Dear reader

In this newsletter, we provide the Benchtest monthly performance survey for February 2011, news from RFIN AGM, an extract from the Maintenance Act, the RSA Adjudicator on what the trustees’ duty to trace dependants entails, the benefit of and limit to group insurance cover and, as usual, some interesting articles from various media.

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Regards

Tilman Friedrich

Tilman Friedrich's Industry Forum

BENCHTEST MONTHLY 02.2011

In February our average prudential balanced portfolio returned 1.21% (January 0.57%). Top performer is Investec (2.21%), while Old Mutual (0.4%) takes bottom spot. In very broad terms, Investec relative to the average prudential balanced portfolio had 5% lower exposure to onshore equities and a 4% lower exposure to onshore bonds and cash, with a compensating 9% higher exposure to offshore assets. Old Mutual’s asset allocation was pretty much that of the average. In both cases the performance should have closely resembled that of the average. Investec’s outperformance and Old Mutual’s underperformance is thus a function of stock picking. 

As far as the global demand for commodities is concerned, which has benefited our domestic markets and economies over the past 10 years or so, we believe that this is likely to subside, without venturing any guess as to a time line though. The argument about the thriving Chinese economy continuing to push demand appears to be flawed in our view. We argue that the global demand for commodities should not exceed global growth significantly over any extended period of time, which it has though, by leaps and bounds, for the past number of years. This in our opinion was probably due to a global realignment having occurred over these years where China took up an ever greater share of production at the expense of other countries that are now likely to experience over capacities to the extent that China’s growth outpaced global growth. While domestic consumption in China is likely to grow faster than that in other countries, there is a limit to the pace at which a country can develop, due to domestic capacity constraints.

For further analyses and our views, click here...

RETIREMENT FUND INSTITUTE OF NAMIBIA

The Retirement Funds Institute recently held its annual general meeting at which a new council was elected. One of our staff members, Hannes van Tonder, was elected to council. We thank Hannes for having offered to stand for and congratulate him on his election. We also congratulate the other members who were elected to council, who are:

• Melki Uupindi
• Bonita de Silva
• Erich Beukes
• Elvis Nashilongo
• Melissa Ramsamy-Agapitus

We believe that in a small community such as ours, we can only prosper, progress and develop if each and every one of us invests his or her personal effort and capacity in voluntary service to our community.

On this note it was rather disappointing that of 40 odd members of the Institute, there were only 14 delegates, three of which from service providers. Retirement funds were very poorly represented. It is also disappointing, in the first instance, that about half of the Namibian retirement funds have not joined the Institute yet.

In the light of what our industry is facing, such as the FIM Bill, the National Pension Fund, FIA etcetera, we appeal to all stakeholders to throw their weight behind our Institute!

LAW AND LEGAL SNIPPETS

The Maintenance Act and the Duty of Children and Parents

It is common cause that parents have to maintain their children. Most of us are oblivious though of our duty to maintain our parents.

The Maintenance Act, Act No 9 of 2003 that was promulgated in the Government Gazette No 3043 on 18 August 2003 defines these duties. This article reflects some interesting facts from this Act. It also contains useful guidance for trustees in the disposition of death benefits to dependants.

Identifying Dependants is the Duty of the Trustees, not of the Dependants

In the determination of the adjudicator in Zikhali & another v Metal Industries Provident Fund (1) [2001] 12 BPLR 2895 (PFA), he described the board’s duty as follows:

“There is a common misconception amongst the parties in this matter and the pensions industry at large, that there is a duty on a dependant to come forward and inform the board of his or her status and potential entitlement to a death benefit. In terms of section 37C of the Act, the onus is squarely on the board of management of a pension fund to conduct an investigation to trace the dependants of a deceased. Thus, in any death benefit claim arising out of a pension fund organization, it is imperative for the board to take all reasonable steps to locate the dependants of the deceased.”

INTERESTING MEDIA SNIPPETS

Does Your Company Code of Conduct Recognise the Risk Posed by Social Media?

It was reported in the Sunday Times (February 27, 2011) that rugby commentator Andrew Lanning really tweeted up after sending a post to Twitter which was supposed to be confidential. As a result he was axed by DStv channel SuperSport. Conference Speakers International recently reported on this case, here...

The Principled Way to Wealth

In this article, Raymond Ackermann shares his wisdom on a few key business principles that no doubt underpinned his success. If you are a manager, see how you rate – a very interesting article indeed.

Inflation Risk in Retirement

In this interesting article by Robert Powell that appeared in Market Watch on 7 March 2011, the author looks at a number of different investments for the purpose of protecting oneself against inflation in retirement.

Charlotte Drayer's Admin Forum

REASSURED BENEFITS PROVIDED BY A PENSION OR PROVIDENT FUND (PART 1)

Benefits provided on death or disability, are usually underwritten by an insurance company.  Insurers typically set a free cover limit for the members of the fund.  This means that members whose benefit cover entitlement falls below this free cover limit are automatically covered irrespective of their health situation and without having to provide medical evidence of health.  Thus the number and cost of medical examinations are limited to the members in the group with the highest cover that present the highest risk to the insurer.

Members whose benefit cover entitlement falls above this free cover limit are automatically covered up to the amount of the free cover limit but have to provide medical proof of health in order to be eligible for the amount above the free cover limit.

The medical evidence of health required by the insurer is in the form of a personal health statement, medical examinations and blood tests, depending on the age of the member and the amount of cover being assessed.  Once these have been provided, the insurer may request further medical information in order to complete the assessment of the health risk if any.   The insurer normally carries the cost of the medical examinations and tests requested.

It is important to provide the medical requirements as soon as possible as cover is limited to the free cover limit until the insurer has completed the assessment and confirmed acceptance, restriction or limitation of cover as the case may be.