|In this newsletter:
Benchtest 09.2019, prescribed assets are blatant theft of pensions and more...
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...
Social security and labour legislation review
The latest Namibia Employers Federation (NEF) newsletter reports on developments concerning the Social Security Act, the Employees Compensation Act, the National Pension Fund and other matters.
Download the newsletter here...
Administration of Estates Act – where do we stand?
Following an informal meeting between the Principal Officer of the Benchmark Retirement Fund and the Master of the High Court, the following points were noted with regarded to the status of the prospective further amendment of the AoEA:
News from parliament on FIM Bill and other Bills
The Namibia Financial Institutions Supervisory (NAMFISA) Bill passed committee stage in parliament without any amendments and was read a third time on 15 October 2019.
The Financial Services Adjudicator Bill passed committee stage in parliament without any amendments and was read a third time on 15 October 2019.
On the motion of the Deputy Minister of Industrialisation, Trade and SME Development, seconded by Ms. Kandumbu, debate on the second reading of the Financial Institutions and Markets (FIM) Bill was adjourned until Tuesday, 22 October 2019. During the session of the 24th of October discussion was adjourned to 24 October at which time the Minister is to answer to earlier questions from the floor. Due to election campaigning underway, a quorum may not be present on 24 October. However should a quorum be present, it is expected that the Bill will be referred to committee stage in the last week in October.
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 ‘News from the marketplace’ read
In ‘News from NAMFISA’ we present –
In ‘Legal snippets’ read our guest writer’s exposition on ‘Age of majority – the Child Care and Protection Act vs the Administration of Estates Act’.
How do you invest in times of political and economic unrest?
A compliment with a difference
I wish to thank you once again for this token of appreciation. As always, I don’t take anything for granted and am indeed grateful that I am working for such a great Company and with such awesome people. I have never regretted a moment since joining RFS more than 12 years ago. I am extremely thankful and proud to be part of this team!
Read more comments from our clients, here...
Changing the retirement funding landscape (part 2)
In the previous article we focused on the key considerations for financial resilience, which was the theme of this year’s Sanlam Benchmark Symposium in South Africa as presented by Barend le Grange – Head of Individual Member Support: Sanlam Employee Benefits South Africa, at the Benchmark Retirement Fund Annual Member Meeting held on 5th September 2019 at NIPAM. In this article we are going to have a look at the fascinating findings and stats of the Sanlam Benchmark Survey that were presented by Le Grange at the same meeting.
Le Grange advised that one of the biggest megatrends in the pension fund industry is the rapid consolidation of stand-alone (private funds) into umbrella funds, stating that “ in South Africa only about 1,500 funds can broadly be categorised as stand-alone compared to about 13,000 in 2005.”. He further noted that about 350 stand-alone funds are in the process of transferring to an umbrella fund. Le Grange advised that the rapid consolidation is driven by the underlying key considerations of financial resilience, which we touched on in the previous article. These are default strategies, good governance, member engagement, information security, professional and independent trustees and scale.
Le Grange advised that increase in funeral cover, the introduction to severe illness benefits and increase in insurance rates were the top advice themes noted by employee benefit (EB) consultants in the Group Risk space. Le Grange advised that 19% EB consultants indicated that their clients experience a trend towards more claims being declined and 52% EB consultants noted that their clients have experienced large insurance rate increases over the past three years.
Le Grange advised that the EB consultants also noted that the number 1 thing that they would change in retirement fund industry is that clients stop fixating on costs and pay more attention to value. Le Grange shared the below, in figures 1 to 3, to illustrate the impact of cost.
Figure 1 – Average Contributions and Cost
Figure 1 is the estimated average contributions and cost of both stand-alone and umbrella funds, which result in an average net contribution of 13%.
Figure 2 – Replacement Ratio
Figure 2 shows the estimated salary replacement ratio over various terms (years) of investment. The salary replacement ratio expresses the pension that will be received on retirement as a percentage of the pensionable salary in the last month before retirement.
Figure 3 – Replacement Ratio with no administration and consulting fees
Le Grange noted that the impact of waiving all the administration and consulting fees over a 40-year term is just a 5% uplift and only 1% uplift over a 10-year term. Le Grange advised that clients should move away from focusing on the difference between the cost of administration and/or consulting between service provider A and B and rather focus more on which service provider produces more value, quoting Warren Buffet – “Price is what you pay, value is what you get.”
"Non-standard service fees" – is this principle in your fund’s interest?
Clients often appear to be irritated about our charging and fee philosophy, more particularly with the principle that while we are usually paid a retainer fee, certain services attract a so-called “non-standard service fee”. In one instance this practice has even been discredited as being unprofessional! Typically, clients take the position that all fund management services must be covered by the ‘retainer’ fee.
The Code of Ethics and Professional Responsibility of the Financial Planning Institute defines a pensions practitioner’s practice for determining fees for professional services. It requires of a professional member of the Institute to “..explain in writing, the precise range of professional services that the fee is intended to cover, the basis on which the fee is computed…” and that “…the main criteria are fairness and equitability for the client and the member…”.
This means that a professional service provider should not charge for work it has not executed. By implication, the principle requires a service provider to charge for services carried out.
The services we carry out in return for a ‘retainer fee’ agreed upon with our clients, are clearly defined in our service level agreement as required by the Code, and in addition, our service level agreement clearly demarcates our mandate from that of other service providers and also clearly defines services we will provide on an ad-hoc basis as and when required, for which we would then raise an additional “non-standard service fee” as agreed upon with our client in advance. If a service provider were to include all conceivable services that a fund might require in the course of time, clearly provision would have to be made for the unknown requirement for ad-hoc services. This would entail charging for services not rendered on an on-going basis and applying the over recovery to recover the cost of ad0hoc services should they be required at any time in future. In our view this is inconsistent with the Code of Ethics and Professional Responsibility.
An analogy ‘closer to home’ for most, is building a house. The only two possible arrangements with the contractor consistent with our professional obligations are, firstly that where you add to the original plans you pay extra and where you deduct you get a price reduction. Alternatively, you agree with the contractor that whatever you desire to be changed must be changed without a change in costs and that the contractor then informs you only upon completion, what the actual cost is. We apply the former approach which we believe is the right approach.
We invite our clients to share their views on this topic with us or to let us know should they prefer any mechanism different from that we currently apply.
RFS recognises long service
Erica Hipondoka celebrated her 5th anniversary at RFS recently. We express our sincere appreciation to Erica for the 5 years of her life she has dedicated to RFS and its clients and look forward to her continuing to contribute towards the success of our team!
RFS welcomes new staff
Elray Goreseb joined our private funds accounting team on 15 May 2019. We welcome Elray heartily and look forward to him applying his skills and experience for the benefit of our team and our clients!
Managed by Namibians, trusted by Namibians - RFS celebrates its 20th anniversary in pictures
The staff behind the success of the company!
F.l.t.r. M Fabianus, managing director of RFS, Ms A Moncur, editor of the first issue of Benchtest Review, T Friedrich, chairperson of the board of RFS and H Müseler, chairperson of the Benchmark Retirement Fund.
Axel Thyssen of Cymot (right), our first and oldest client.
Martino Olivier of UNIREF, our first SOE client.
RFLAUN, our largest client.
Agra, our second private fund.
RFS made a donation to Make-a-Noise, a community safety organisation.
Charlotte Drayer received a 20 year certificate. Charlotte joined the company with no salary.
Founder Tilman Friedrich receives his 20 year certificate.
Read the press release here...
Here are some messages from stakeholders:
“Good day Tilman, Marthinuz and Gunter
Thank you very much for the invitation to your 20th birthday celebration. I was indeed memorable and very enjoyable. RFS is truly a Namibian success story and you, rightfully, have a lot to be proud of. Here is to another great 20 years!” ̴
~ I Erlank, CEO Capricorn Asset Management
“Dear Marthinuz, words of thanks sound so ordinary but I can assure you and your excellent team that there was nothing ordinary to the celebrations last night. Thank you for the invitation to be part of the joyful occasion to celebrate with RFS the 20 Year Birthday Celebrations. It was such a great evening and portrayed the effort that RFS puts into everything they do. I was really honoured to be part of it. A very big Thank You for the Certificate of Appreciation – it will proudly be displayed in the UNIREF office. It is my wish that you and your team and the company as a whole will reach even higher milestones. With respect and appreciation.”
~ A de Greef, Fund Administrator Universities Retirement Fund
“Guten morgen Tilman & Kai,
Vielen Dank für gestern Abend! Habt Ihr gut gemacht ?”
~ A Theissen, CEO Cymot
“Fabulous evening, amongst great company! Thank you! ?”
~ A Schimming-Chase, Trustee, Benchmark Retirement Fund
The price of fuel – do you know what you pay for?
The latest fuel levy was set in Government Gazette 7003 of 25 September 2019 and reflects an interesting composition of the price of fuel as per below table. The total for Namibia is based on an estimated annual consumption of 1.6 billion litres of fuel in Namibia.
Interestingly included in the ‘taxes and levies’ is a ‘strategic oil storage levy’ at N$ 0.6 per litre. That is approximately N$ 1 billion per year. Given the total capital cost of the strategic oil storage facility at Walvis Bay harbour of around N$ 5.5 billion, as reported in local media, the annual levy presents a return on investment of 17% p.a. if the capital cost was amortised over 20 years.
Concerning news for pension funds and their members
So the chickens are coming home to roost? Forcing pension funds’ and pensioners’ life savings into Namibia through regulation to promote development has not really happened and this is making them lose money in the process.
“Capital market in diversification dilemma. Namibia’s financial market is not developed enough to take up excess funds in the economy, with most pension funds recently settling for government debt. Worryingly, this has resulted in returns on government debt diminishing, with some investors currently praying that inflation stays low in order for them to earn meaningful returns on their investments. The Bank of Namibia recently said changes in the domestic asset requirement is gradually reducing treasury bills and bond yields as the market becomes flooded with too much money chasing few investments.” ~ The Namibian
“Lack of bankable projects keeping money idle. There are a lot of funds in Namibia but there are few bankable projects to take up such money, Bank of Namibia governor Iipumbu Shiimi said yesterday. Speaking at the monetary policy announcement in the capital, he observed that the capital market is flooded with funds, and not even the government debt issuance will make a dent on it. “In the last two months, there has been a lot of interest in treasury bills from financial institutions and investment outlets. In itself, it is not bad, as they had enough money and were just looking for where to invest and making more money for themselves,” he said. ~ The Namibian
“Revenue agency struggles to take off. The finance ministry is struggling to launch the Namibia Revenue Agency this month as promised, and has now pushed the implementation date to March 2020. Finance minister Calle Schlettwein revealed the new date yesterday after the ministry missed the 1 October launch date. “The launch will now be in March next year,” the minister said, adding that the date is not far, as the process involves the migration of personnel. At the appointment of the board of directors last year, the minister said the tax authority would be operational by March 2019, but that take-off date was pushed to October due to “many operational hurdles that remained unresolved”. ~ The Namibian
Minutes of industry meeting of 19 September 2019
NAMFISA held another quarterly pension funds industry meeting on 19 September 2019. Some 26 funds were represented, which is only about 30% of the 82 active registered funds. Of these 7 are RFS administered funds, just less than one-third of those represented. It seems, our comment in previous newsletters on the low representation of funds administered by our competitors has borne some fruit at last!
Here is a summary of the key discussion topics for the convenience of our readers:
Age of majority – the Child Care and Protection Act vs the Administration of Estates Act
A guest contribution by Andreen Moncur BA (Law )
Ordinarily, in the case of two contradictory statutes, the most recently promulgated Act would amend the earlier Act, unless otherwise provided in the most recent Act or there is an entrenched clause in the earlier Act or in another Act. While the Administration of Estates Act 66 of 1965 (the Estates Act) appears to conflict with the Child Care and Protection Act 3 of 2015 (the Child Care Act), a closer examination of both statutes will show that this is not the case. The Estates Act as amended on 31 December 2018 does not amend the age of majority in Namibia; it merely deems a minor to be a person younger than age 21 for purposes of the Estates Act. While the Child Care Act, effective from 30 January 2019, amended s72 of the Estates Act, it did not amend s1(2) of the Estates Act. Section 1(2) is the section deeming a minor to be a person under age 21 for purposes of the Estates Act. While it is true that the Child Care Act repealed the Age of Majority Act 57 of 1972 and reduced the age of majority from 21 to 18 years, there are certain exceptions:
Can a death claim become unclaimed?
Luxury handbag designer Lana Marks has been appointed US ambassador to South Africa, the US embassy said on Friday. Marks was born in South Africa and speaks Afrikaans and Xhosa, the White House has said. The US Senate confirmed her nomination, which President Donald Trump put forward last year. Washington has had no ambassador in South Africa since Patrick Gaspard left in December 2016, with its mission being overseen by a chargé d’affaires. The website for Marks’ firm offers handbags for up to $20,000 and says they have become favourites for celebrities including Oprah Winfrey, Kate Winslett and Madonna.