|In this newsletter:
Benchtest 03.2020, Corona relief measures, TIN numbers for pensioners and more...
The Minister of Finance recently established a committee of experts from various industries, to advise him on measures government should take to relieve the pressure on employers, employees and the economy. This committee invited various industry bodies to compile reports from contributions by members of their industry.
Recommendations from RFIN
In response to the invitation by the committee RFIN invited its members to submit recommendations. Interestingly, it seems RFS was the only member to submit recommendations. Here are some of the more noteworthy recommendations that RFS submitted to RFIN:
Recommendations by ICAN
The Institute of Chartered Accountants of Namibia similarly submitted a report to the ministerial committee. Here are some of the more noteworthy recommendations:
...and for completeness, ICAN advised its members “Following the letters issued by ICAN and NIPA to the Minister of Finance and the Commissioner of the IRD requesting a blanket extension of tax payment and tax return submission deadlines due to the practical difficulties caused by the lockdown, we received a response today which stated that a blanket extension will NOT be issued either for payments or return submissions.
It appears that a response to the 11 suggestions made above is still outstanding.
SSC introduces Corona relief measures
The Social Security Commission has sprung into action and is offering a N$ 320 million package of relief measures. Here are a few key measures:
Pensioners and fund members urged to provide TIN number to RFS
As representative tax payer for pensioners and pension fund members, RFS is obliged to submit monthly returns to Inland Revenue in electronic format. The prescribed information in respect of the taxpayer and the PAYE 5 certificate issued, must be submitted in a specified manner. One of the pieces of information required is the pensioner’s or the fund member’s TIN (tax identification number) for the benefit is has paid to the pensioner or member in the course of the month and the tax RFS has deducted from the benefit.
The ITAS (income tax administration system) does not allow RFS to submit the monthly return unless it reflects the TIN number for every person who received a benefit from a fund. PAYE 5 certificates must reflect the TIN of the taxpayer as its information is to reflect in the monthly return.
The obligation to submit monthly returns was back-dated to 1 March 2019. RFS has to date not been able to submit the monthly returns as it is not in possession of the TIN of a large number of pensioners and other former fund members who were paid a benefit in the course of the year from 1 March 2019 to 29 February 2020.
As the result RFS cannot issue PAYE 5 certificates to pensioners. This may delay pensioners submitting their annual tax return.
We are therefore urging all pensioners to provide us with their TIN urgently. Please mail or arrange to have your ITAS registration certificate delivered to RFS, for attention your fund’s administrator.
Pension fund governance - a toolbox for trustees
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 ‘Tilman Friedrich’s industry forum’ we present:
In ‘News from RFS’, read about staff being recognised for long service.
As always, your comment is welcome, so open a new mail and drop us a note!
Covid 19 precautions by RFS and Benchmark Retirement Fund
This topic is dominating all discussions and actions. RFS saw it necessary to send out a special newsletter on the precautions it has and is taking in an effort to protect its staff and clients. If you are interested to establish what we are doing , refer to the article, here...
Monthly Review of Portfolio Performance
to 31 March 2020
In March 2020 the average prudential balanced portfolio returned -8.2% (February 2020: -3.7%). Top performer is Stanlib Balanced Fund with -4.3%, while Momentum Namibia Growth Balance Fund with -11.2% takes the bottom spot. For the 3-month period, Stanlib Balanced Fund takes the top spot, outperforming the ‘average’ by roughly 4.7%. On the other end of the scale Momentum Namibia Growth Fund underperformed the ‘average’ by 4.9%.
The Monthly Review of Portfolio Performance to 31 March 2020 provides a full review of portfolio performances and other interesting analyses. Download it here...
It's not a good time to invest while the volcano is still active!
At this stage, the huge uncertainties and the unknown consequences linked to the prevailing lockdown, markets will remain jittery and volatile. A significant part of the economy will disappear over the lockdown with many companies closing down. Governments will focus on rebuilding their economies. They will make every effort to convince their citizens to travel within their countries and to spend their discretionary moneys within, rather than outside. Tourism for one will not anytime soon return to what it has been before the lockdown. A large number of people will be poorer so their spending capacity will have declined and they will spend less on travelling, hospitality entertainment and other discretionary expenses. Some industries will change their face for an extended period, others forever.
We now have to live with the economic and financial consequences of the COVID 19 measures taken across the world. The global economy was already in the doldrums even before COVID 19, and it’s now in much worse shape. The problem is that we cannot really reliably say how things are going to evolve after we are all out of this disaster nor how long it will take until global economies and global financial markets have found their bottom and will turn around. It is also pretty certain that some industries will be negatively impacted and others will be positively impacted.
Read part 6 of the Monthly Review of Portfolio Performance to 31 March 2020 to find out what our investment views are. Download it here...
Old Mutual introduces new AGP series
Compliment from a long-standing member of the Benchmark Retirement Fund
“...Also as I am extremely satisfied with your performance and service over the years, ...”
Read more comments from our clients, here...
Long service awards complement our business philosophy
RFS philosophy is that our business is primarily about people and only secondarily about technology. Every time a fund changes its administrator, a substantial amount of information and knowledge is lost. Similarly, every time the administrator loses a staff member, it loses information and knowledge. We know that as a small Namibia based organisation, we cannot compete with large multinationals technology wise because of the economies of scale that global IT systems offer. To differentiate us we need to focus on personal service and on the persons delivering that service to get customer acceptance and service satisfaction. With this philosophy we have been successful in the market and to support this philosophy we place great emphasis on staff retention and long service.
The following staff members celebrates their 5-year work anniversary at RFS! We express our sincere gratitude for their loyalty and support over the past 5 years to:
We look forward to Elbie and Faith continuing their value-addition to our clients!
Old Mutual introduces new AGP portfolio series
Old Mutual in March informed its AGP investors that “The spread of COVID-19 has led to the JSE All Share Index dropping by more than 33% in the month leading up to 18 March 2020. As a result, the value of the assets underlying AGP has fallen, but none of the negative market returns have been reflected in bonuses – which have remained positive to date. The Bonus Smoothing Reserve (BSR) has absorbed these negative market returns and, in the process, fallen into a significant negative position.
As a result of the unprecedented impact on financial markets, a decision has been made to close the current AGP 2007 series to new investments with immediate effect. This will protect investors from investing new money in an underfunded portfolio that will negatively impact them in the short term.
The aim of the closure is to allow the BSR to recover to a level that allows reasonable future bonuses to be declared before accepting new investments.”
A new 2020 AGP portfolio series was launched and all new cash flows since date of the notification will be invested in the new series.
Find the circular here...
RFS newsletters are too technical for the layman
I think I have emailed this before, but would it not be better, instead of publishing a large number of figures and acronyms, totally unfamiliar to non funds managers, to publish a plain language summary, which someone like me can actually understand?
I for one would like know if now is the time to buy or if the funds to buy will still go down, but gain no information at all from this, in fact I tune out after a few lines, because of the jargon.
I would appreciate if you could bring this to the attention of management.
We produce quite a bit of information on retirement fund investments, the retirement funds environment and views on the market on a monthly basis. All of these serve a particular purpose and address a particular need of our stakeholders. One may say it is a bit of ‘horses for courses’.
One of these is the monthly Earlybird newsletter that really only provides an early overview of the market and market indices, that you are referring to. The latest one, the Earlybird 2020-03 can be accessed at this link...
We also produce a more detailed and more descriptive overview and analyses of financial markets and market indices (the monthly Benchmark Performance Review). In paragraph 6 of that newsletter we normally provide our views of the current state of affairs and what we expect of the future. The latest is the February 2020 newsletter that can be accessed by following this link... Perhaps our views in paragraph 6 of the newsletter is closer to what you are looking for?
In addition we produce monthly Benchtest newsletter with topical articles of interest and developments in the pensions industry, the latest of which is the 2020-03 newsletter that can be accessed by following this link.
I would also like to draw your attention to important information on fund investments under the ‘Benchmark’/‘Investments’ tab on our website at this link (‘Investment portfolios’, ‘Fund fact sheets’ and ‘Investment policy’). These are all important documents that should assist members with their investment decisions.
We would not go as far as giving advice on investments and investment markets, given that pension fund investments are constrained by regulation. Investment decisions depend very much on the individual’s personal circumstances, personal preferences and personal objectives and ‘one size certainly does not fit all’. Our financial advisers, Mrs. Annemarie Nel (081 217 9549) or Mr. Kristof Lerch (081 127 8055), however are geared to use the information we provide to assist you in taking investment decisions. As you know face-to-face meetings can currently unfortunately not be arranged. You are however welcome to contact them telephonically. You are of course also welcome to give me a call.
I hope that this will give you some cues and that you will find information that will be of some use to you from the sources referred to above.
Note: The opinion of our readers does not necessarily reflect the opinion of RFS. We reserve the right to shorten and to edit letters received from our readers.
NAMFISA’s COVID 19 relief concessions
NAMFISA issued circular PF/CI/01/2020 announcing the following concession to industry in the wake of the lockdown:
Nominated beneficiary predeceasing policy holder
What happens if a policy holder nominated a beneficiary to receive the policy proceeds in the event of the death of the policy holder? Can the executor of the deceased beneficiary claim the benefit from the insurer after the death of the policy holder, or will the insurer pay the benefit into the estate of the deceased policy holder? This is an interesting question that no doubt also occupies financial planners and their clients in Namibia regularly.
This subject is discussed in an article that was published the De Rebus journal of the SA Law Society. The case discussed in this article is that of PPS Insurance Company Ltd and Others v Mkhabela (SCA). In this case Ms Sebata had a life policy issued by PPS. She nominated her mother as beneficiary of the policy proceeds in the event of her death. Her mother passed away on 26 May 2007. Her daughter, the life insured passed away on 12 August 2007, without having nominated another beneficiary. The mother’s executor claimed the policy proceeds in the High Court. The full bench held that once the mother accepted her nomination as beneficiary and PPS recorded this, a binding agreement between her and PPS came into effect and that her executor was entitled to accept the benefit of the policy on deceased’s mother’s behalf.
PPS appealed this judgement. PPS succeeded in its appeal as the appeal court found that because the mother died before her daughter her expectation of benefiting expired at the death of the nominee (the mother).
Read the full article by Dwight Buys, in De Rebus journal of 1 March 2012, here...
Markets are not going to slow down!
The speed of market movements over the last month has been almost unprecedented.
Statistics from S&P Dow Jones Indices show that in the space of just two weeks in March the S&P 500 experienced two of its ten largest daily drops ever as well as two of its ten biggest daily gains ever.
As the tables below indicate, all four of these significant movements happened between March 12 and 24 – a period of just 12 days.
Read: Global markets lost nearly $8 trillion in value in March
The only time something like this has happened before was at the start of the Great Depression in 1929.
Read the full article by Patrick Cairns in Moneyweb of 8 April here...
Expect wild swings in asset prices
“As countries globally continue to count COVID-19 infection rates and mortality figures attributable to the pandemic, the elevated level of risk being experienced in financial markets may be sustained for periods longer that initially envisaged – leaving investors vulnerable to volatility and implying that decisions to enter or exit markets might be postponed until more stable conditions return.
Benedict Mongalo, Chief Investment Officer at leading independent fund manager, Novare Investments, commented: “Investors in South Africa and globally have over recent months faced a daunting array of risks that are impacting asset prices in different ways, complicating investment decisions and raising the chances of financial losses.”
He added that, while predictable risks like the possibility of Moody’s Investors Service downgrading South Africa to “junk” tend to some extent to be reflected in asset prices in advance, unknown and unpredictable risks like the coronavirus are inclined to cause short-term shocks in capital markets.
These events are taking place against the background of one of the longest equity market bull runs ever. Some analysts argued that one reason the coronavirus initially had such a huge impact on markets was because nervous investors saw it as an opportunity to reduce their exposure to asset prices that had run too far in the global equities rally...
Investors should stick to their investment objectives, avoiding short-term knee-jerk reactions to perceived market risks, whether expected or unannounced. For investors in stocks especially, withstanding short-term price fluctuations often generates superior long-term returns.”
Read the full article by Novare Investments in Cover Magazine of 8 April here...
Should pensioners do something about their investments?
“...It’s a very difficult position partly because of where we find ourselves today. There’s no real historical benchmark that we can use to try and project what markets are going to do. So let’s just look at the basics.
My kind of high-level suggestion to pensioners would be first of all to assess whether your annuity was healthy to start off with.
So what do I mean by ‘Was it healthy?’ What I mean by that is: if you’re younger than age 70 where you’re drawing a responsible income of something like 5% or maybe 6% or less; and if you’re older than 70, what was your income – 8% or less? – then at least it’s a responsible income. Did you have adequate exposure to equities, 50-60% minimum, and did you have at least 20-30% offshore exposure?
If the answers to those questions are generally yes, for that category of pensioners, I would say you should actually not be doing anything to your annuity. And the reason quite simply is that because we don’t know what markets are going to do from this kind of wildly volatile point on forward, anything that you do to your annuity is as likely to be detrimental as beneficial.
So it becomes a bit of a gambling situation and therefore if you have a responsible annuity, I would say you would be best served doing nothing to the portfolio. However, a lot of people might not be in the position where their annuities are in line with the benchmarks I’ve given at the start. And those are the people who, I think, the question is much more pertinent [to]. So let’s start with people where the income draw is too high. If your income draw was too high, I think that should get attention immediately...”
Read this interesting interview with Ryk van Niekerk and Jaco van Tonder of NinetyOne (formerly Investec) in Moneyweb of 2020, here...
Corona virus I – Why it is vital to keep asking if we are wrong about the pandemic
“Lord Sumption, retired justice of the supreme court of the UK, insists that the measures taken by the UK government in response to the threat posed by the Covid-19 pandemic represent a “hysterical slide into a police state” and an “irrational overreaction driven by fear”.
Moreover, he told the BBC, the public, consumed with panic, have abandoned their critical faculties, failing to ask:
A non-essential business? There is no such thing!
In a recent webcast, Jerry Gundlach, founder and chair of US investment firm DoubleLine Capital, posed exactly this question.
“There is no such thing as a non-essential business,” Gundlach argued. “They are all essential to their owners, and those businesses are interconnected to one another.”
This is something South Africa is going to have to grapple with in a very real sense when the lockdown is over. It is a reality that will be recognised in two ways.
The first is that every business exists because it is supplying something to somebody...here companies and individuals are able to respond to a pent-up demand, could well be a good news story post-lockdown. However, there will be others that are far less positive.
Many businesses that are supplying parts or services within larger supply chains are going to struggle to survive. Even if they do, they may start operating at reduced capacity after the lockdown.
This will have knock-on effects. Any supply chain only runs as well as its least efficient component, and this could mean major disruptions to many parts of the economy as capacity is re-established. This could take years.
Put another way, every business in a supply chain is ‘essential’ to keeping it functioning in a productive manner. Unfortunately, the lockdown is going to prove how true this is.
Read the full article by Patrick Cairns in Moneyweb of 7 April 2020, here...
Lockdown: poking the bear?
“There is no doubt – poverty kills more people than all the other nasties put together.
And there is no doubt that the current lockdown will lead to more poverty – which, accordingly, will kill more people.
So will the lockdown save more lives than the number that will be taken as a result of poverty?
Wealth is good and poverty is bad. Everything that most people regard as good correlates with wealth: good education, good health systems, low crime, long lives and so on. Correspondingly, everything perceived as bad relates back to poverty, from unemployment and low life expectancy to corruption and, as the saying goes, much, much more...
A healthy economy shelters healthy citizens. The health of a country equates to the wealth of a national economy.
The current lockdown is intentionally undermining the economy – obviously in the belief that it will lower or limit the number of lives lost to Covid-19 as opposed to the number of lives lost as a result of increased poverty...
The options are grim: to lock down the economy and kill 300 000 people over time due to the rise in the poverty rate, or not to lock down and potentially kill a maximum of 600 000 people if all South Africans get the virus in a short period of time, at a morality rate of 1% (mentioned above, far too ugly an estimate).
Unfortunately, it’s not an either/or choice; people will die of the virus whether we lock down or not.
In fact, some analysts reckon that everybody will eventually get the virus, and some will die. The sum of these statistics and projections are not encouraging.
The total number of South Africans that will die over the next 10 years could be more than 300 000 killed by poverty, plus the number that will die from the virus despite all efforts to limit or contain the spread.
That many people will die from the virus is a given. Locking down the economy will simply serve to increase the number of poverty-related deaths.
Read the full article by Dawie Roodt in Moneyweb of 17 April 2020 here...
Great quotes have an incredible ability to put things in perspective.
I rebel therefore I exist.
~ Albert Camus