In this newsletter:
Benchtest 08.2019, IMF report, provident funds and the IT Act, Benchmark member meeting and more...

NAMFISA levies

  • Funds with year-end of September 2019 need to have submitted their 2nd levy returns and payments by 25 October 2019;
  • Funds with year-end of March 2019 need to have submitted their 1st levy returns and payments by 25 October 2019;
  • Funds with year-end of October 2018 need to submit their final levy returns and payments by 30 October 2019;
  • November 2018 year-ends need to submit their final levy returns and payments by 30 November 2019.
It must be borne in mind that the new levy was introduced only from 1 November 2017 and the levy must thus be pro-rated between the new levy and the old levy calculation methods.

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

Certain pension fund service providers need to be registered by NAMFISA and need to report to NAMFISA regularly

These service providers are:-

  • Registered Investment Managers
  • Registered Stockbrokers
  • Registered Linked Investment Service Providers
  • Registered Unit Trust Management Companies
  • Registered Unlisted Investment Managers
  • Registered Special Purpose Vehicles
  • Registered Long-term brokers
  • Registered Long-term insurers

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...

News from parliament on the FIM Bill and other topics

The FIM Bill was introduced again in parliament by the Minister of Finance on 17 September and a motion to read the Bill for the second time was adopted. Discussion on the second reading was adjourned to Thursday 26 September following the motion by the Minister of Justice. In the meantime the Minister of Justice, in his capacity as the Chairperson of the Cabinet Committee on Legislation, has called a meeting with NaSIA, NAMFISA and the Minister of Finance for 25 September, in response to certain allegations raised by NaSia in connection with the FIM Bill.

A motion was tabled that parliament discusses  “...the impact of implementing the National Medical and Pension Benefit Fund, as stipulated in the Social Security Act 34 of 1994, and other social security protection funds as may be required by society. The motion is premised on the need to implement mechanisms aimed at promoting and improving social welfare.”

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...

Dear reader

In ‘Tilman Friedrich’s industry forum’ we present -

  • The editor's thoughts on how to invest in times of economic and political unrest.
  • Some interesting observation in the IMF Financial Stability Report 2018 for Namibia;
  • The dilemma of provident funds, NAMFISA and the Income Tax Act
  • FIM Bill – NAMFISA questions and answers
  • The full article in last month’s client circular – ‘When is a good time to switch to another investment manager’.

In our Benchmark column we present

  • Then 2018 financial results of the fund;
  • A summary of the presentation by Barend le Grange on ‘Changing the Retirement Funding landscape’.

In our Administration Forum column we alert employers of their obligations concerning correct calculation and payment of contributions.

In ‘News from RFS’, read about more staff being recognised for long service and about our social activities.

In ‘News from the marketplace’ read about government’s responses to matters raised at the recent economic summit.

In ‘News from NAMFISA’ we present –

  • A summary of the minutes of the industry meeting held on 13 June 2019
  • A link to the NAMFISA 2019 annual report.

In ‘Legal snippets’ we our guest writer’s exposition on section 37D deductions from benefits for misconduct.

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!


Tilman Friedrich

Monthly Review of Portfolio Performance
to 31 August 2019

In August 2019 the average prudential balanced portfolio returned 0.2% (July 2019: -0.7%). Top performer is Allan Gray Balanced Fund with 1.4%, while Momentum Namibia Growth Fund with -1.0% takes the bottom spot. For the 3-month period, Investec Namibia Managed Fund takes top spot, outperforming the ‘average’ by roughly 1.6%. On the other end of the scale Momentum Namibia Growth Fund underperformed the ‘average’ by 2.5%. Note that these returns are before (gross of) asset management fees..

How do you invest in times of political and economic unrest?

Since governments across the globe are net debtors, they all have to pay interest and they all have to repay their debt. The best friends of governments are economic growth and inflation. Economic growth raises tax collections while inflation reduces the real value of debt and both thus ease the burden of governments to service their debt.

In the aftermath of the financial crisis, followed by a deep slump in global consumer confidence and global economies, reserve banks across the globe, including Namibia, thought it wise to boost consumer confidence and consumer spending through massive monetary easing and an ultra-low interest rate environment, thereby creating massive liquidity in global financial markets. Unfortunately these measures never achieved the desired results and where we are today global economies, including those of China, the Eurozone and Namibia are in reverse gear. Consumer confidence has not really improved and the consumer has not really started to consume. Much of the global liquidity flowed into China. The result of that was a massive build-up of Chinese foreign reserves, and massive investment in economically unviable projects and infrastructure such as futuristic ghost cities centrally planned by the communist government.

Read part 6 of the Monthly Review of Portfolio Performance to 31 August 2019 to find out what our investment views are. Download it here...

IMF Financial Stability Report 2018

This report contains some interesting comments and observations on the Namibian Non Banking Financial Institutions (NBFI) sector that we have been raising repeatedly and we quote from the executive summary:

“NAMFISA should continue to build its technical competency and reinforce its accountability framework and relations with industry. The extensive set of new regulations, under the updated NAMFISA and FIM bills, is best implemented in a proportional manner not to overburden the regulator or industry. Operations of the Government Institutions Pension Fund should remain transparent, market-based, and comply with investment regulations and its mandate. Increases in the domestic investment requirements for institutional investors should be avoided.”

The report then details its caution stating “NAMFISA has improved its supervisory oversight over the years, however, on-site inspections are not sufficiently regular and the inexperience of supervisors may lead them to focus on non-central issues. The upcoming detailed legislative and regulatory structure could, if anything, make the authority’s approach more compliance-based.”

These observations thus clearly echo our warnings that the FIM Bill may overburden the regulator and the industry and that the intention of moving to a risk based supervisory regime will be negated by a barrage of compliance based regulations. It cautions that NAMFISA staff is not sufficiently experienced. This has also been one of our concerns that this first world array of laws is not backed up by a formal qualifications and training framework.

Interestingly, while the above excerpts insinuate that NAMFISA should strengthen its capacity, which is not possible without increasing its operational costs, the report at the same time cautions “NAMFISA’s costs have increased considerably in the past few years, with expenditure now exceeding income, largely from higher headcount and salaries. As its operating expenses rose sharply in recent years, NAMFISA has proposed a major increase in levies which, if implemented, could result in an increase in costs to industry. The proposed increase in levies appear excessive and should be reassessed. A review of administrative and support staffing needs versus front line supervisory staff should be undertaken.”

Well further on we do refer to the huge surplus the new levies have produced in their first full year of operations for NAMFISA. Of course this will give NAMFISA leeway to strengthen its capacity. What I am sorely missing in the report is any international benchmarking of regulatory and supervisory costs.

Finally the report suggests “NAMFISA should prioritize stronger accountability as it goes through the current period of transition. Governance and accountability should be strengthened by further public reporting and the setting of response performance targets. The focus on delivering to stakeholders could be improved, as consultations with the market are not always considered substantive by the industry.”

Again, the matter of consultations with stakeholders has been raised by industry stakeholders repeatedly, whether it was with regard to the FIM Bill and the draft regulations issued under the Bill, with regard to circulars issued or with regard to the manner in which supervision is approached. All of these concerns generally create the perception that stakeholders are not a partner but purely a subject.

It is comforting in this context that NAMFISA CEO Kenneth Matomola is well aware of the comments raised in the report and that NAMFISA will attend to them.

Provident funds, NAMFISA and Inland Revenue – where to from here?

In the previous two newsletters we reported on the gauntlet thrown down on provident funds by the regulator. A meeting should have taken place between Inland Revenue, NAMFISA and industry participants. As we had to find out two month further on, this meeting never took place. In the meantime NAMFISA put down its foot by rejecting rules and rule amendments of provident funds that offer any benefits suspected to be inconsistent with the Income Tax Act. Where new rules are rejected it means the fund is not registered, is not a legal entity and cannot operate. In one instance it took close to a year to resolve queries of NAMFISA relating to how the rule amendment was communicated to the members. Eventually that hurdle was crossed just to find out about the gauntlet just thrown down on provident funds by the regulator.

There has never been any official communication between Inland Revenue (IR) and NAMFISA or anyone else for that matter, setting out Inland Revenue’s position with regard to certain matters relating to the Income Tax Act that NAMFISA has now taken issue with. The whole matter had its origin in a communication between Inland Revenue and an umbrella provident fund where IR questioned the provision of funeral benefits for family members of the fund member and the corresponding deductibility of contributions towards such benefits by the employer. This fund took up the matter with RFIN which in turn involved NAMFISA.

We enquired with the principal officer of this provident fund, whether Inland Revenue has taken any action with regard to rules of or rule amendments by the fund that indicate a change in its position by IR from the status quo that has prevailed up to the time the first questions arose. The principal officer confirmed that there has been no change in the status quo as far as IR is concerned. He mentioned however that rule amendments by the fund relating to funeral benefits were turned down by NAMFISA. In passing the principal officer mentioned that NAMFISA now also has an issue with additional voluntary contributions that are not tax deductible according to its website. Although I agree with this interpretation, the question may be posed whether it should really be NAMFISA to raise a concern rather than IR.

To get clarity on this issue from the ‘horse’s mouth’ so to speak we had a teleconference with Mr Sepo Shigwele and Mr Vivian de Koe of IR on the tax issues relating to provident funds that NAMFISA has of late taken as justification for turning down rules and rule amendments of provident funds. The following sets out the conclusions reached during this teleconference:

Funeral benefits: Funeral benefits for family members of a provident fund member cannot be provided by a provident fund in terms of the definition of ‘provident fund’.

Employer contributions: Employer contributions towards an approved fund are not tax deductible to the extent that they are made to cover benefits that cannot be offered by the relevant fund in terms of the relevant definition in the Income Tax Act e.g. funeral benefits for family members of a fund member following their passing away.

Resignation benefits: Inland Revenue took note that it can be read into the definition of ‘provident fund’ that such fund cannot offer termination benefits. Inland Revenue does not take this view, which is also corroborated by section (dB)(ii) of the definition of ‘gross income’.

Disability benefits:  Disability lump sum benefits can be offered by a provident fund in terms of section (dB)(i). The two officials also agreed that a disabled provident fund member can remain a member of the fund where the insurance company assumes the role of the employer of paying the fund member a monthly income while the member is disabled. We did not go into more detail but it is reasonable to assume that the provident fund itself cannot pay the disability income when one applies the definition of ‘provident fund’ nor does the definition of ‘gross income’ refer to such benefit from a provident fund specifically. Inland Revenue was very specific on the point that a provident fund cannot offer annuities.

Death benefits: Death benefits for fund members or their spouses, children, dependants or nominees cannot be annuities but only lump sum benefits. These are taxed in the hands of the estate of the deceased member and can then be paid to the beneficiaries without any further tax being deducted.

Approval of rule amendments: Rejecting rules or rule amendments on the basis of being inconsistent with the Income Tax Act is the responsibility of Inland Revenue.

We impressed upon Mr Shigwele the dilemma the industry is facing as the result of NAMFISA refusing to register rules and rule amendments as described above. He advised that he will try to arrange a meeting with NAMFISA for the second week of September still.

FIM Bill – NAMFISA questions and answers

NAMFISA has published an interesting document marketing the benefits of the FIM Bill in the form of questions and answers and can downloaded here...

The reader will likely be impressed with the noble objectives of the Bill. To be realistic though, while the FIM Bill will certainly make NAMFISA’s life a lot simpler and sounds good and well when one takes a high level look at it, it will be very far from all sunshine and roses and as usual the devil will lie in the detail. On the flip side of this coin one can see numerous challenges and other downsides such as:

  • It affords NAMFISA tremendous legislative powers without an efficient and effective counter balance.
  • It substantially dilutes the prevailing protection of members’ benefits;
  • It removes regulatory certainty and fairness for many years to come;
  • It raises the level of complexity of implementation and application for all stakeholders;
  • It largely disregards and removes the interests of an employer in providing for its employees;
  • It largely disregards and removes the interests of product providers to establish umbrella funds;
  • Service providers will become compliance centric instead of being customer centric;
  • It will criminalise many menial administrative failures;
  • It substantially raises costs of application and compliance and it is highly questionable whether the benefits will outweigh the costs;
  • The regulator has a personal interest in raising penalties;
  • It will substantially increase the pressure on the legal system and substantially extend response times of the legal system (‘justice delayed is justice denied’);
  • Without a proper training and educational framework in Namibia, its noble objectives will largely not materialise and will remain a ‘castle in Spain’;
  • The small number of private funds that will survive the introduction of the FIM Act and the consequent small number of trustees – probably less than 150 - that will require formal training to a professional standard will not warrant any training institution establishing any formal graduate, let alone post-graduate courses.

When is a good time to switch to another investment manager

Retirement fund members who have become used to Allan Gray ‘shooting the lights out’ often can no longer bear with its performance lingering right at the bottom or close to the bottom of the performance ranking tables of prudential balanced managers, for periods up to 5 years. Interestingly, for the month of July Allan Gray managed to rise to the top, given that it is a very short period and bears no relevance.

As the result, clients more and more often contemplate or even decide to move their investments away from Allan Gray to another manager. The questions are - is it a good time to move away from Allan Gray and when is a good time to move away from your trusted manager?

I guess when we talk about buying or selling a house, there will be little argument about not selling when the market is at the bottom and not buying when the market is at the top. This is a sensible principle that one should apply to one’s investments and investment manager as well. The difficulty however is to know when any asset has reached the bottom or the top.

In last month’s column, I pointed out that the members that invest in a prudential balanced portfolio should have an investment horizon of at least 3 years as these portfolios tend to outperform money market and bond portfolios only over 3 years and longer.

The following graphs therefor depict rolling 3 year returns of a few of the more prominent prudential balanced portfolios measured against Allan Gray and against the average prudential balances portfolio as represented by the ‘0’ line on the vertical axis of the graphs.

Graph 1

Graph 1 above shows that Allan Gray is currently on a downward slide. Since the beginning of 2000, Allan Gray has only had 2 periods of underperforming the average (on the zero line). It also shows that the previous period of underperformance stretched over a year from around the middle of 2011 to around the middle of 2012. There is currently no other experience of below average performance from which one can draw any meaningful conclusion. One does not know whether Allan Gray is at the bottom but evidently it is not at the top, i.e. it is not the time one should sell as it is too late to avoid the downturn that has already happened.

Graph 2

In graph 2 above we see that Namibia Asset Management (Coronation) oscillates around the average. Interestingly, curves typically cover 3 year periods. Since the end of about 2015 this manager was below the average but there seem to be an uptick since earlier this year. Going by that experience, this is potentially a manager one should buy now rather than sell.

Graph 3

In graph 3 above we see the Old Mutual Pinnacle portfolio moving very close to the average for all the time since the beginning of 2008. This portfolio only commenced at the beginning of 1998 and probably experienced the benefit of then still being a small and nimble portfolio. This is a portfolio that one can buy and sell at any time without running too much of a risk of picking the wrong time.

Graph 4

In graph 4 above, we see that Investec has performed above average for longer periods than it has performed below the average. It is also interesting to note that the cycles typically stretch between 3 and 4 years. Investec more recently had a period of outperforming the average from the end of 2014 to the end of 2017. It currently looks as if Investec has entered a period of average performance. It does not look like Investec generally poses a serious risk of under-performance. It is currently not at the top of an outperformance cycle and hence Investec is currently a potential buy rather than a sell, just having reverted to average performance, given that past cycles indicate that the current cycle of average performance may still last for another  a while (two to three years?).

Graph 5

In graph 5 above we see Stanlib having badly under-performed for a period of roughly 5 years up until the middle of 2008. This was followed by another roughly 5 years of significant outperformance until the beginning of 2014 and subsequent average performance of yet again 5 years. On that basis, Stanlib is currently a potential buy rather than a sell. In the case of Stanlib, there is a risk of severe under-performance but also the prospect of substantial out-performance over extended periods.

Graph 6

In graph 6 above we see Prudential oscillating fairly closely around the average manager (on the zero line). The cycles appear to typically stretch over 3 years, the latest one having commenced at the beginning of 2016. As it shows limited deviation from the average manager performance, the risk of buying or selling at the wrong time appears to be low. In the same way as one needs not fear Prudential to under-perform significantly, it is unlikely to outperform significantly.


The above 3 year rolling return graphs are very meaningful for assessing a manager’s absolute capabilities as well as its relative capabilities with reference to the average manager. It is quite interesting to note over what periods the managers seem to consistently either out-perform or under-perform the average manager and the extent to which they do so. Given the wisdom of not selling at the bottom and not buying at the top, the 3 year rolling return graphs should assist the investor to better understand where the manager is on its performance cycle. If the investor cannot rely on such information he is really left to gut-feel when deciding which manager to buy and which manager to sell at any given point in time. Of course hind-sight can be exact science the saying goes and is not an indicator of what the future may bring.

Besides the question when is a good time to switch to another investment manager the investor should consider employing a combination of managers so that he is not totally reliant on the fortunes of one manager. In Benchmark Performance Review to January 2018 in this link, we have dwelled on this question and the reader is referred to the article ‘Selecting an Asset Manager to Diversify Risk’ under ‘Günter Pfeifer’s Benchmark Notes’.

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 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.

From an investment consultant

“Hi T...
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.
  • The members were disappointed with the level and type of advice they receive, disappointed with their service providers and, in fairness, disappointed with themselves for not doing more, earlier to secure their future.
  • Taxation of benefits often comes as a huge shock for members, but the biggest shock of all is the net outcome of the pension they have managed to accumulate for themselves.
  • Taxation of retirement savings is often news to members and consequently they are shocked at the net outcomes achieved at retirement.
Regret then sets in. With two aspects being mentioned:
  • Regret in terms of poor choice of retirement vehicles; and
  • Regret in terms of their own behaviour towards savings and preservation.
The key challenges members cited were the following:
  • Insufficient Information;
  • Lack of accessibility to their options, their progress and even the values of their funds and benefits; and
  • Jargon used in our industry, which prevents members from understanding their choices.
This leads to members feeling isolated and unengaged. Barend suggested that retirement funds should not only consider member choice in a fund, but also member engagement. Individual member engagement includes the frequency, timing, method and simplification of complex topics. He gave an example of the impact of counselling when members exit the fund and pointed out, of the members who exited the fund without counselling, 78% choose cash withdrawals. This rate reduced significantly to 39% when members were counselled.”

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.

Paul-Gordon /Guidao-Oab joined RFS as Manager: Audit and Compliance in May 2016 and then moved into the position of Benchmark Product Manager. In 2019 he assumed the duties of Principal Officer of the Funds. Paul holds a B Compt degree from Unisa and has completed his articles with SGA.

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.

Kai 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..

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!
  • The winners of the 2019 were Elite Consulting with 69 points.
  • Schoemans came 2nd with 59 points.
Zane-Lea and Giovanni about to make things happen.
Fltr: Julien, Stefanus, Elbie and Helena posing for the victory photo shoot.
Amanda wondering what happened.
RFS teams watching what’s happening

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:
  1. COA reporting:
    • It  seems to have largely settled down;
    • people still requiring training are invited to contact NAMFISA;
    • certain formula errors were corrected;
    • validation sheets were created for the income statement the balance sheet and the investment section;
    • NAMFISA will also provide a regulation 13 validation sheet that would allow immediate verification of compliance;
    • Classification of top 10 holdings in the various asset classes remain a problem as the coding is not consistent between asset managers;
    • NAMFISA is looking at developing an upload functionality;
    • Funds are requested to advise NAMFISA should they not have received an automatic submission approval notification.
  2. Memorandum of Understanding between RFIN and NAMFISA
    • A draft has been prepared and still needs to be submitted to the principals for finalisation and signature;
  3. Complaints lodged with NAMFISA
    • 30 complaints were lodged of which 19 were resolved in favour of funds. These mainly related to non-payment of benefits and excessive timelines for payment;
    • As a matter of course, NAMFISA always first refers complaints to the principal officer of the fund.
  4. Circular 04/2019 on disposition of death benefits:
    • NAMFISA is concerned that funds do not always trace beneficiaries within 12 months;
    • Funds pay to pensioner nominees to the exclusion or at the expense of dependants;
    • Funds should consider spouse and eligible children of deceased pensioners.
    • Once the agreement between RFIN and NAMFISA is in place, industry can provide input before a circular is issued;
    • Industry is invited to use the appeal process should anyone be in disagreement with any decision of the registrar;
    • Tracing costs cannot be recovered from the ‘allocated benefit’ of a member.
  5. Unclaimed benefits:
    • After benefits have remained unclaimed for 5 years they must be advertised in the government gazette in January of each year;
    • If the unclaimed benefit remains unclaimed after a further 3 months post advertisement the money must be deposited with the Master of the High Court;
    • Failure to advertise or to pay over to the Master is an offence;
    • Fund must submit to NAMFISA proof that funds were paid over to the Master.
  6. Fund applications:
    • These should be submitted on ERS, printed out, signed and delivered to NAMFISA in hard copy.
2019 Annual financial statements boast huge surplus

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 [2000] 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.

Appreciating value

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 cons of working remotely:
  • without clear delineation, there is increased risk of falling into the “always-on” trap;
  • boundaries between work and personal life may become blurred;
  • the individual is unable to ever completely disengage from their work responsibilities
  • working remotely may also create inter-role conflict, where a worker is required to fulfil different roles at the same time;
  • the presence of children in the remote work environment may be extremely demanding on the worker
  • the lack of role differentiation may leave the individual feeling overwhelmed and guilty;
  • the lack of proximity to supervisors and managers may actually lead to micromanagement and a breakdown of trust between the manager and the worker;
  • travel time between work and home serves as a buffer to assist the worker in leaving the role of employee and stepping into the role of spouse, parent, or partner before entering the home environment, and vice versa. The loss of this buffer might lead to inter-role conflict;
  • social interaction is limited to the primary group in the household or immediate community;
  • may provide little scope for peer-group support, such as social contact with people from the same work environment;
  • non-verbal communication cues, tone of voice, and social subtleties are lost when communicating via electronic media, which may lead to miscommunication and depersonalisation;
  • a sense of connectedness and achievement, may also be difficult to replicate when working from home;
Here are some of the pros of working remotely:
  • work productivity and satisfaction depend on the meaningfulness of the work, autonomy with regards to work tasks and measurable outcomes, and meaningful social relationships at work;
  • may provide the worker with a greater sense of autonomy;
  • more flexibility can enhance feelings of independence,
  • can create opportunities for exercise during traditional working hours.;
  • may reduce stress by diminishing travelling time;
  • reduced stress leads to various physiological benefits such as reduced blood pressure, improved digestion, reduced muscular pain, better sleep and improved cardiovascular functioning.
Read the full article by Akeso Milnerton in Cover of 14 August 2019 here...

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.'

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