In this newsletter:
Benchtest 07.2015, investment commentary, housing loans present risks, payments of death benefits in a stalemate, Ms Skoppelitus joins RFS board, RFS Exco expanded, 6th annual member meeting of Benchmark coming up, SSC considering new social security benefits and more...
In this newsletter we comment on the decline of the Rand and the oil price, we draw attention to a number of risks relating to housing loans and what is to be done about it, we report on difficulties experienced with payment of death benefits, we welcome Ms Skoppelitus to RFS board and 4 senior staff to the RFS executive committee, we draw attention to the 6th annual member meeting of the Benchmark Retirement Fund, we report on plans of the SSC to introduce new benefits and provide links to a number of interesting and relevant articles that appeared in various news media.
As always, your comment is welcome, so open a new mail and drop us a note!
Tilman Friedrich's Industry Forum
Benchtest Monthly 07.2015
In July the average prudential balanced portfolio returned 1.53% (June: -0.95%). Top performer is Stanlib (2.69%); while EMH Prescient(-1.18%) takes the bottom spot. For the 3 month period Stanlib takes top spot, outperforming the ‘average’ by roughly 1.5%. On the other end of the scale EMH Prescient underperformed the ‘average’ by 2.6%.
The tides have changed
Undoubtedly the two subjects that currently feature most prominently in financial circles, is the rapid depreciation of the Rand and the dramatic decline in the price of oil. For the investor, these are important indicators and the question begs to be answered whether we will see a reversal of these developments or whether these represent new norms.
The graph below depicts the depreciation of the Rand against the Euro, the British Pound and the US Dollar since October 2000. Over this period to end of July the Rand depreciated by 67% against the US Dollar, by 80% against the British Pound and by 117% against the Euro.
Read part 6 of the Benchtest 07.2015 newsletter to find out what our investment views are. Download it here...
Pension backed housing loans are risky business
Pension backed housing loans offered by commercial banks are typically based on an agreement between the bank the fund and the employer. The main responsibilities of the parties are as follows:
The employer is required to
The bank is required to
The fund is required to
Since pension funds typically outsource the administration of their fund, the fund’s obligations in terms of the agreement with the bank and the employer will have to be transferred to the fund’s administrator.
Kai Friedrich's Administration Forum
Handling of pension backed housing loans
The article ‘Pension backed housing loans are risky business’ (above) points out what can go wrong to lead to a fund incurring a loss as the result of a shortfall between the outstanding housing loan balance a fund was required to settle and the respective member’s available capital.
It was also pointed out above that the records we keep on behalf of a fund are prone to error and omission due to the fact that such loans do not initiate a ‘book entry’ in the fund’s records.
The employer, on the other hand, does have to make book entries on a monthly basis as it is required to deduct the loan repayments from the relevant members’ salaries and pay this over to the bank. The bank in turn should query any loan in respect of which it has not received a repayment. The employer payroll is thus a reliable source for confirming whether or not an employee has a housing loan.
To protect the fund against any losses as best as one can, it is essential that the employer diligently indicates on each member’s termination form whether or not the member has a housing loan by reference to the member’s last month’s salary record.
Given the ‘margins for error’ and to protect funds, we have in the past requested settlement balances in respect of all exits whether or not our record indicated that the member has a loan. Banks have now objected to this practice as it burdens their systems and delays the provision of settlement amounts.
To accommodate banks we will adopt the following procedure:
RFS will not request settlement amounts from the bank on termination of membership if, and only if:
Where the record is flagged on our system and/or where the claim form does not clearly indicate that the member does not have a loan, we still proceed to request settlement amounts from the Bank. It is therefore critical that HR officers complete the forms thoroughly and with due care.
Besides the Return To Work programme, the SSC is also mulling over the introduction of an Unemployment Insurance Fund. The project is to investigate the foundation of a legal, administrative and financial framework, and a number of other issues, such as:
News from Namfisa
We found this news item in the Namibian of interest and worth sharing with stakeholders of our industry:
To fix the problem this article offers the following suggestions –
All of this is as relevant to Namibians as it is to South Africans. In Namibia too personal debt levels have been a concern to the Bank of Namibia for quite some time, and we are probably not in a similar situation.
Read the article by Ingé Lamprecht in Moneyweb of 5 August 2014, here...