behalf of investors. It is regulated by the Capital Markets Authority and the Uganda Retirement Benefits Regulatory Authority and mainly invests in low risk instruments with central and commercial banks.
Old Mutual Investment Group is a good example. In 2025, its Umbrella Fund returned 12.56 percent, its Balanced Fund 13.62 percent and its Dollar Fund 5.15 percent. You can start with as little as Shs100,000. It is an open ended fund which means free entry and free exit. You earn interest daily and you can access your funds when need arises.
Here is an example. A trader puts Shs500,000 into a unit trust every month. When school fees are due or a business deal comes up, she withdraws part of it without waiting for retirement.
Consider an investor with a lump sum of Shs100 million who invests in a unit trust and earns approximately Shs1 million in monthly returns. That provides a steady stream of passive income. Similarly, a retiree can invest their retirement package in a unit trust and receive regular monthly returns to support living expenses. In both cases, the money works for them and helps preserve financial independence.
The key differences
NSSF is for your old age. A unit trust is for your goals before then and you can use it to build your emergency fund. NSSF is compulsory for most employees but a unit trust is your own choice. NSSF money is locked while unit trust money reaches you within days. NSSF declares its rate once a year. Unit trust returns move with the market and are declared daily, so the investor earns daily compounding interest. This year’s 22.53 percent is excellent, but past returns do not promise future ones.
Your take home
My advice is simple, diversify. Keep your NSSF pension growing for your retirement. Then build your unit trust for emergencies, alternative investments and passive income.
One protects your future and the other protects your present.
The writer is a Finance, Investment and Insurance Advisor.
