The CEO of the Social Security Commission at a public forum recently advised that the National Pension Fund is very much in the pipeline. She did not answer a question why it is necessary to engage foreign consultants and whether Namibia does not have any experts. A suggestion to make pension fund membership compulsory through the existing funds appears not to have found favour with her. She posed as argument for rejecting this suggestion that administration costs in the private sector are excessive and reduce members retirement capital unreasonably. This argument directly contradicts the argument government fielded when it introduced the local investment prescription, as being a necessary cost to the pension fund member for the benefit of the wider community. Centralising activities carried out by the private sector in a government entity not only creates another systemic risk, removes the competitive element that prevails in the private industry and freedom of choice concerning one’s own retirement savings, but if it is efficient as SSC claims it will be, it will also rob jobs of the wider community for a cost benefit of NPF members. With the swearing-in of the new members of government, our president reportedly emphasised that government must listen to the concerns of and promote the private sector.
Considering the argument of cost efficiencies through economies of scale, let us look at the other large systemic risk, the GIPF. Total cost of fund management, excluding asset management amounts to N$ 1,679 per member and pensioner per annum (139,896 members and pensioners as at 31/03/2018). For the balance of the industry of over 70 funds and an average membership of only 2,540 per fund, the average cost of administration per member per annum amounts to only N$ 1,592. In addition, one needs to bear in mind that the GIPF is a defined benefit fund while the balance of the industry are, with one small exception, all defined contribution funds. The administration effort of administering a defined contribution fund is substantially higher than that of a defined benefit fund.
Will the Minister of Labour head the cautioning of the president and listen to the concerns of the private pensions industry and the misconceptions about efficiencies of public funds?
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