In this newsletter:
Benchtest 08.2015, investment market commentary, joint bank accounts, PN 5/2003 rediscovered, commutation of annuities, new admin platform and more...
Dear reader

In this newsletter we cover the following topics:
  • In times like this stick to your investment strategy
  • Can a pension fund benefit be paid into a jointly held bank account or to the former employer?
  • Death benefits and the rediscovery of PN 5 of 2013
  • Commutation of annuities – the subtle difference between a pension and a pension preservation fund
  • RFS moves to new administration platform
  • RFS board of directors
  • RFS executive committee
  • Benchmark sixth annual member meeting
  • More draft general standards issued for comment
  • Circular  on approved bills, bonds, securities, loans, institutions & countries revoked
  • Commencement of part 3 of Employment Service Act
  • Admissability of affidavits as evidence in death benefit claims
  • Bull & Bear report Q3 2015
  • Questions around Allan Gray’s new benchmark

We also 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

Tilman Friedrich's Industry Forum

Benchtest Monthly 08.2015

In August the average prudential balanced portfolio returned -0.83% (July: 1.53%). Top performer is Allan Gray (0.80%); while Momentum (-1.53%) takes the bottom spot. For the 3 month period Allan Gray takes top spot, outperforming the ‘average’ by roughly 1.9%. On the other end of the scale EMH Prescient underperformed the ‘average’ by 3.7%.

In times like this, stick to your investment strategy

Global investment markets have disappointed investors of late. So, where are we heading and are we likely to experience more disappointment and pain going forward? The typical incriminating question then being directed at the consultant or adviser often rings – “why did you not pro-actively have us switch to a conservative portfolio”? Well, history has shown time and again, if you switch to last year’s top performer every year, you will end up with under performance. Switching investment portfolios to avoid poor or even negative returns always consists of two legs – switching ‘out of the market’ and switching back into the market.

Very often it seems obvious that the market has overheated and that a correction is imminent, yet timing the correction to avoid getting out half way down is the first challenge that even astute investors are likely to get wrong by a far stretch like one year, two years or even longer. When the Fed instituted its monetary easing and large scale asset purchasing programs, reducing nominal interest rates to close on zero and pumping up to US$ 90 billion into markets monthly to prevent the US economy from stalling as the result of the financial crisis, it was actually a ‘no-brainer’ that it will only convert a collapse of markets to a long drawn out and painful recovery. Had the investor abandoned the market at the trough and moved into cash at the time, he would have sacrificed a return on equities of 13.5% per annum to earn 6.4% per annum on his cash investment over a 7 year period, or in absolute values, his initial investment of N$ 100 in equities, that would have grown to N$ 240 by now, has now only grown to N$ 153.

O.K. you may say, this is a flawed argument because one should have moved back into the market. Well, most of this recovery actually happened over the first 5 years that returned 17% per annum and would have produced an absolute value of N$ 217 by October 2013 already. Again this second leg is difficult to time, much more so than the first leg. 7 years ago you may have expected markets to go down even further yet they recovered with vengeance over the first 5 years with a very pedestrian subsequent growth of 5% per annum over the next 2 years!

So where are we heading and what should the investor do from here onwards? Let’s look at some interesting data. The following graph measures the Rand: US$ exchange rate against the FTSE/JSE Allshare Index. Evidently they are very closely correlated over this period from 1987, barring the two periods of a sudden violent swing in the exchange rate. But look at the recent past where the Allshare Index is turning down while the Rand continues to weaken – a deviation from the general trend depicted by this graph. What may be the relevance of this deviation for the investor?

Read part 6 of the Benchtest 08.2015 newsletter to find out what our investment views are. Download it here...

Can a pension fund benefit be paid into a jointly held bank account or to the former employer?

We recently had to deal with two interesting scenarios that no doubt occur regularly.

In the first case, a former pension fund member instructed us to pay his withdrawal benefit into an account that is held jointly by him and his wife who thus has unrestricted access to all funds in this account, including any pension fund moneys paid into the account.

In the second case, the employer of a deceased employee incurred a number of costs related to the funeral of the deceased employee and to transport deceased’s family members from SA to the funeral in Namibia. The employer entered into an agreement with the family members authorizing the fund to pay such portion of the death benefit directly to the employer, as the employer had borne in connection with the funeral.

Considering the stipulations of section 37 of the Pension Funds Act, the question must be asked whether such payments would contravene the Pension Funds Act?

Section 37A deals with a “…benefit, or a right to a benefit being reduced, transferred or otherwise ceded, or of being pledged or hypothecated, or be liable to be attached or subjected to  any form of execution under judgment or order of a court ….”. The section goes on to say that “…in the event of the member or beneficiary concerned attempting to transfer or otherwise cede, or to pledge or hypothecate such benefit or right, the fund concerned may withhold or suspend payment thereof …”. 

The desired payments must be evaluated against the provisions of section 37A. In this context Pensions World journal of June 2006 contained an interesting deliberation on the application of Section 37 A. This talks about two schools of thought, one being that the benefit must reach the member and it cites two cases that dwelled on this question. Whether a payment into a jointly held account or to the deceased’s employer in terms of an instruction by beneficiaries can be construed as having reached the member or the beneficiary is questionable, but certainly poses a risk to the fund that the fund needs to consider.

Section 37A(1) permits a fund to withhold or suspend payment of benefits should any attempt be made to transfer, cede, pledge or hypothecate the member's benefits. If our interpretation of the Act is correct, the fund is permitted to withhold or suspend payment of the benefit, which these instructions by the member and the beneficiaries of the death benefit may entail.

Before simply following the instructions of a former fund member or of the beneficiaries of a death benefit that may be in contravention of the Pension Funds Act and more specifically with regard to Section 37A(1), the trustees should consider obtaining a legal opinion in this regard although a legal opinion is also only an opinion, unless it relies on decided legal precedent that leaves no room for any interpretation.

Death benefits and the rediscovery of PN 5 of 2013

In our previous newsletter we reported on the fact that Inland Revenue has rediscovered its PN 5 of 2003 and is now applying it to its letter when issuing tax directives for the payment of death benefits by pension funds.

The ‘long and the short’ of this state of affairs is now that 51% of the total capital payable to any beneficiary must be applied for the purchase of an annuity. Of this portion 1/3rd may once again be commuted free of tax by the beneficiary, and if so done, 34% remains to be paid in the form of an annuity.

Where the 51% is equal to or less than N$ 50,000, the full capital may be paid out in cash and the full benefit will then be paid free of tax.

The tax directives issued by Inland Revenue since the rediscovery of the practice note requires that 34% of the capital is to be taxed when paid as an annuity.

This means that payment of the 34% cannot be affected other than into an annuity policy or to another approved fund that will pay an annuity to the beneficiary.

Pension funds are advised to amend their rules to reflect the requirement that 51% of the capital available for the payment of benefits upon death of a fund member, must  be applied towards any annuity of which 1/3rd may once again be commuted for a cash lump sum.

As things stand neither the FIM Bill nor any of the draft regulations or standards define any distinction between a pension fund and a provident fund. The FIM Bill only refers to ‘retirement fund’. A number of standards refer to ‘pension fund’ and ‘provident fund’ but do not define these words. It may be accepted though that a standard will be issued to require a pension fund to not pay more than one-third in the form of a lump sum while a provident fund shall be a fund that pays no annuities under any circumstances. Considering that SA is doing away with provident funds and requires the annuitisation of fund benefits it is odd that Namibian seems to accept the continuation of the provident fund concept.

Commutation of annuities – the subtle difference between a pension and a pension preservation fund

Upon a superficial study of the definitions of ‘pension fund’ and ‘pension preservation fund’ one may be forgiven for reaching the quick conclusion that these definitions are the same – not so. There is a subtle but important difference that we draw readers’ attention to and that fund members may be able to exploit for their best benefit.

The definition of ‘preservation fund’ determines in sub-section (b)(ii)(cc) that  if in the case of a pension preservation fund, “(cc) a person dies after he or she has become entitled to an annuity, no further benefit other than an annuity or annuities shall be payable to such person’s spouse, children, dependants or nominees;”. There is no equivalent provision in the definition of ‘pension fund’.

The relevance of this subtle difference is that when a pensioner passes away who retired in his former or another approved pension fund, benefits to his/her spouse, children, dependants or nominees are not restricted by the Income Tax Act to being an annuity or annuities, as is the case with a pension preservation fund. Depending on the rules of the pension fund, the beneficiaries could be entitled to a cash lump sum and/or the commutation of 1/3rd of any annuity payable to the beneficiary, which is clearly beneficial from the tax point of view. (Refer to the afore going article on ‘Death benefits and the rediscovery of PN 5 of 2003’.)

tilman-friedrichTilman Friedrich is a qualified chartered accountant and a Namibian Certified Financial Planner ® practitioner, specialising in the pensions field. Tilman is co-founder, shareholder and managing director of RFS, retired chairperson, now trustee, of the Benchmark Retirement Fund.
Compliment from the principal officer of a large fund

“Dear T and N
Your e-mails of 1 September 2015 with regard to the withdrawal benefit of Mr V H.
Thank you –
  • for taking care of a first ever request from a member of our Fund.
  • N, for asking me immediately, when I called you, whether I have read my e-mails.  I was out of office, did not know which form must be signed, and I could not recall signing an indemnity form ever before.  Having read my e-mail, I knew exactly what to do.
  • T, for explaining the consequences of such a request.  When I saw your e-mail, I knew that this was not just an ordinary e-mail,
that we can always rely on your support, your immediate action – whatever the situation.”

Read more comments from our clients, here...

Kai Friedrich's Administration Forum

RFS moves to new administration platform

On the occasion of a client function, RFS recently announced that it will move its fund administration from Compen to MIP. The MIP administration platform offers cutting edge technology with full integration of member data base, general ledger and investment ledger. It offers extensive features such as workflow -, client relationship -, calendar –, events - and document management. Its web-based front end it offers location independent secured access to members, consultants and employers with comprehensive on-line processing and reporting. E-mail, fax, SMS and XML communication tools are available to its users.

MIP  is an SA based organisation with over 250 employees  of which more than 30 are focussing on employee benefits only. MIP has been involved in the development of technology driven software for over 20 years and offers a range of widely used applications such as ‘!WAYTAG’ and ‘itemate’ throughout Africa and the Middle East.

Our task team and the development team of MIP have already made significant progress in planning for the transfer of data and the deployment of the system to our local IT environment. User training will commence during October and we are hoping to convert the first funds during January 2016 with a target date for completing the project by the end of June 2016.

Whilst we will do all in our power to avoid pitfalls and to uphold our normal service standards, it is highly likely that we will experience unexpected difficulties and unintended consequences. We are therefore requesting the indulgence of clients over the next 12 months and trust that it will have been worth your while to bear with us once we are up and running on our new MIP administration platform. It should be common cause that more advanced technology will offer greater flexibility, responsiveness and complexity.
kai-friedrichKai Friedrich Director: Fund Administration, is a qualified chartered accountant and a Namibian Certified Financial Planner ® practitioner, specialising in the pensions field. He holds the Post Graduate Diploma and the Advanced Post Graduate Diploma in financial planning from the University of the Free State.

Company news

RFS board of directors

From left to right – Festus Hangula, non-executive director, CEO Nampost, Günter Pfeifer, Tilman Friedrich, managing director, Kai Friedrich, Marthinuz Fabianus, deputy managing director, Louis Theron and Sharika Skoppelitus. Our executive directors were introduced in the last newsletters of 2014.

RFS executive committee

From left to right - Kai Friedrich, Sharika Skoppelitus, Marthinuz Fabianus, Charlotte Drayer, Günter Pfeifer, Frieda Venter, Louis Theron, Victoria Nashongwa, Tilman Friedrich, Hannes van Tonder.

We will introduce the members to our readers individually over the next few newsletters.

Meet the team

Victoria Nashongwa, senior manager: fund administration, joined RFS at the beginning of 2002 and can now look back on 18 years in the pensions industry. She obtained the Intermediate Certificate from IISA and is currently busy with her last 2 subjects to complete a B. Tech. degree in Economics.

She ascribes to the wisdom of Don Alden Adams who said that “…to give real service you must add something which cannot be bought or measured with money, and that is sincerity and integrity.” She believes that RFS is loyal to its clients, making it priceless and the fact that our service takes place in a human-to-human situation makes it memorable. Her advice to clients is that they must always remember that “The quality is remembered long after the price is forgotten”.  This she believes is why RFS is the name to be associated with.

She enjoys working for RFS as she has found a family in the company, family must always stick together.

RFS ladies visit old age home

As we do every year a team of RFS ladies visits an old age home to hand over flowers to residents of the frail care unit.

From left to right, our compassionate team – Lizette Fourie, Amei Diener, Anna Willemse, Chanelle van Wyk, Amanda O’Callaghan and Mariana Auene. The company expresses its sincere gratitude to this caring team!

Graeme Codrington visits RFS

Graeme Codrington recently spoke to RFS customers and staff about the disruptive forces changing the world of work, at an event hosted by RFS at the Windhoek Country Club Hotel in Windhoek. Codrington is an expert on the future of work. He is an author, futurist, facilitator and strategy consultant working worldwide across multiple industries and sectors.

Benchmark sixth annual member meeting

Stakeholders of the Benchmark Retirement Fund are reminded that the Sixth Annual Member Meeting of the Benchmark Retirement Fund will be held on Thursday, 8 October 2015 at 16h30 for 17h00 at the Protea Hotel formerly known as Hotel Fürstenhof.

To book a seat, interested persons are requested to contact Mrs. Elaine Blom at Tel 231 590 or This email address is being protected from spambots. You need JavaScript enabled to view it. on or before 30 September 2015.

Benchmark Annual Report 2014 - 2015

The Benchmark Annual Report has been released. If you cannot attend the annual member meeting, download the report here...

News from Namfisa

Acting CEO appointed

In the wake of the untimely passing of CEO, Phillip Shiimi, the NAMFISA Board has appointed Mr Kenneth Simataa Matomola as acting Chief Executive Officer, effective from Monday 21 September 2015.

More draft general standards issued for comment

The following draft standards have been issued for comment recently:

General Standards

  • GEN.S. 9.16 Imposition of penalties on list applicants and others;
  • GEN.S. 9.17 Description of plain language;
  • GEN.S. 9.18 Fiduciary responsibilities of financial institutions and financial intermediaries.

GEN.S. 9.16: Imposition of penalties on list applicants and others

  • This standard applies to registered
    • insurer, exchange, investment manager, securities adviser, securities dealer;
    • manager of a collective investment scheme, authorised representative of a manager that is a company.
  • Penalty may be raised for non-compliance of 1% of revenues earned in previous financial year, or
  • Part of or all business of authorised user or authorised representative may be suspended  for 3 months.

GEN.S. 9.17: Description of plain language

  • This standard applies to all
    • Financial institutions, financial intermediaries and
    • their directors, principal officers, officers, employees and agents and
    • documents presented to their clients.
  • Prescribes that documents must
    • Be written for clients not financial institution/intermediary
    • Based on what client may know or not know
    • Clearly convey content
    • Avoid legal and technical jargon.
  • Prescribes what financial institution/intermediary must do to ensure document meets requirements of previous bullet
    • Outside person to read document
    • Include glossary of terms
    • Clear and simple design with illustrations
    • Be guided in design by client questions.qqq
  • Prescribes what words and phrases to use/not to use and lay-out re headings/sub-headings.
    • Financial institution/intermediary must be satisfied that client
    • Has understood content by acknowledging in writing
    • Is making an informed decision
    • Understands his rights and obligations.

GEN.S. 9.18: Fiduciary responsibilities of financial institutions/ intermediaries

  • This standard applies to
    • Regulated institutions and their functionaries who are
      • a director, a member of the board, principal officer or other officer of a financial institutions / intermediary
  • Regulated institutions and their functionaries owe a fiduciary duty to clients and they must
    • Act in best interests of clients or investors
    • Disclose all material information
    • Avoid conflicts of interest
  • A functionary of a regulated institution must
    • Act in best interests of clients or investors
    • Keep client information confidential
    • Avoid conflicts of interest
    • Fully and factually disclose all dealings with other persons that may cause conflict of interest
    • Must make decisions affecting clients in on reliable information and in good faith
    • Seek expert advice in client dealings
    • Act with diligence, skill and care
    • Manage affairs of institution in a prudent manner
    • Act lawfully and within institution’s governance framework
    • Provide material information to clients
    • Keep a record of material dealings re fiduciary duties.

Circular  on approved bills, bonds, securities, loans, institutions & countries revoked

Namfisa circular PI/PF/CIR/01/2015 issued on 25 June 2015, was revoked by circular PI/PF/CIR/02/2015.

Annexure 1, section 4 and 5 of regulation 28 provides for Namfisa approving certain bills, bonds, loans, securities, institutions and countries. Asset managers believed that the directive was misguided by being focused on the principle of investment grade while they believed that other non-investment grade instrument are often more appropriate. Namfisa heeded the appeals by the asset management industry by revoking the circular.

Asset managers once again will have to approach Namfisa for the approval of certain bills, bonds, securities, institutions and countries they would want to invest in as required by regulation 28.

Legal snippets

Commencement of Part 3 of the Employment Services Act, 2011

As per Government notice 203, published in gazette no 5829 of 15 September 2015, Part 3 of this Act (Act No. 8 of 2011) has commenced effective 24 August 2105. In terms of the Regulations all employers employing more than 25 people are designated employers and need to comply with the Act. Designated employers  need to comply with certain conditions regarding:

  • Notification of vacancies
  • Reporting
  • Submitting returns
  • Recordkeeping

One more law to be added to your compliance register, if you employ 25 staff or more.

Admissability of affidavits as evidence in death benefit claims

“Under SA law, an affidavit is a statement made under oath by an individual to a Commissioner of Oaths. While the person making the statement does so with the knowledge that if it contains false information they could face a jail sentence, this doesn’t necessarily mean that the affidavit is proof of the claims it contains. This means that trustees should be wary of simply accepting affidavits as substantial evidence to back a benefit claim.”

Section 37 requires the trustees to

  • identify dependants,
  • effect and equitable distribution between dependants and nominees and
  • determine and appropriate mode of payment.

The SA PF Adjudicator believes trustees must consider the following factors when deciding on the distribution of benefits:

  • the age of the parties,
  • the relationship with the deceased,
  • the extent of dependency, the financial affairs of the dependants and
  • the future earnings potential and prospects of dependants.

In the case of Maake vs Old Mutual Superfund and Old Mutual Life Assurance Company, the adjudicator’s ruling shows that affidavits alone are not enough.

Download the full article by Wahida Parker in Pensions World of June 2015 here…

Media snippets
(for stakeholders of the retirement funds industry)

Bull and bear report Q3 2015

The Bull & Bear report that is produced from a survey conducted by Sanlam's Glacier Research, collates the performance expectations of leading South African Asset Managers over the coming 12 months. Asset Managers are asked to comment on expected performance for various asset classes and sectors, currency levels, commodity prices and the performance of selected global markets. These viewpoints are subject to change in line with changes in economic and market conditions.

Download the article here...

Questions around Allan Gray’s new benchmark

In December last year Allan Gray proposed four changes to its equity fund. It wanted to allow the fund to invest in offshore equities, change the fund's benchmark, change the fund's fee structure, and allow the use of derivatives.

Clients were asked to vote on the changes, and ultimately, more than 99% of those who sent in their ballots were in favour. This overwhelming support would suggest that the changes were uncontroversial, but the change in benchmark is beginning to raise questions.

Read the article in Moneyweb of 17 September 2015, here….

Offshore investing explained in 3 graphs

“The decision to invest offshore goes hand in hand with a realisation that as an investor, you need to diversify your portfolio across geographies, sectors, companies and currencies.

Investing offshore widens the opportunity set to an investable universe of roughly 15 000 stocks. Going offshore also offers investors a chance to access sectors like biotechnology or pharmaceuticals which are either not available in the local market or for which there are fairly limited investment opportunities. It can also help to reduce the risk in the portfolio.”

Read the article in Moneyweb of 17 September 2015, here...

Insights into the recent market volatility

Bank Windhoek offers some insightful commentary on recent market volatility – what caused the recent sell-off , what are the effects of the Chinese slow down, is the US economy strong enough to sustain interest rate increases and what does this mean for my portfolio -  in a Financial Advisers’ Newsflash of September 2015 here…

Retirement is good for you says German study

Retired people are using their leisure time to become healthier than when they were working, research suggests.

A study presented at the annual congress of the European Economic Association in Mannheim, Germany, provides a corrective to the conventional view that retirement is the first stage in a person’s declining health.

Read the article by Jamie Doward in The Guardian of 5 September 2015, and learn from the Germans how to make the most of your retirement here...

Media snippets
(for investors and business)

Six ways to tell if you work for a really great company

“A company where people really want to work has one of the most powerful competitive advantages in the game: the ability to hire and field the best team. Building that advantage can often take years -- decades or more. That’s just the way it is with employer reputations.”

Here is an excerpt of the 6 ways to tell:

  1. Great companies demonstrate a real commitment to continuous learning.
  2. Great companies are meritocracies
  3. Great companies not only allow people to take risks but also celebrate those who do.
  4. Great companies understand that what is good for society is also good for business.
  5. Great companies keep their hiring standards tight.
  6. Great companies are profitable and growing.

Read the article by Jack and Suzy Welch in Linkedin posted 15 September 2015, here….

You’ll regret these choices for ever

“Some decisions have repercussions that can last a lifetime. Most of these decisions are made daily, and they require focus and perspective to keep them from haunting you.”

Here is an excerpt of the choices people will regret for ever:

  1. They wish they hadn’t made decisions based on what other people think.
  2. They wish they hadn’t worked so hard.
  3. They wish they had expressed their feelings.
  4. They wish they had stayed in touch with their friends.
  5. They wish they had let themselves be happy.

Read the article by Dr Travis Bradberry in Linkedin, posted 16 September 2015, here…

Bill Gates and the one thing all successful people have in common

“There is one crucial thing that most, if not all successful entrepreneurs have in common. Before the fame, glamor, and money came, most of them had built up an extreme domain expertise in a particular field. They had become true experts before launching the businesses they've become most well-known for.”

Read the full article by Jeff Haden in Inc here…

Readers’ contributions

Neighbourhood watch – are you covered if anything happens to you?

Many trustees and members of pension funds are actively involved in their communities in one way or another. More recently the Neighbourhood watches have started to patrol their neighbourhood in various suburbs all over the country.

If you are taking part in patrolling, have you ever thought about your life and disability cover should anything happen to you during these patrols? It might seem obvious that your fund’s life and / or disability cover kicks in should something happen to you, but is it really?

Insurance companies have certain clauses incorporated in the policies with their pension fund clients in terms of which certain events or circumstances  that may give rise to a claim are excluded. Such exclusions typically relate to, for example, extreme sports performed by members, self-inflicted injuries, participation in terrorist activities or consequences of political unrest etc.

Our reader requested a number of local insurance companies to provide their view on whether members would in general be covered under their death and disability policies should something happen to such member whilst on patrol.

From the responses received it would appear that insurance companies would generally not exclude death or disability arising from participating in neighbourhood patrols.

We suggest nevertheless that readers should contact their fund’s underwriter/s to establish whether you and your family are adequately covered should anything happen to you.

This contribution was submitted by Henning Tiemann, trustee of the Agra Retirement Fund.

And finally...

"We are made wise not by the recollection of our past, but by the responsibility for our future."
~ George Bernard Shaw

How much will you need when you retire and are you investing enough?
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