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In this newsletter:
Benchtest 02.2019, National Pension Fund 3, Proportionate Supervision, COEs and more...

Important notes and reminders

NAMFISA levies

  • Funds with year-end of February 2018 need to have submitted their 2nd levy return and payments by 25 March 2019;
  • Funds with year-end of August 2018 need to have submitted their 1st levy returns and payments by 25 March 2019;
  • Funds with year-end of March 2017 need to submit their final levy return and payment by 31 March 2019; April 2017 year-ends need to submit their final levy return and payment by 30 April 2019.

Phasing out of cheques - reminder
 
Local banks no longer accept any cheques issued after 1 February. Note that cheques will expire after 6 months, thus 1 August. Cheques issued on 1 February 2019 will thus be valid only up to 31 July 2019.


Check out our new retirement calculator


Our web based retirement and risk shortfall calculator has been enhanced and updated to assist you to determine how much you should contribute additionally, either by way of lump sum or regular salary based contribution, to get to your target income at retirement, death or disablement.

Try it out. Here is the link...


Newsletter

Dear reader

In this newsletter we continue the discussion on how a National Pension Fund can be established. In our opinion piece we question whether proportionality is applied in supervisory effort.

In our investment commentary in the monthly Performance Review as at 28 February 2019, we comment on poor medium term investment returns and the prospects of them improving particularly in the light of an ever increasing dilution of returns as the result of regulation.

We present in full length our commentary ‘The world of investments is not what it used to be’ that already appeared in last month’s Performance Review newsletter.

We are proud to share some interesting news from RFS and the market that should not be missed.

In legal snippets we examine whether the requirement for COE’s breaches any rights or laws and we examine the obligations of a fund to transfer a resignation benefit.


The topical articles from various media should not be overlooked – they are carefully selected for the value they add to the management of pension funds and the financial well-being of individuals...

...and make a point of reading what our clients say about us in the ‘Compliments’ section. It should give you a good appreciation of who and what we are!


As always, your comment is welcome, so open a new mail and drop us a note!

Regards

Tilman Friedrich


Reasons for failures of past attempts to operationalise the National Pension Fund (NPF)
A contribution by Marthinuz Fabianus, Managing Director

As alluded to in the previous two articles, various attempts have been made over the past 20 years to come up with proposals to operationalise the NPF. In last month’s newsletter, consideration was given to the noble reasons for the provision and need for a NPF as provided for in the Social Security Act (SSA). In this edition, we make a high level attempt to explore and appreciate the conceivable and apparent reasons why previous attempts and proposals by Social Security Commission (SSC) to introduce the NPF stopped in their tracks. We have reasons to argue that no impactful efforts have been made whatsoever to consider the reasons and take appropriate lessons from the previous failed attempts. If the reasons have been looked into and are available, we believe these should be made known by SSC as part of any new attempt being embarked upon regarding the NPF.

For the purpose of this edition, we have peripherally considered some of the more conceivable reasons which we briefly highlight below:

It is to be considered that the SSC board is a tripartite body consisting of government, labour and employer representatives. It is conceivable and to be appreciated that the diverse interests of the tripartite body, add to it the organisational interests of SSC and other interested parties, make it difficult for consensus to be reached on the policy framework of a complex institution like the NPF.

In considering a suitable or largely agreeable model for the operation of the NPF, some of the important aspects for finding lack of agreement are:

  • Costs and contribution levels;
  • Type of scheme (i.e. defined benefit or defined contribution);
  • Total or part exemption or non-exemption of occupational schemes;
  • Regulatory ambit (separate new regulator or NAMFISA);
  • Administrative capacity of SSC etc.

More specifically from a government’s point of view;

  • Government sometimes drives political policies which may not at times be congruent with national policies.
  • Most of the previous proposals purported to have been preferred by government were premised on defined benefit models, which is believed would commit government (tax payers) to increasing contribution liabilities which have to be carried by future generations.
  • Often there have been disjointed efforts, with no budgetary plans and projections made as an indication of government’s readiness as employer, to participate in the NPF.
  • The nature of governments’ mandate to drive social justice makes it difficult not to exercise control over NPF affairs etc.
  • The inclusion of the informally employed;
    • Government’s stand has always been that an NPF that excludes informally employed is a non-starter.
    • Yet, studies show that most countries hailed for their successful social security systems do not include informally employed persons in contributory schemes, except on a voluntary basis etc.

From a labour (union) point of view;

  • There is an expectation of high benefits against low contributions (cross subsidisation).
  • Largely indifferent to actual complexities and challenges that can hamper the sustainable or effective operation of an NPF, etc.

From an employer’s point of view;

  • Exemption should be granted to occupational schemes subject to meeting certain criteria.
  • Costs and contribution levels should be sustainable and kept under check.
  • Concerns about institutional capacity and inefficiencies of SSC going by the current poor administration of MSDF and ECF.
  • Governance structures and independence of regulatory body.
  • Prudential investment of funds, etc.

As stated, most (if not all) previous and current consultants to the SSC on the NPF were foreign experts. These experts have preconceived views about suitable pension fund models based on first world experiences;

  • They do not consider institutional inefficiencies of our public entities.
  • Do not consider our lack of institutional capacities.
  • Generally do not fully appreciate our labour demographics and income disparities etc.
  • First world social protection schemes cannot reasonably be replicated successfully in third world countries;
    • First world countries have developed their social protection schemes over many years.
    • Have well developed institutional capacity to manage these schemes.
    • Have different labour demographics etc.

Finally, the laborious task to overhaul the statutory environment to accommodate the NPF has not received coordinated attention. There is a need to prepare a thorough assessment of the impact a proposed NPF would have on the statutory environment to fully appreciate its extent.

In the next edition, a rationale will be presented on the basis of the approach we propose for the operationalisation of the NPF. The conclusion to our mind is a fresh, yet seemingly obvious but practical solution based on our existing unique current country strengths and successful experience of managing pension funds, that we believe should provide a wining solution to the tripartite partnership of government, labour and employers etc.

Marthinuz FabianusMarthinuz Fabianus graduated from Namibian University of Science & Technology with a Diploma in Commerce and Bachelors in Business Management. He completed a senior management development programme at University of Stellenbosch and various short courses including a macro-economic policy course which he completed at the International Training Centre of the ILO in Turin, Italy. Marthinuz also serves as trustee on the board of the Benchmark Retirement Fund and is a member of the board of the Retirement Funds Institute of Namibia. Marthinuz also served as a Commissioner on the Social Security Commission from 2015-2017.

Tilman Friedrich's Industry Forum

Monthly Review of Portfolio Performance
to 28 February 2019


In February 2019 the average prudential balanced portfolio returned 2.8% (January 2019: 1.2%). Top performer is Investec Namibia Managed Fund (4.4%); while Hangala Prescient Absolute Balance Fund (1.4%) takes the bottom spot. For the 3-month period, Investec Namibia Managed Fund takes top spot, outperforming the ‘average’ by roughly 1.4%. On the other end of the scale Metropolitan Namibia Managed Fund underperformed the ‘average’ by 1.6%. Note that these returns are before asset management fees.

Can we allow pension fund returns being diluted ever more?

To the end of February 2019 the average prudential balanced portfolio’s return of 8.2% represents a slightly improved outperformance of inflation of 5.1% and of the money market return of 7.6% over a 5 year period but still falling far short of both the money market portfolio and its long-term performance objective over any shorter periods. It only managed to achieve its long-term objective of inflation plus 5.5% over 10 years and longer.

Our concern is not so much that equities may not meet their long-term return expectations going forward.  Our concern is much more that pension fund investment returns are diluted ever more by what we have been referring to as a serious onslaught on the pensions industry that seems to be considered a duck that lays the golden egg. Consider the ever increasing cost as a result of increasing regulatory and governance requirements. Consider fiscal and monetary objectives of healing all sorts of ailments government and our national economy are experiencing where pension fund assets are forced into unlisted investments and where the local investment allocation will soon reach 45%, higher caps having been mooted already.

In our commentary in the September column of this investment brief, we speculated that the investment regulations will result in pension funds’ equity allocation effectively being capped at 60% as opposed to an implicit allocation of 75% that the current typical pension fund model presupposes. This will dilute expected long-term pension fund returns down from 6.3% to 4.6% before fees. After fees we will thus be looking at a net return of below 4% per annum whereas the pension model requires 5.5%.

We believe that this is a very unfortunate development pension fund members are facing without them being able to do much about it...

Read part 6 of the Monthly Review of Portfolio Performance to 28 February 2019 to find out what our investment views are. Download it here...


The world of investments and retirement is not what it used to be!
by Tilman Friedrich

Politicians, particularly those of the western world, would want to make us believe we live in an open global economy. However, where international trade is concluded in a single currency, where fiscal and monetary authorities intervene massively in financial markets, more will have to be done by the politicians to make the public believe.

The law of demand and supply, has no bearing on the behaviour of markets today. Savers are paying off the debt of borrowers through artificially low interest rates that are set by monetary authorities. So-called ‘safe haven’ investments are earning negative real interest rates and the investor is now conditioned to accepting that he will have to work until he drops dead, instead of realising his dream of retiring at an age where one might still be able to enjoy life for a while. Retirement ages are extended while pension entitlements are at best being questioned and already reduced in some countries.

With negative real interest rates seemingly having become the ‘new norm’, asset valuation models are now being questioned. Why should this be of concern to a pension fund member? Well the point is that pension fund contribution structures were established over the course of the past century or more based on the assumption of cash returning around 2% above inflation, bonds around 4% above inflation, property around 5% above inflation and equity around 8% above inflation. A typical balanced portfolio comprising of a mix of these assets based on conventional investment theory was expected to return roughly 5% above inflation, net of fees. Pension theory then arrived at a net retirement funding contribution rate of 11%+, to produce an income replacement ratio of 2% per year of membership.

Indications based on the ‘new norm’ are that one is now only looking at a net return of between 2% and 3% p.a. If this were to be true, the retirement funding contribution rate would have to be raised from 11% to at least 16%. Add to this a typical cost element of 6% for risk benefits and management costs, the ‘new norm’ for a total retirement fund contribution rate is now at least 22% instead of the 17% before the advent of the ‘new norm’. Alternatively the retiree would now have to settle on an income replacement ratio of only around 40% after 30 years of service, instead of his expected 60%! No wonder the mortals are being conditioned by politicians to be prepared to work until they drop dead.

We are certainly living in a different world today to what it was 30 years ago. What we expected of the future will be materially different and we will have to find ways and means to deal with the impact these changes have on our lives and on our retirement planning. One can only find some comfort in the fact that we are all ‘in the same boat’, the answers have not been found and a lot of energy and time will be spent all across the globe to find answers how to still have time in retirement to enjoy.

For local pension fund investors, one probably needs to take a different view of the risks of investing offshore. In the past, developing countries and Africa in particular was loaded with a political risk premium. Today the political risks in developed countries are probably as high, if not higher than those in developing countries. Sanctions and trade war are the weapons the US employs today to achieve its political goals and being the largest economy in the world such actions have serious repercussions for any country arousing the fret of the US, such as Iran, Turkey, Russia and so on. Add to this huge demographic risks, for a more callous view on investment in developed countries. In contrast the demographic risks Africa is facing appear to be receding going by general population growth rates.

Given this environment, where can a pension fund still invest? Fixed interest assets are evidently too risky being too exposed to monetary and fiscal manipulation. Even if we at the southern tip of Africa are living in a much more sheltered environment, our financial markets are shackled to global developments. This essentially leaves real business as the asset class to invest in. We all have to live, eat, drink, dress, get to work, nurture our health, go on holiday, learn, find shelter and so on. The ‘real economy’ will continue and is best represented by commerce and industry, in short, investment in equity appears to be really the most appropriate asset class for the normal investor who shies away from the more exotic asset classes such as gold, works of art etc.


Conclusion

As we usually say, based on fundamentals, equity is our preferred asset class, more specifically value companies offering a high dividend yield. We believe that the normalization of interest rates has largely been factored into equity valuations already and that the risk of a further downward correction is slim. We expect normal returns from US equities and believe that SA equities need to catch up as they are behind the curve in terms of long-term returns. They should present a buying opportunity. Despite all we have said about the risks presented by offshore markets, sound risk diversification principles still dictate that investments should be spread across the globe, the prevailing exchange rate allowing, and again with an equity bias. If one can find value in property, it should also be an appropriate asset class, being closely tied into the ‘real economy’.

Since there is no evidence that the global economy is busy turning around, it is difficult to identify any economic sector that might produce some fireworks over the next 12 months meaning that one should spread your investments across all economic sectors but should preferably pick companies with quality earnings and high dividend yields. In SA Consumer Goods and Consumer Services should be viewed with caution as they are still ahead of the curve having delivered stellar performance over the past 13 years, despite their more recent sharp correction.

The Rand is currently substantially undervalued and should be closer to 12 to the US Dollar. It is probably to some extent weakened through the low Repo rate that should be around 2% higher than it currently is based on current inflation. An increase in the Repo will be forced by an increase in the Fed Rate but that looks like an unlikely course for the next 12 months. A weak Rand should allow the local economy to pick up which is what the SA Reserve Bank would like to see. We are therefor unlikely to see a change in interest rates for the next 12 months and we are likely to see a relatively weak Rand for the next 12 months

The relatively weak Rand that holds the prospects of strengthening over the next 12 months intimates that it is not a good time to move money offshore for the purpose of diversifying one’s investments although that should remain the objective of any local investor who holds more than half his wealth in Namibia..


One elephant in the room and the question of proportionality

I just came across an interesting discussion on regulation and supervision of financial institutions. Not NAMFISA this time around but its SA equivalent nowadays known as FSCA (the Financial Sector Conduct Authority - I love acronyms!)

In Moneyweb of 13 March 2019, Patrick Cairns quotes Brandon Topham, newly appointed head of investigations and enforcement blowing his trumpet on his unit. This was now established as a “...division in its own right...in a fundamental change from how investigations took place within [predecessor] Financial Services Board”. His team has doubled to around 60 staff. “...With the change in legislation, the importance of being proactive and not just reactive has become emphasised, which is why we have established a separate division within the FSC...” He prides himself on one of their first major break-throughs “...In a recent example, the regulator was able to act within just one week of receiving a complaint against Dian Goosen, a licenced representative in Cullinan who was misappropriating clients’ funds. Having scrutinised what he was doing, the FSCA conducted an early morning search and seizure operation at his premises...” Well done, we say!

At this juncture, just a brief interlude – if FSCA employs 60 staff in the investigations and enforcement division, NAMFISA should deploy 2 staff members, considering that our economy is about 4% of SA’s, applying proportionality!

But let’s carry on and get to the story of the elephant in the room...

As one reader of the FSCA’s trumpet blowing aptly comments “...Now, there’s an asset manager in Pretoria called the Public Investment Corporation. They’re a registered Financial Services Provider (FSP), so you’re their regulator. They’ve been a bit naughty with their client’s money, investing into some dodgy deals like AYO Technologies. Are they one of your 13 investigations? Or are you worried because the PIC is owned by the SA government, and answer to the Minister of Finance, who is actually your boss! Maybe you could use some of those great conflict of interest regulations that you expect the rest of us to adhere to, to resolve the problem...You might also want to know that the PIC’s client is the Government Employees Pension Fund. So the money they’ve been a bit naughty with is probably yours...”

We are talking of billions of public moneys having been misappropriated between AYO and VBS by the PIC!

By now you may have guessed where I am heading. We too have a PIC, called GIPF, the elephant in the room, and it seems the issues are not dissimilar. Fortunately the GIPF has pulled up its socks doubling and quadrupling its governance and oversight.

Fact of the matter is that it is an elephant in the Namibian room.

And unfortunately it is also intent to unleash its financial muscle to compete with the private sector for the spoils of the pensions industry it hitherto managed to survive on, considering that the GIPF represents 50% of all active members of pension funds and close to 70% of all assets owned by members of pension funds in Namibia. That is market domination by any measure! If government is at all sincere about creating an economic environment that will allow a private sector to flourish it should take urgent and purposeful steps to create an enabling environment for a vibrant private sector. I do not think it will be in anyone’s  interest to further undermine the foundation on which our economy rests! Where the private sector is capable and willing to drive economic activity, it should be left to do so while government should preserve its extremely scarce resources on such economic activity that the private sector is not capable or willing to undertake.

But back to the regulator and proportionality. So here we have this elephant that represents 50%+ of Namibian pension fund membership and about two-thirds of total Namibian pension fund assets. This means that in terms of supervisory effort, NAMFISA should allocate roughly 60% of its pension fund supervisory attention on the GIPF in terms of proportionality. I do not know how much attention NAMFISA spends on GIPF. I suspect it is disproportionally little, going by the number of on- and off-site inspections of funds as small as 200 members that in terms of proportionality should not ever feature on the inspecti0n program.


Pension fund governance - a toolbox for trustees

The following documents can be further adapted with the assistance of RFS.
  • Download the privacy policy here...
  • Download a draft rule dealing with the appointment of the board of trustees here...
  • Download the code of ethics policy here...
  • Download the generic communication policy here...
  • Download the generic risk management policy here...
  • Download the generic conflict-of-interest policy here...
  • Download the generic trustee performance appraisal form here…
  • Download the generic investment policy here...
  • Download the generic trustee code of conduct here...
  • Download the unclaimed benefits policy here...
  • Download the list of fund service providers duly registered by NAMFISA here... 
  • Download the Principal Officer performance appraisal form here...
  • Download the revised service provider self-assessment here...
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 Chairman of the RFS Board, and retired chairperson, and now trustee, of the Benchmark Retirement Fund.
 
Check out the new retirement calculator

Our web based retirement and risk shortfall calculator has been enhanced and updated to assist you to determine how much if anything, you should contribute additionally, either by way of lump sum or regular salary based contribution, to get to your target income at retirement, death or disablement.

Try it out, here is the link...

 
Compliment from a personal principal officer

“Dear Kai,
I would like to really thank you and your team for a “Tops” service, our Fund would not achieve much without your excellent service.
Best regards”


Read more comments from our clients, here...
 
The Benchmark Retirement Fund - Flagship of umbrella funds in Namibia
By Paul-Gordon, /Guidao-Oab, Benchmark Product Manager

Agribank and Dutch Reformed Church in Namibia to join the Benchmark

The board of trustees of the Agribank Retirement recently invited proposal from interested umbrella funds to accommodate Agribank as a participating employer of the umbrella fund.

Similarly, the Dutch Reformed Church in Namibia Retirement Fund recently considered whether it should join an umbrella fund, after it became evident that it is no longer viable for smaller employers to maintain their own pension funds due to the ever increasing regulatory and compliance requirements, and the costs attached thereto.

We are proud to share the news that both, the Agribank and the Dutch Reformed Church in Namibia resolved to join the Benchmark Retirement Fund! That is a feather in the cap of the Benchmark Retirement Fund. We  welcome Agribank, the Dutch Reformed Church and their staff and look forward to serve them beyond expectations for many years to come!

 
Paul-Gordon /Guidao-Oab joined RFS as Manager: Audit and Compliance in May 2016 and then moved into the position of Benchmark Product Manager. Paul holds a B Compt degree from Unisa and has completed his articles with SGA.

News from RFS

Long service awards complement our business philosophy

RFS philosophy is that our business is primarily about people and only secondarily about technology. Every time a fund changes its administrator, a substantial amount of information is lost be it physically or knowledge. Similarly, every time the administrator loses a staff member, it loses information and knowledge. We know that as a small Namibia based organisation we cannot compete with large multinationals technology wise because of the economies of scale that global IT systems offer. To differentiate us we need to focus on personal service and on the persons delivering that service to get customer acceptance and service satisfaction. With this philosophy we have been successful in the market and to support this philosophy we place great emphasis on staff retention and long service.

The following staff members recently celebrated their 10 year work anniversary at RFS! We express our sincere gratitude to these staff for their loyalty and support over so many years:
  • Amanda Ocallaghan
  • Belinda Carlson
We look forward to these staff members continuing their value-addition to our clients!

RFS once again sponsors prize giving for NAMCOL achievers

For the 7th consecutive year RFS sponsored generous financial rewards to high performers at NAMCOL.


Above FLTR: Special advisor to the Governor of the Khomas Region, Mrs R Sibiya; Director of NAMCOL, Dr H Murangi; RFS Client Manager, Ms M Auene; and Director of Ceremonies Mr J Nitschke.


Above RFS Client Manager Mariana Auene handed the prizes (totalling N$ 16 000) to the recipients. FLTR: best overall NAMCOL candidate on NSSCO Level, Ms. Condensia Paulus; best overall NAMCOL candidate Mr. Simaneka L Mumbala; Ms Mariana Auene of RFS.

We congratulate all NAMCOL achievers! May their dedication and commitment to their studies serve as an example to many other Namibians!


News from the market

RFS entrusted with the administration of NAMFISA Provident Fund

With great pleasure and gratitude we announce our reappointment as administrator to the NAMFISA Provident Fund.

This is a great compliment to our combined admin, fund accounting and client servicing team directly responsible for this account and of course the support teams and indeed the entire RFS team at large. We are humbled and grateful for this gesture of comfort in our service delivery and trust that we will be able to continue providing service beyond expectation!

At this juncture we would like to quote wisdom of unknown origin:

“In today’s world meaningful differences between businesses are rarely rooted in price or product, but instead in customer experience!”


Specialist Administration Services swallowed by Liberty Life

Specialist Administration Services (SAS) was launched in June 2014 by Monique Cloete, former managing director of Alexander Forbes Financial Services in Namibia and her colleague Janell van Wyk. Since its launch SAS attracted appointments by the Standard Bank Namibia Retirement Fund and the Meatco Retirement Fund. Rumours of a tie up between SAS and Liberty Life have been rife since its appointment by the Standard Bank Namibia Retirement Fund from the beginning of 2015. Although not publicly announced yet, the buy-out of SAS by Liberty Life was now confirmed independently.

With this buy-out, RFS remains the only Namibian private fund administrator.


SA heading the FIM Bill way

A revised draft Conduct of Financial Institutions (COFI) Bill will be submitted to the South African cabinet for approval towards the end of 2019. The draft bill was published for comment in December 2018.

It is designed to provide for the setting up of a consolidated, comprehensive and consistent regulatory framework for the conduct of financial institutions. These objectives are also integral to our own FIM Bill meaning that SA is now heading the FIM Bill way as far as market conduct standards are concerned. The SA Pension Funds Act must be next in line for a major overhaul. After all Namibia may once again be able to rely on big brother down south for training and legal support?


Legal snippets

Certificate of existence – unnecessary red tape?
A guest contribution by Andreen Moncur BA (Law )

What is a Certificate of Existence (COE) in the context of retirement funds?

When a person becomes a pensioner, the retirement fund that will pay his pension/annuity enters into a contract with the pensioner. In essence, this contractual arrangement provides for the pensioner to “pay” the fund a capital sum in exchange for the fund undertaking to pay the pensioner a monthly pension, usually for life. The fund and the pensioner may also agree that when the pensioner dies, the fund will pay a pension to a surviving dependant/s of the pensioner. For the fund to be able to pay the pensioner his pension, the pensioner must provide the fund with certain documentary and other information and proof, including but not limited to proof of age, bank details, and proof of life. Some of this information may need to be furnished only once, while some of it, such as a COE, may need to furnished at regular intervals.

A COE is a form that essentially states that a pensioner is alive on a given date and that this fact has been verified by an authorised person (attestor), e.g. a Commissioner of Oaths, bank manager or police officer. This form is issued to pensioners annually by a retirement fund and must be completed, certified and returned to the fund by each pensioner before the expiry of a certain period. The pensioner must complete and sign the form and have it attested by the attestor. The pensioner must present himself, proof of identity and the form to the attestor to certify the form. If the attestor is satisfied as to the pensioner’s identity and other relevant facts, he attests thereto by signing and stamping the COE with an offical stamp. Thereafter the pensioner must return the certified form to the retirement fund by the due return date.  


Why is a COE necessary

A COE is necessary because only members of a retirement fund and other beneficiaries as defined in the rules of the fund may receive benefits from the fund. Furthermore, in order to receive a pension from a retirement fund, a pensioner must be alive.

There is a fiduciary relationship between the Board of Trustees (BOT) of a retirement fund and the fund and its members. The fiduciary role of the BOT creates fiduciary duties for the BOT to prevent possible abuse of the trust placed in it. A fiduciary duty is the duty of utmost good faith (uberrima fides) that demands a greater standard of care than the reasonable person would apply when dealing with his own affairs. This means that BOT must always act in good faith towards the fund and its members and always exercise its powers for the benefit of the fund and in the best interests of the members.

Should a breach of its fiduciary duties by the BOT constitute a criminal offence, the BOT can be prosecuted under the Financial Institutions (Investment of Funds) Act 39 of 1984, which prescribes financial penalties and/or imprisonment. There could also be action by the fund for breach of trust and the BOT could be held liable for any losses suffered by the fund as a result of negligence. It is the duty of the BOT to direct, control and oversee the operation of the fund on behalf of the members and to look after the fund assets. This includes ensuring that:
  • the fund employs proper control systems;
  • managing the fund in terms of its registered rules;
  • paying benefits in terms of the rules of the fund and the Act to the beneficiaries who are entitled thereto in terms of the fund’s rules.
If the BOT negligently pays an incorrect amount or pays a benefit to a person not entitled thereto, the BOT may be held personally liable for making good the loss to the fund.

Finally, the relationship between a retirement fund and its members is one of good faith. For each party to act in good faith and comply with their obligations, certain information/proof is required from the other party.


Are COEs required by law?

COEs are an established trade practice in the retirement funds industry and in other sectors in Namibia. In this sense, COEs are customary law requirements.

COEs are also statutory law requirements, albeit implicit equirements.

The Pension Funds Act 24 of 1956 (the Act) implicitly recognises the need for COEs. In terms of section 11(d), the rules of a fund must provide for the conditions under which any member or other person may become entitled to any benefit and the nature and extent of any such benefit.

In terms of Regulation 6 of the Regulations made under the Act, the BOT of a retirement fund must annually furnish a statement of responsibility to the Registrar of Pension Funds wherein it confirms that during the financial year under review it has complied with duties imposed by law and the rules of the fund, including ensuring that proper internal control systems were employed.


Fund ignores member instruction to transfer to another fund

In this case (ref PFA/WC/00028340/2016/MCM) former fund member AJ van Zyl  (complainant) laid a complaint with the Adjudicator on the basis that the fund paid his withdrawal benefit in accordance with his first instruction, ignoring a subsequent instruction he had submitted.

The Adjudicator received the complaint on 19 October 2016 and this was forwarded to the former member’s fund for a response. It was alleged by the complainant and acknowledged by the former fund that it had paid a cash withdrawal benefit on 20 September 2016 to complainant’s bank account after having received a signed and stamped withdrawal claim form to pay the benefit in cash. Complainant had subsequently to his request for a cash withdrawal benefit, submitted a withdrawal claim form requesting the benefit to be transferred to another fund and submitted that the subsequent request was ignored by the fund. As the result he suffered loss as the result of tax on the benefit.

The fund informed  complainant’s former employer on 18 October 2016 that it assumed the second form was a duplication of the first form as the form was neither stamped nor signed by the authorised signatory and that it would have to submit an ACB recall to the complainant’s bank to reverse the payment already effected. The fund sent an email to complainant on 26 September after it received the member’s complaint on 26 September 2016, wherein the fund apologised and explained that it would have to submit an ACB recall in order to give effect to the second form. Complainant however advised that he no longer wanted to claim or continue as he had already invested the benefit and that he would lay a complaint.

In adjudicating the complaint the tribunal considered whether the fund –
  1. Failed to adhere to complainant’s instruction;
  2. Had observed the rules of the fund being supreme and binding on its officials, members, shareholders and beneficiaries.
The tribunal observed that the complainant’s claim was founded on delict, which requires that the following elements must be present and proven by the claimant:
  1. An act or omission that caused damage or loss;
  2. The act or omission must be wrongful;
  3. There must be blameworthiness in the form of intention or negligence;
  4. The complainant must have suffered loss or damage; and
  5. A causal link must exist between the act/ omission and the loss/ damage.
The tribunal further observed that the fund administrator is required to act with due care and diligence in the best interest of members at all times and that failure to do so, constitutes maladministration.

The tribunal concluded that -
  1. The fund cannot be faulted for failure to adhere to the second withdrawal claim form as it was not properly completed. The form was thus not valid and the fund did not act negligently.
  2. Payment of the benefit was made in accordance with the rules of the fund.
  3. Although the fund attempted to remedy the situation, complainant was no longer interested and transfer was thus not possible anymore.
The claim was consequently dismissed by the tribunal.

Media snippets
(for stakeholders of the retirement funds industry)


Should government tell you what to do with your retirement savings?

“...At the launch of its election manifesto in January, the ANC said that it intends to look at the introduction of prescribed assets to fund social and economic development. This would mean that retirement funds, and potentially other forms of investment, would have to invest in specific asset classes or securities set by the government.

This is hardly a new idea. For a long period up until 1989, when international investment into apartheid South Africa dried up, the government prescribed that pension funds had to invest 53% of all their assets into para-statals and government bonds...It was not widely perceived to be a positive thing for individual investors then, and the return of the idea has not been welcomed by the industry now...Overall, limiting investment freedom is not a good thing. It creates artificial demand for certain asset classes and limits the amounts of money available for other asset classes, which has an impact on returns...There is no question that South Africa’s enormous retirement savings pool has the potential to play a bigger role in developing the country. It must however do so in a way that does not pose a risk to the investors whose money it is...This is because South Africa already has a retirement savings problem...The government therefore needs to bring a more nuanced approach to the problem...The question is whether one does that through prescription or other policies. We think you can do it by making asset classes that are difficult to invest in, like infrastructure, easier to invest in...This has shown conclusively that large amounts of capital, much of it from pension funds, can be freed up for economic development when the right incentives are created...”

Read the full article by Patrick Cairns in Moneyweb of 8 March 2019, here...


RA vs pension fund – here are the pros and cons

“...Retirement annuity

Retirement annuities are private retirement funds that anyone can purchase in order to save for their retirement.

Pros
  • You can choose how much you want to contribute with a retirement annuity, raising and lowering the amount you contribute according to what you can afford.
  • By contributing to an RA, you will be able to reduce your tax bill annually when you submit your tax returns.
  • You can still contribute to your RA before the end of February to get some tax relief and, hopefully, get a hefty refund.
Cons
  • The tax incentive will only show once you have submitted a tax return, so the relief won’t be immediate, and you will eventually be taxed in your monthly retirement income.
  • No withdrawals are allowed, except in the case of an early retirement due to ill-health or if you officially emigrate.
  • At retirement, you can only access one-third of the value of your savings in cash (R500 000 across all your retirement products can be taken tax free) and with the remaining two-thirds you need to buy an annuity income, which is taxable.
Employee fund

You contribute to an employee fund through your employer deducting the amount from your salary. An employee retirement fund can either be a pension fund or a provident fund.

Pros
  • The retirement contribution is deducted before you get your salary, so you save without feeling like you are depriving yourself. An employee fund will help you invest in your future, even if you lack the discipline to save on your own.
  • Your employer might even match your retirement savings. This means if you save 10% of your salary and your employer matches it, you will invest an extra 10% of your salary for your retirement - and it’s not even your own money. Take advantage of this opportunity, because it’s basically free money, and maximise it if you can.
  • Contributing more into your retirement fund immediately reduces your tax bill by, for example, putting you in a lower tax bracket - you don’t need to wait for a tax refund later in the year. Your payroll administrator will recalculate your taxable income and you’ll see a lower tax amount on your payslip.
Cons
  • Your options for a pension fund or provident fund are offered by your employer, so investment options might be limited.
  • You normally need to commit to an increased contribution for a year and many companies will only allow you to change the amount on a fixed date every year. You don’t have the flexibility to simply top up or reduce your contribution to your employer’s fund.
A pension fund works the same way as an RA at retirement but with a provident fund, for now, you will be able to get all your money at retirement...”

Read the full article by Zola Zingithwa in Sunday World of 13 February 2019, here...


Media snippets
(for investors and business)


Is your leadership team acting like a true team...?

Here is an extract of 2 interesting questions and answers from an article on leadership:

Q. So how do leaders create that level of trust?

A. As a leader, you have to be very open and up front yourself. If the team leader doesn’t demonstrate that they’re prepared to be challenged and questioned, then it’s very hard for the rest of the team to do the same. If you’ve got a senior leader with appropriate humility who is prepared to put issues on the table and be challenged and questioned, then I think it makes it easier for the rest of the team to do that.

It also helps to be explicit in team discussions about what, as a leader, you want from the meeting. Have you already made your decision and you just want their input? Or do you want their input to help make a decision? I don’t think leaders are always clear with their team about such things in meetings, and people will generally be accepting if you’re clear with them because they know that, on the really big calls, it’s the CEO’s decision because he or she ultimately is held accountable for the outcome.”


Q. What were some important leadership lessons for you personally?

A. The biggest feedback I got about my leadership style early on was around my style of communicating to people on major issues. I would try to get them to see the issue through prompts and communication rather than being very direct. I was probably too empathetic as a leader, and that would get in the way of sometimes giving the direct or clear feedback that people needed to hear.

I was told that I needed at times to be a lot more direct and a lot clearer and less consensus-driven and empathetic. One challenge for leaders is that you sometimes have to move into a style that’s not your natural style. Some people struggle with that because they almost feel like they’re acting – “That’s not who I am. I’m not being real.”

But as a leader, sometimes you have to be different things to different people, and you may need to stretch your style. And that doesn’t mean in any way impacting your integrity or your honesty. But a lot of people struggle with that.”

Read the full interview by Adam Bryan in Linkedin of 11 March 2019, here...


Think your job is meaningless? Think again.

“In our lifetimes, each one of us will spend the majority of the time we have on Earth doing one of two things: sleeping (26 years) and working (13 years). That’s right, 113,880 hours of our lives will be spent working - that’s more time than we will spend on holiday or even socialising... It goes without saying that that the career we choose to follow is a dominant force in our lives, not just in terms of the amount of time we spend doing it, but also in terms the impact it has on us...

What gets us out of bed each and every morning for 13 years?

I think most of us would agree that it’s not the pay packets or office perks that ultimately get us out of bed every single morning, time and time again, for years and years... In fact, what really drives us is the sense of meaning and purpose we get from what we do every day...

Our jobs are changing yet again, with most of us facing the prospect of working alongside machines in the not too distant future. So, does this, combined with the fact that most will be working for longer, mean it will become even harder for us to find meaning in our work?


Are some jobs more meaningful than others?

The short answer is no.

When people think about meaning at work, many wrongly assume this is reserved only for those who work for organisations that have a direct, positive impact on the world around us – for instance, charities, schools, hospitals etc. That thinking is wrong...


How to build more meaning into your work, no matter what you do

Even if, admittedly, you’re not inherently motivated by your company’s mission, it is, in fact, possible to find and build meaning in other aspects of your day-to-day work:
  • Focus on the bigger picture
    Stop assuming that your job isn’t as meaningful as others...Change the perception you have of yourself and the work you do, you’re doing yourself a disservice if you don’t.
  • Spend time with the people your work impacts the most
    One way to help yourself see the impact your work has on the end goal is to spend some time with the people that your work helps – that might be a customer, client, or an internal stakeholder.
  • Leaders and managers must reinforce the bigger picture
    If you are a leader or a manager, it’s your responsibility to help keep the bigger picture alive for your team members and overcome the disconnect... So, every time you brief your team on a new task or project, always link it back to the impact it will have on the bigger picture, and clearly explain its purpose. You’ll soon find that your team are finding more meaning in what they do.
  • Craft your job in a way that injects more meaning
    But meaning isn’t just found in and built from more consciously connecting what you do to the end goal. It can be found in each task and process you embark on as you arrive at the office every day...In a nutshell, crafting your job to play to your strengths, passions and interests will allow you to think differently about the impact you’re having on the organisation and thus help you to build more meaning into what you do...This isn’t about fundamentally changing your role and its objectives. It’s about understanding where your unique strengths lie and changing the way you do things in order to play to those strengths.
  • Leaders and managers - help your team members craft their jobs
    If you manage a team, you must challenge any longstanding thinking you have that certain tasks must be done in a certain way, by everyone...So, bring your team together to discuss in an open forum which tasks they each enjoy and derive the most personal meaning from...
  • Give your team the space to build meaning into their work
    This isn’t about dictating how exactly each task must be done. It’s about empowering your people to do their work in a way that they think will deliver the most value, and in a way that will play to their key strengths. And, if they are given the freedom to do this, they will be able to build a sense of personal meaning into their work...So, the next time someone asks you what you do for a living, how will you answer?...”
Read the full article by Alistair Cox in Linkedin of 25 February 2019, here...

The secret power of a thank you note

Thank-you notes might seem old-fashioned but there's plenty of value to be found in the tradition. According to a study by Accountemps, just 24% of job applicants send thank-you notes after interviews — but 80% of hiring managers who receive them say they are useful in evaluating the potential of applicants. Proponents of thank-you notes say they are an inexpensive way to strengthen a relationship and show the applicant cares about the job.

Perspectives curated by LinkedIn Editors


And finally...

Did you ever wonder why??

WHY: In golf, where did the term 'Caddie' come from?
BECAUSE: When Mary Queen of Scots went to France as a young girl, Louis, King of France, learned that she loved the Scots game 'golf.' He had the first course outside of Scotland built for her enjoyment. To make sure she was properly chaperoned (and guarded) while she played, Louis hired cadets from a military school to accompany her. Mary liked this a lot and when she returned to Scotland (not a very good idea in the long run), she took the practice with her. In French, the word cadet is pronounced ‘ca-day' and the Scots changed it into caddie.

 
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