|In this newsletter:
Benchtest 11.2017, Christmas greetings, NAMFISA levies, NAMFISA circulars, FIM Bill training, do we need a National Pension Fund, rule amendments and affidavits, and more...
Thank you sincerely for your valued support! We look forward to being at your service in 2018, and beyond.
The following documents can be further adapted with the assistance of RFS.
The Benchmark Retirement Fund
RFS in action
Corporate governance a key pre-requisite for peace of mind!
To strengthen the internal controls, RFS recently introduced a full-time audit, compliance and risk management function. Mrs Carmen Diehl, our manager: internal audit, compliance and risk management is a chartered accountant. Her work is peer reviewed by Mr Schalk Walters, a qualified chartered accountant and independent corporate governance expert. In the following newsletters we will be briefly looking at the three areas of corporate governance, namely risk management, compliance management and internal audit.
The board of RFS views a robust and effective risk management process, based on the NamCode, as a necessary and integral part of the day-to-day operations and acknowledges that its board holds ultimate risk management responsibility. Risk management activity is aligned to corporate and business plan objectives and priorities and is aimed to embed risk management at RFS into its daily operations. It encompasses strategic and operational risks that may prevent RFS from achieving its objectives. Risk management criteria in terms of impact and likelihood have been established covering financial, legislative and reputational risks. Risk review meetings of the executive directors are held every two months while the agenda of quarterly meetings of the board of directors includes risk management.
News from RFS
Rauha Hangalo started her career in retirement funds management as fund accountant at UPA in 1996, and joined RFS in July 2002. Rauha now heads up our Benchmark client services team while also providing client services to a portfolio of our prime private funds. Rauha obtained a BA (Business Administration) from Thiel College in the US. She holds an Advanced Postgraduate Diploma in Financial Planning (Employee Benefits) from University of Free State, the Certificate of Proficiency from Insurance Institute of South Africa and has completed a Programme in Retirement Fund Management through UNISA (IISA Licenciate). She also successfully completed the Programme in Advanced Insurance Practice from IISA and is now an Associate member of IISA.
In her 20 plus years in the retirement fund industry, Rauha gained very broad experience to all areas of fund management from fund accounting, fund administration and client servicing and is well placed to guide her pension fund clients wherever assistance may be required.
RFS staff in festive mood
RFS kids year-end party
As is the case every year the RFS social committee laid on a kids party that was thoroughly enjoyed by the RFS kids, their mummies and their daddies.
RFS staff year-end function
The year-end function for RFS staff with the theme of Gatsby was a singular occasion on a high level that will still be spoken about for some time, as the following pictures reveal:
RFS Readers’ letters
One Chart of Accounts Reporting
A trustee of a medical aid scheme comments as follows:
“In general it should be pointed out that:
A trustee of a pension fund that received an ‘off-site inspection report’ on service provider familiarity and trustee rotation commented as follows:
“This Monday morning I respond like someone who got out of bed with the wrong foot. The trigger in this instance is the assumption made by NAMFISA with their off-site inspection that familiarity is a major risk and that we need to do something about it. I just now went back to my MBA handbooks, as I am not so well versed in articulating my understanding of risk.
“Fundamental of Corporate Finance” – 3rd edition (Firer, Ross Westerfield and Jordan) describe risk in the following words: “The unanticipated part of the return, that portion resulting from surprises, is the true risk of any investment. After all, if we always receive exactly what we expect, then the investment is perfectly predictable and, by definition, risk-free. In other word, the risk of owning an asset comes from surprises - unanticipated events”. A systemic risk is described “ as a risk that influences a large number of assets, also called a market risk” , they describe “GDP, interest rates, or inflation” as examples of systemic risks. Added to this is the standard deviation of an investment and the diversification of a portfolio that primarily manages risk.
For NAMFISA to now claim that familiarity is a risk, while not proven by factors such as significant changes in the standard deviation of our portfolio, is to question the integrity and intelligence of our team. Furthermore is the specialist knowledge of our service providers. Should familiarity have become a risk, it would have shown in the figures, which it does not. The transparency needed in the management of our pension fund is indeed in place and managed through policies, and proven through the adherence as displayed in minutes. The unsystematic risk however that has shown itself on the horizon over the last three years, is the continued increase in fee’s set by NAMFISA. The observation of this risk I believe has indeed been recorded in the minutes of Trustee meetings...”
News from NAMFISA
False statements made under oath in statements required by NAMFISA – PI/PF/Circ/02/2017
Above circular was issued by NAMFISA on 14 December 2017 “…by virtue of …[its] functions and powers in terms of the Namibia Financial Institutions Supervisory Authority Act…and is applicable to all pension funds. This circular serves to advise funds that making false statements in any affidavit constitutes a criminal offence.
News from the market
Prudential loses Melanie Allan
Prudential Portfolio Managers announced the resignation of Melanie Allan effective 1 January 2018.
BIPA no longer accepts revenue stamps
The Business and Intellectual Property Authority recently announced that it no longer accepts revenue stamps for fees payable under the Close Corporations Act and the Companies Act. Only payments made in the form of cash, electronic bank transfers or direct deposits will be accepted as from 30 November 2017.
For more detail download the advertisement that appeared in local newspapers, here...
Steinhoff debacle likened to Enron and Abil
In the aftermath of the Steinhoff debacle that resulted in a drop in its share price of 90% following the shock resignation of CEO Marius Jooste, we made enquiry with asset managers about any exposure to Steinhoff. By the time of ‘going to press’ we received the following responses:
(for stakeholders of the retirement funds industry)
Pensions and politics are in an uneasy mix the world over
“I recently participated in a panel discussion of the International Pension & Employee Benefit Lawyers Association in Prague under the topic: “Pensions Crises: Many jurisdictions report that significant percentages of their populations are unable to retire with the level of dignity they would have liked and that future prospects for many fund members appear to be weakening.”
High-level participants agreed on certain conclusions:
The jurisdiction with the best results have:
Board ordered to re-exercise its discretion in terms of section 37C
In this case T Norris, friend of late S Roche who was employed by the University of Kwazulu-Natal, was the only person nominated by deceased on her beneficiary nomination form. The board of trustees of the fund resolved to allocate the full death benefit to deceased’s mother. Deceased’s friend complained to the Adjudicator about the fact that no allocation was made to him arguing that Mrs Roche senior was not a dependant of deceased and that he took care of deceased when in hospital making him his next of kin while deceased made him his sole nominee in turn.
The administrator of the respondent pension fund argued that it had carried out an investigation into the facts of this case on behalf of the pension fund. During this investigation it interviewed friends of the deceased and his mother from which it became clear that deceased’s friend Norris was not a dependant of deceased. It was also established that deceased was not married and had no children. Deceased had 2 siblings who had their own children to look after and were living outside South Africa. The allocation was then made on the basis that deceased’s mother was living in an old age home and was in poor health and that she would have become a dependant of deceased in time to come as her savings would run out. Deceased siblings would not have been able to support their mother while deceased’s mother would then have become a dependant of deceased.
The adjudicator agreed that T Norris was not a dependant of deceased and also agreed that Mrs Roche senior would have resorted to deceased if she could not take care of herself anymore and would the become a dependant. The adjudicator thus rejected the assertion of the complainant that deceased’s mother was not a dependant. She did point out though that the extent of dependency was purely speculative and had not been established by the fund. She pointed out that the siblings of deceased would have had an equal obligation to support their mother and that the fund had not established whether the siblings would fall short of their obligation to support their mother. By ignoring the other sibling’s equal obligation to support their mother on the basis of the fact that they had their own children to care for, the board totally misdirected itself. Ms Lukhaimane thus ordered the board of the pension fund to re-exercise its discretion in terms of section 37C of the Act.
Read the full report in Insurance Gateway of 20 November, here...
Method of paying a benefit when a member dies after accrual date but before the benefit can be paid
Another interesting discussion in the ‘Member Community Digest’ of the Financial Planning Institute of Southern Africa reflects on what a fund should do when the beneficiary dies after a benefit became due to him or her but before the benefit was paid:
“When a member of an approved retirement fund exits the fund as a result of resignation, dismissal, retrenchment or retirement, the benefit accrues i.t.o. of the fund rules. Should the member die after the date of accrual but before the benefit can be paid, according to [SA] … Information Circular PF No. 2 of 2010, the provisions of Section 37C of PFA do not apply.
Which law becomes applicable for the payment? If it is payable to the estate and taking the quantum of the benefit in mind, would there not be double taxation? What are the other viable ways of paying the benefit in order to avoid this double taxation?’
“This is an interesting situation you are asking about.
I do not think it is really double taxation. Let's see what would have happened if the member withdrew from the fund, received the funds and then passed away thereafter.
Client withdraws from fund
What I would question is, if the member's last day is let's say 31 October, he or she completed the withdrawal forms on 15 October and submitted it to the administrator, but passes away before his last day, then I am of the opinion that no right would have been created, as the lump sum only becomes due on the last day of membership. In such a scenario, Section 37C should still apply.”
(for investors and business)
What should you expect of your personal financial adviser?
An interesting discussion in the ‘Member Community Digest’ of the Financial Planning Institute of Southern Africa reflects on the approach to personal financial advice:
“There are many "old school" type businesses who operate in the traditional way where they see themselves as fund pickers for their clients who ad value by switching portfolio's every year, in my opinion this practice will generally detract value to the client rather than add. The newer type of Financial Planner is one who is focused on the client, helping them budget, set lifestyle goals and deal with transitions in their lives all the while helping them stay focused on their long term investment strategy. This I believe is where we can add real value and justify whatever fee we charge.
At the end of the day value is in the eye of the beholder in this case the client. It is up to the Financial Planner to show how he or she adds value equal to what they charge their clients.”
The quieter you become the more you hear
“Norwegian explorer and author, Erling Kagge, is someone who knows a thing or two about silence. In his insightful book, Silence, Kagge unpacks the power and importance of silence in an increasingly noisy world…
Here are three experiments that you can try in order to ‘engage the silence’:
Quit all social media for a month. Yes, a full month! Keep a daily journal as to what it was like – here would be some helpful questions for your consideration.
Something to smile about
This is from a book called 'Disorder in the American Courts', consisting of things people actually said in court, word for word, taken down and now published by court reporters who had the torment of staying calm while these exchanges were actually taking place.
ATTORNEY: Now doctor, isn't it true that when a person dies in his sleep, he doesn't know about it until the next morning?
WITNESS: Did you actually pass the law exam?