A contribution by Marthinuz Fabianus, managing director
Since some 20 years ago, various attempts have been made by the Social Security Commission (SSC) to come up with a broadly acceptable and viable policy and legal framework for the operationalisation of the NPF. Over the many years, various proposals have been submitted with the help of mainly foreign experts on social security. It goes without saying that the various proposals that have not seen the light of day have cost the SSC and obviously the taxpayer huge amounts of money, which surely have not been quantified to date.
In considering previous proposals for operationalising the NPF, they have all without any known exception, based their suggested models on social protection schemes of first world countries and generally countries with much bigger economies in a typical ‘copy and paste’ approach. This is with regard to key aspects such as contributions and benefit design, governance framework, management and administration of the fund, participation and the consideration of occupational pension funds, investments of funds and regulatory supervision etc.
When I was at Social Security, we were getting close to finalising a policy framework that would have seen the NPF being introduced for the working class that currently does not save towards retirement. Based on 2016 labour surveys and NAMFISA’s statistics, the number of formally employed persons who could deductively contribute to an occupational pension fund was estimated at around 230 000. The draft policy was truly based on an inclusive tripartite spirit of employer, labour and government, where a defined contribution fund allowing for exemption of existing occupational funds was being considered, but with a solidarity contribution element to subsidize costs and to provide certain social benefits. Provision was also made for SSC to manage the NPF but with a strong emphasis on governance structures being put in place.
It seems however, SSC has since taken a completely different direction in the way they want to structure the NPF. There is now talk of a need to consider a Defined Benefits fund with an adequate redistributive element as being advised by experts from the International Labour Organisation (ILO). These experts are guiding us on a path of pension fund structures that may be working for western countries, but is sure to fail and lead us into trouble as our situation is completely different as a developing nation.
There is a need for a fresh approach to considering the NPF. The time I served on Social Security Commission (SSC) board enabled me to get good grasp and perspective on the key issues involved in the considerations for establishing the NPF from the vantage point of Government, labour, employers and SSC itself. With sufficient local experience of occupational pension funds and the long term insurance industry which is a 5th player to the equation, I believe we can build our own thoughts for how the NPF can work to best answer most of the questions emanating from all these stakeholders referred to.
Namibia has a well-developed occupational pension fund industry. An existing industry has been established and GIPF is part of the existing industry. There have been some outdated laws that have allowed GIPF and other occupational pension funds to grow to where pension fund assets are today the backbone of our economy. Just about every working Namibian does not save anything from their salary, except what they are forced to put away as a result of their employer sponsored pension fund. Given the existing infrastructure aided by employers, service providers, and a legal framework that has been working very well in favour of occupational pension funds, my view is that we must use the tested and well developed infrastructure to our absolute advantage.
Before SSC closes the curtain and surprises us with another western inspired policy framework for the operationalisation of the NPF, an opportunity must be given to a locally engineered solution.
The proverbial “devil is in the detail”, but it is my resolve to share through a series of articles the suggested fresh approach to considering a NPF. In the approach, consideration will be given to the noble socio political objectives and reasons for the provision and need for a NPF as provided for in the Namibian Social Security Act. I will also make a high level attempt to explore and appreciate the conceivable and apparent reasons why previous attempts and proposals by the SSC to introduce the NPF may have stopped in their tracks. A rationale and basis for the approach we propose be taken for the operationalisation of the NPF will be explored, before exploring examples of model national pension fund schemes. The conclusion to our minds is a fresh, yet seemingly obvious and practical solution based on our existing unique local strengths and successful experience of managing pension funds that should provide a wining solution to the tripartite partnership of government, labour and employers.
Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.