|In this newsletter:
Benchtest 08.2019, IMF report, provident funds and the IT Act, Benchmark member meeting and more...
Annual insurance cover confirmations
Fund officials and trustees who may have missed our annual insurance cover confirmations by financial institutions and intermediaries, can download the circular here...
If this is important information to you please ascertain whether the information provided suffices for your needs or if not, please follow up with the relevant institution for more comprehensive and conclusive information. Since there are no standards for insurance cover and for reporting by insurers on insurance cover underwritten, it is not possible for us to provide a summary report that addresses all possible permutations.
Extension granted for Online Submission of Employees Tax (PAYE) returns via the ITAS portal
Employers were originally required to submit their monthly PAYE 5 returns on ITAS by 20 September. Due to difficulties experienced by many employers to adapt their payroll systems in time, the due date was postponed to 20 February with a clear message that any further extension will not be granted.
Read the relevant PWC alert here...
Namibia joins Base Erosion and Profit Shifting (BEPS) Inclusive Framework
“The BEPS agenda focuses on equipping governments with domestic and international instruments to address tax avoidance to ensure that profits are taxed where economic activities generating the profits are performed and where the economic value is created. In part it is focused on closing the gaps in international tax rules that allow multinational enterprises to legally, but artificially shift profits to low or no-tax jurisdictions...”
Download the EY tax bulletin 06/2019 here...
Registered service providers
If you want to find out whether your service providers are registered, or whether you need to establish directly from NAMFISA because the service provider does not appear on the list, use this link...
In our Benchmark column we present
In our Administration Forum column we alert employers of their obligations concerning correct calculation and payment of contributions.
In ‘Legal snippets’ we our guest writer’s exposition on section 37D deductions from benefits for misconduct.
When is a good time to switch to another investment manager
From an investment consultant
Thanks for the email. Yes, it worked and we submitted on time. Thanks so much for your input. We really appreciate your valuable contribution towards the Fund. You make the whole process so efficient with your world class input which is timeously and of high and undisputable quality. We have so much joy working with you.”
Read more comments from our clients, here...
Benchmark announces 2018 results to members
In 2018 the Benchmark Retirement Fund’s assets grew to N$2.920 billion, up from N$2.744 billion in 2017. Its membership grew to 11 548 members.
Despite the challenging operating environment and the proliferation of regulatory requirements, the Fund continues to grow, with new participating employers joining the Fund as well as with a growing number of members preserving their retirement capital in the Fund or choosing to draw monthly pensions from the Fund. The Fund catered to 961 annuitants who received N$54 million in annuities in 2018.
The Fund continues to be managed on a world class basis with a strong focus on governance and is increasingly becoming the number one address in the umbrella pension fund space.
Read the full press release here...
Changing the Retirement Funding Landscape
At the Benchmark Retirement Fund annual member meeting that was held at NIPAM on 5 September, Head of Individual Member Support: Sanlam Employee Benefits South Africa presented on ‘Changing the Retirement Fund Landscape’. In this article we focus on the key considerations for financial resilience that Barend shared with our audience. Fascinating findings and stats of the Sanlam Benchmark Survey that were presented by Barend will be discussed in the next Benchtest newsletter.
On an annual basis Sanlam South Africa conducts a market survey with a specific focus and presents their findings at the Sanlam Benchmark Symposium in South Africa. This year their research included a deep dive into the concept of financial resilience, basically the ability of individuals and corporates to withstand the financial impact of a downturn in the economy.
Barend le Grange, one of the speakers at the Sanlam Benchmark Symposium, presented the findings of the market survey on financial resilience at the Benchmark Retirement Fund Annual Member Meeting held on 5th September 2019 at NIPAM.
Barend noted that the key considerations for financial resilience are default strategies, good governance, member engagement, information security, professional and independent trustees as well as scale. He briefly discussed some key consideration as documented below.
Barend advised that the South African Regulator has basically forced all pension funds to introduce default strategies with the Default Regulation effective 1 March 2019. He advised that all retirement funds should actually have this in place, without the Regulator’s intervention, to cater for the average member who is not that knowledgeable on retirement funds and may end up losing his retirement savings by investing in the wrong product(s). Barend complimented Benchmark Retirement Fund on having default strategies in place, saying “I was pleasantly surprised to find out that Benchmark already had default options. South African pension funds can learn a thing or two from Benchmark.”.
Barend pointed out that the King IV Report, for the first time, includes principles and practices for good corporate governance of retirement funds. The previous King Reports did not include any retirement funds. The trustees of retirements are now able to enhance governance even further.
Barend noted that the research indicates that consultants believe the 2nd most dominant trend in advice is the shift to focusing more on members rather than on funds or employers. The findings from the research indicate that the Member’s actual experience with their retirement funds has been pretty bleak: disappointment, shock and regret.
Information security is the practice of preventing the unauthorised use, disclosure, disruption, modification, inspection, recording or destruction of information, whether physical or electronic. The 2019 Allianz Risk Barometer of Top Business Risks indicated that Cyber Risk is the top worldwide business risk alongside Business Interruption. Cybercriminals are global, ruthless, skilled, organised, at times government funded and have a sophisticated network. Barend mentioned that the average cost of cybercrime has increased by 62% in 5 years to U$600 billion per annum, that’s almost threes time the average loss due to natural disasters at U$208 billion per annum. He advised that the biggest counter to cybercrime is people. Collectively, we (people) must make information security an integral part of our culture and overall structure across funds, employers, consultants and administrators. Finally, he noted that IT Governance is addressed in detail for the first time in King IV Report.
Employers to ascertain that contributions are paid timely and correctly
In last month’s newsletter in ‘Employers to ascertain that contributions are paid timely and correctly’ under ‘Legal snippets’ we reported on a case before the Eastern Cape High Court dealing with an employer who failed to pay the correct premiums over a very long period and who was obliged to pay-up all amounts underpaid plus interest.
Incorrect contribution payments by the employer are one of the more serious headaches the fund administrator faces. Accurate member records are sine qua non for a pension fund. This requires meticulous reconciliation of moneys received from the employer with moneys updated in the fund member data-base on a monthly basis.
Having meticulously reconciled and updated the contribution for any month, more often than not the administrator will have ended up with differences between what was received and what was updated. This is typically due to information from the employer being incorrect or incomplete, or the employer having over- or under-paid by mistake.
Often the manner in which the employer calculates the contribution of a member (particularly upon entry or exit) is inconsistent with the rules, while being in accordance with the member’s conditions of employment. The rules constitute the agreement between the fund, the employer and the member, and contributions have to be made in terms of the rules of the fund. This may well create a dilemma for the employer if it is inconsistent with the employee’s employment contract. In such a situation it is incumbent upon the employer to either change its conditions of employment or to arrange with the fund to have the rules amended in order to be consistent with the employer’s conditions of employment.
As per last month’s article under ‘Legal snippets’, incorrect payments by the employer do not prescribe while the employer continues to make monthly contributions. Differences between contributions received and contributions updated by the administrator must be communicated to the fund by the administrator. While it is practice that the administrator would also inform the employer, no contract exists between these 2 parties and the administrator has not authority to require of the employer to resolve all differences without delay.
Such differences of course are of multiple nature, so it is not as if the administrator can run an ‘open-item’ debtors ledger of the differences. Over time it becomes ever more difficult to substantiate how the accumulated balance of over- and under-payments has built up and what the exact nature of the differences was.
Typically, when the administrator requests that the accumulated balance eventually be written off, the fund and the employer want to know what the balance is made up of. That despite the fact that the administrator may have provided full detail, month-by-month, that was simply ignored. When such accumulation spans more than one financial year it becomes extremely challenging and time consuming to build up the accumulated balance, as this will have to be a manual process. It is the responsibility of the fund, through its principal officer, to ascertain that the employer diligently corrects all differences, month-by-month, by either adjusting its payment for the following month or by requesting the administrator to correct its member data-base.
RFS recognises long service
Jo-ann Klazen and Terence Christiaan celebrated their 5th anniversary at RFS recently. We express our sincere appreciation to Jo-ann and Terence for the 5 years of their life they have dedicated to RFS and its clients and look forward to them continuing to contribute towards the success of our team!
RFS welcomes new staff
Desiree Kuutondokua joined our Benchmark department on 1 April 2019. Desiree matriculated at Ella Du Plessis Secondary School in 2002. She started to work in the pension funds industry in 2011 when she joined Old Mutual as an Administrator. During the 5 years she worked at Old Mutual she gained a lot of experience especially on the Orion funds. Desiree joined NMG in 2016 as a Scheme Administrator and then moved on to join Liberty Life later in the same year as a Scheme Consultant. She resigned from Liberty at the beginning of 2017 to become a full-time mother. Desiree is married and her husband is employed by Namdeb at Oranjemund. They have 3 kids, 2 girls and one boy.
We welcome Desiree heartily and look forward to her applying her skills and experience for the benefit of our team and our clients!
RFS teams up for a jukskei day
RFS “Witches & Wizards” in black t-shirts finished joint 10th out of 36 teams with 41 points, comfortably beating their colleagues of the Benchmark “Red Warriors” in the red t-shirts that finished with 31 points. Not a bad result for juksei apprentices at all!
Government responds to matters raised at economic summit
Should you have missed the official document issued by government in response to various recommendations made, and concerns raised at the economic summit arranged by the High Level Panel on the Namibian Economy (HLPNE) that took place in early August this year, you can read up by following this link...
Minutes of industry meeting of 13 June 2019
If you missed the minutes of the industry meeting of 13 June 2019, you can download them here...
This meeting was attended by representatives from 28 funds and a representative from RFIN. Interestingly only 24 of some 80 active funds in Namibia were present and of the 24 present 12 are RFS clients. It seems RFS is more successful in mobilising its clients that any of the other service providers.
Following is a brief overview of the content of the minutes:
NAMFISA annual report for the year ended 31 March 2019 boasts a huge surplus of N$ 65 million on a total income of N$ 261 million. That represents 25% of its total income. 2019 was the first full year of the new levies that were implemented as from 1 November 2017!
The report offers a wealth of interesting information that offers fertile ground for further research. If you are interested, follow this link...
If you are a Master’s or PhD student and you are interested in doing research on the report, talk to us, we may be able to assist you.
Section 37d and the meaning of misconduct by a retirement fund member
A guest contribution by Andreen Moncur BA (Law )
Section 37D of the Pension Funds Act 24 of 1956 (the Act) allows the employer to claim compensation in specific instances for certain damages caused by an employee who is a member of the employer-sponsored retirement fund. Section 37D(b)(ii) states that a fund may - “(b) deduct any amount due by a member to his employer on the date of his retirement or on which he ceases to be a member of the fund, in respect of ... (ii) compensation (including any legal costs recoverable from the member in a matter contemplated in subparagraph (bb)) in respect of any damage caused to the employer by reason of any theft, dishonesty, fraud or misconduct by the member... from any benefit payable in respect of the member or a beneficiary in terms of the rules of the fund, and pay such amount to the employer concerned;”.
What constitutes “misconduct” for the purposes of s37D? This issue has not yet come before the Namibian courts. However, valuable insights from South African common law can guide us. While South African common law is not binding in Namibia, it is highly persuasive and Namibian courts are likely to consider it. In the case of a claim for damages due to a member’s misconduct, the SA common law principle is that the member’s conduct “must have been wrongful and intentional conduct that causes harm and have involved dishonesty”. The SA judiciary has interpreted “misconduct” rather strictly as excluding negligent or careless conduct. In Moodley v Local Transitional Council of Scottburgh Umzinto North and Another  9 BPLR 945(D), the high court effectively distinguished between “negligent misconduct” and “dishonest misconduct”. The court applied the principle of restrictive application and held that “misconduct” as envisaged in s37D(1)(b)(ii) should be interpreted to mean conduct that has an element of dishonesty because the words “theft”, “dishonesty” and “fraud” as referred to in section 37D(b)(ii) all describe wrongful and intentional conduct causing harm. Under the principle of restrictive application, where words which have a limited or particular meaning are followed by a phrase of general application, the meaning of such phrase is restricted to the generic meaning of the preceding words. Given that the words “theft”, “dishonesty” and “fraud” all describe deliberate actions, “misconduct” as referred to in s37D(1)(b)(ii) must be interpreted as referring to wilful, reckless and intentional conduct, which would exclude negligent misconduct. Furthermore, the court held that the common denominator of the preceding words is dishonesty. Thus, only “misconduct” that contains an element of dishonesty will qualify as one of the grounds upon which a fund may deduct an amount from the employee’s benefit.
The interpretation of “misconduct” laid down in Moodley was upheld by the Pension Funds Adjudicator (“PFA”) in subsequent rulings. In William M. Sebola v Johnson Tiles (Pty) Ltd & Alexander Forbes Financial Services & Johnson Tiles Provident Fund PFA/ GA/529/99/CN, the PFA, citing Moodley, held that, “Neither the rules of the fund nor the Act contain a definition of the word “misconduct”. The meaning of the word is ambiguous... used in connection with misdemeanours of both a serious and a less serious nature. Therefore, I am of the view that in ascertaining its meaning, the word should be looked at in the context of the rule in which it appears. This is known as contextual interpretation, which is encapsulated in the maxim noscitur a sociis. The maxim means that the meaning of words is inferred from that of its companions...
When used in the context of rule 7.2, the word “misconduct” should be construed in the light of the word “fraud” ... In my mind, the drafter of the rules intended to deprive only members who had been dismissed on grounds of misconduct which has an element of wilful dishonesty, of their entitlement to the employer’s portion of the withdrawal benefit.” This concept of only allowing compensation for “dishonest misconduct” to be deducted was echoed in, among others, Razlog v PLJ Pension Fund Case No PFA/KZN/761/02/PM 31 October 2002, where the PFA found that the fund was not entitled to deduct any damages from the complainant member’s benefit despite him having caused his employer great loss because the fund could not prove that the member’s mistakes were in any way “tainted with impropriety or dishonesty.”
The difference between cost and value
“In the retirement fund industry, value for members is about more than just the cheapest option.
The idea that umbrella funds are all the same and that the cheapest one must be the best one is misguided – there are many more factors at play.
In 2005 there were around 13 000 standalone retirement funds in South Africa. There are now fewer than 1 500. This massive consolidation in the industry is largely due to many companies choosing to use umbrella funds rather than manage their own pension funds.
Umbrella funds cater to multiple employers, which brings benefits of scale. In the last 17 years, 78 new umbrella funds have been launched in the country.
While this has created choice for employers, deciding on the criteria to use when selecting an umbrella fund is a challenge.
Since their primary benefit is bringing down the cost to the employer, the decision is often driven by the fees being charged.
However, David Gluckman, head of special projects at Sanlam Employee Benefits, says that while a focus on costs is broadly desirable, it has an unintended consequence.
“It’s easier to measure costs than value, so I think that while disclosure and transparency should drive the right behaviour from providers, one of the slight risks is that it might put more emphasis on costs than it should,” he says.
One of the findings of the recently published 2019 Sanlam Benchmark Survey is that the consultants who advise companies on umbrella fund options see this as a particular challenge.
“The number one thing that employee benefit consultants would want to change is for their own clients to stop fixating on costs and pay more attention to value,” says Viresh Maharaj, chief executive at Sanlam Corporate for sales and marketing. “There is value to be sought elsewhere, not just in costs.”
To illustrate this point, Maharaj calculates what a 20% reduction in overall costs would mean for the average retirement fund member. Over an investment horizon of between 10 and 40 years, their final outcome improves by only between 0.4% and 4%...”
Read the full article by Patrick Cairns in Moneyweb of 28 June 2019, here...
Keep your retirement goal post in sight
“Many South Africans face a bleak retirement because they are either not saving enough, cash out their retirement savings when changing jobs, or are following an inappropriate investment strategy. However, even those fund members who are keeping their eyes on the prize risk being blindsided by an unfortunate and unexpected life event.
This is according to Nashalin Portrag, Head of FundsAtWork at Momentum Corporate, who warns that illness and disability, or the premature death of a spouse, can seriously hamper the probability of members reaching their retirement goals.
“While the ultimate aim is to save sufficiently for retirement, all members need to be aware of these unpredictable, yet often sudden and life-changing events. In addition to derailing a member’s retirement plan, a hurdle such as being diagnosed with a critical illness or losing a spouse can have a major negative impact on someone’s lifestyle during retirement...”
Read the article by Nashalin Portrag Cover magazine of 9 September 2019 here...
Educating children for the jobs of the future
“...By 2030, robots, artificial intelligence, automatons, call them what you like, will have displaced up to 800 million workers or one fifth of the global workforce, according to McKinsey Global Institute. The inexorable and exponential march of technology will create new jobs, experts assure us, but what are those roles likely to be and how should we prepare?
It’s important to equip young people with foundational skills that will stand them in good stead regardless of what jobs they end up taking on
The World Economic Forum’s Future of Jobs Report 2018, estimates that by 2022 “no less than 54 per cent of all employees will require significant reskilling and up skilling”. The report adds: “Human skills, such as creativity, originality and initiative, critical thinking, persuasion and negotiation will retain or increase their value, as will attention to detail, resilience, flexibility and complex problem-solving.”
What skills should we be teaching children in schools?
How about in 2032, or 2042, and beyond? What tools should we be arming today’s children with so they stand a chance of surviving the world or work in one or two decades from now? “Many pedagogical experts argue that schools should switch to teaching ‘the four Cs’ – critical thinking, communication, collaboration and creativity,” Yuval Noah Harari writes in his new book, 21 Lessons for the 21st Century...”
Read the full article by Oliver Pickup in Raconteur of 5 December 2018, here...
Pros and cons of working remotely
“Technology and improved ease of communication are making it possible for an increasing number of people to work remotely. Akeso Milnerton occupational therapist, Mariaan Jacklin, says there are both advantages and disadvantages in working away from a central office, and offers advice for maintaining a work-life balance to avoid burnout... “There is a common perception that working remotely has positive effects for the worker, however, there is very little evidence to support this view,” Jacklin notes.
“Ease of communication across the planet makes it possible to work from the other side of the world, which may even involve working across different time-zones, however, this makes it challenging to differentiate when a workday starts and ends.”
Here are some of the pros of working remotely:
Here are some of the cons of working remotely:
Did you ever wonder why?
WHY: Why are zero scores in tennis called 'love'?
BECAUSE: In France, where tennis became popular, the round zero on the scoreboard looked like an egg and was called 'l'oeuf,' which is French for 'the egg.' When tennis was introduced in the US, Americans (naturally), mispronounced it 'love.'