The Minister of Justice issued a second draft amendment to the Administration of Estates Act (AoEA) following a stakeholders meeting held on 10 July, that would bring about changes to the previously promulgated amendments of 31 December 2018 and draft regulations. For the purpose of this analysis, I will not consider the previous draft amendment issued in July. I presume that the regulations on the ‘governance framework of the Guardians Fund’ and on ‘Knowledge management and financial administration regulations of the guardians fund’ are to remain in place and for completeness of my analysis my comments in last month’s newsletter are repeated below.
Key proposed changes or clarifications to the AoEA are –
- Subject to 2 below, all moneys due to a person under the age of 21 or under curatorship, which derive from
o a long-term insurance policy (other than a policy owned by a person under age 21 or under curatorship who is also the beneficiary) or
o a death benefit from any pension fund as contemplated in the Pension Funds Act, other than a pension fund that administers payments to dependants;
o the capital amount underlying monthly annuities, including lump sum (this clause is still ambiguous);
o a bequest in a deceased estate;
must be transferred to the Guardians Fund within 30 days after the date upon which the capital becomes payable in terms of the relevant law or contract;
- Benefits deriving from the following sources are exempted-
o Funeral policy;
o Health policy owned by a person under age 21 or under curatorship who is also the beneficiary;
o Disability policy owned by a person under age 21 or under curatorship who is also the beneficiary;
o Life policy owned by a person under age 21 or under curatorship who is also the beneficiary;
o A short-term insurance policy
o The Motor Vehicle Accident Fund.
o A testamentary or inter-vivos trust.
- All amounts referred to in 2 above, are exempted from the requirement to be paid to the Guardians Fund provided ‘…the money remains secured in terms of growth and properly managed to the best interest of a person under the age of 21 or under curatorship until the person attains age 21 or is released from curatorship.’
- The Minister may prescribe further requirements and conditions for exemptions under 2 above.
- The Minister may amend the list of benefits deriving from sources listed in 2 above.
- Provision is made for the voluntary transfer of capital in a testamentary or inter-vivos trust to the Guardians Fund.
- A person who is obliged but fails to pay over any money as required in terms of the above shall pay ‘…interest a prescribed under the Prescribed Rate of Interest [Act], 1975…’
It is interesting to note that –
- Direct money bequests to a person under the age of 21 or under curatorship must be transferred to the Guardians Fund unless a trust has been or is to be established for managing these moneys.
- Movable property of a person under the age of 18 or under curatorship shall remain the responsibility of the person’s natural guardian yet the guardian will be deprived of his/ or her responsibility to manage moneys in the interests of the minor.
- Where a person is required to transfer money to the Guardians Fund but fails to do so, interest will be due, from the date it was due to the actual date of payment and this is independent of whether the moneys concerned already earned interest or investment returns. This seems of be an oversight that should be corrected.
- Since benefits deriving from any type of pension fund, as contemplated by the Pension Funds Act, are not exempted (except from a pension fund paying annuities), the question of whether or not a pension benefits is to be paid to the Guardians Fund after deducting PAYE remains unresolved.
The proposed regulation dealing with the governance framework of the guardians fund contains the following interesting stipulations –
- An investment committee is established for the guardians fund which shall comprise of the Master as chair and two experienced independent external members appointed by the Minister;
- Remuneration and allowances, as approved by the Minister must be paid to members of the committee;
- The committee must within 6 months after the close of its financial year report to the Minister;
It is interesting to note that
- the prudential investment guidelines otherwise applicable to NAMFISA regulated institutions do not apply so that all moneys can in theory be invested in government bonds (or any other dubious investment for that matter);
- Unlike the future 90 day reporting timeline applicable to all NAMFISA regulated institutions, the guardians fund is afforded 6 months to report to the Minister;
- The guardians fund will be a cosy closed shop arrangement managing the money of all minors in the country without any public accountability;
- One of the arguments of the Minister in parliament for conscripting all moneys of all minors in Namibia was his accusation of high fees being charged by private sector institutions. Now committee members must be remunerated without the Minister publicly committing to any cost benchmarking, in respect of private moneys conscripted by law.
The proposed regulation dealing with the financial administration of the guardians fund and contains the following interesting stipulations -
- Great emphasis is placed on digitization and electronic records management;
- Persons required to file any document electronically must retain a hard copy of such document until 5 years after the expiry of the matter at hand (presumably age 21 in most cases and must produce or submit such hard copy document to the Master when so required;
- The Master’s electronic records shall be admissible evidence in a matter before the Court;
- Beneficiaries’ moneys are pooled for investment;
- Foreign investments are provided for;
- Master is entitled to appointed investment managers, investment advisers and portfolio managers;
- Cost of management of the guardians fund shall be borne by the fund without recourse to seeking funds from Treasury.
It is interesting to note –
- While the Master takes pride in its digitalization and electronic funds management, he seems not to quite trust his own proclamations and keeps a back-door open by compelling all and sundry to keep hard copies of all moneys conscripted without consent by the Master for a very long time;
- How will private individuals and estates comply with the hard copy document retention requirement?
- One of the arguments of the Minister in parliament for conscripting all moneys of all minors in Namibia was his accusation of high fees being charged by private sector institutions. Now all costs incurred in managing the guardians fund must be borne by the fund, without the Minister publicly committing to any cost benchmarking, in respect of private moneys conscripted by law.
Anyone who may leave an estate from which persons under the age of 21 will or may benefit, need to take comfort that this capital due to such persons under age 21 will be managed by the Master within his unfettered discretion in every respect, including the manner in which it will be invested. If you cannot find peace with that arrangement you should either determine in your will that the moneys earmarked for persons under 21 either be paid into an inter-vivos or testamentary trust, or to someone you have total trust and confidence in to look after your heirs under 21 within their total discretion. With the changes now made to the amendment there is really no need to pay the moneys into a trust registered outside Namibia.
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.