Recommendations to relieve Corona distress
- Funds with year-end of April 2020 need to have submitted their 2nd levy returns and payments by 22 May 2020;
- Funds with year-end of October 2020 need to have submitted their 1st levy returns and payments by 22 May 2020; and
- Funds with year-end of May 2019 need to submit their final levy returns and payments by 29 May 2020.
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:
Download the RFIN recommendations here...
- Provide contribution holiday to employers and members in respect of the retirement funding portion of their contribution;
- Extend due date for submission of regulatory reporting;
- Reduce minimum and maximum living annuity draw-down rates to 2.5% and 17.5%, respectively;
- Issue a standard tax deduction directive for all benefits due to be paid as reduced tax rate;
- Reduce interest rate on in-fund housing loans;
- Allow suspension of housing loan repayments;
- Allow pension fund members to borrow against their fund credit for household expenditure;
- Exempt from income tax benefits payable to minor beneficiaries;
- Suspend requirements re unlisted investments;
- Increase tax deductible limit for retirement fund contributions to N$150,000.
Recommendations by ICAN
The Institute of Chartered Accountants of Namibia similarly submitted a report to the ministerial committee. Here are some of the more noteworthy recommendations:
If you are interested to learn what ICAN recommends, download the recommendations here...
- Abolish import VAT payments on goods;
- Pay all VAT claims without prior verification procedures;
- Allow taxpayers to offset VAT and income tax payments against any credit balance with Inland Revenue;
- Zero-rate all basic foodstuffs;
- Get all arrears assessments up-to-date and refund overpayments;
- Allow full deduction of all capital expenditure;
- Grant an additional tax allowance of 25% of remuneration to employers;
- Reduce corporate tax rate to 30%;
- Exempt retrenchment pay-outs to employees;
- Exempt from income tax zero interest rate loans to employees; and
- Place moratorium on interest payable by taxpayers.
...and for completeness, ICAN advised its members “Following the letters issued by ICAN and NIPA to the Minister of Finance and the Commissioner of the IRD requesting a blanket extension of tax payment and tax return submission deadlines due to the practical difficulties caused by the lockdown, we received a response today which stated that a blanket extension will NOT be issued either for payments or return submissions.
It appears that a response to the 11 suggestions made above is still outstanding.
SSC introduces Corona relief measures
The Social Security Commission has sprung into action and is offering a N$ 320 million package of relief measures. Here are a few key measures:
Download the recommended measures here...
- SSC contribution holiday for a 3-month period (presumably MSD fund contributions);
- 50% salary subsidy of severely affected sectors depending on type of industry business and employee;
- Informal sector employee grant of N$ 1,000 for 3 months;
- A grant of N$ 3,000 for street vendors; and
- Post COVID 19 assistance to SMEs in form of grant and re-training in collaboration with NTA.
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
- 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...
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...
Check out our 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...
In this newsletter we address the following topics:
In Marthinuz Fabianus’s section read about:
- Covid 19 precautions by RFS and Benchmark.
In ‘Tilman Friedrich’s industry forum’ we present:
- Old Mutual introduces new AGP portfolio series – urgent action required;
- Unemployment security or National Pension Fund – are our priorities flawed?
- Corona virus – Trevor Noah interviews Bill Gates;
- NAMFISA showing no mercy?
- The problem of growth; and
- The full article in last month’s Benchmark Performance Review “Will there be life after Corona?”
In ‘News from RFS’, read about staff being recognised for long service.
...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!
In ‘News from the market place’ read about “Old Mutual introduces new AGP portfolio series”.
In ‘Letters from our readers’ read about “RFS newsletters are too technical for the layman”;
In ‘News from NAMFISA’, read about NAMFISA’s COVID 19 relief concessions.
In ‘Legal snippets’ read about “Nominated beneficiary predeceasing policy holder”; and
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...
|Marthinuz Fabianus graduated from Namibian University of Science & Technology with a Diploma in Commerce and Bachelors in Business Management. He completed a senior management development programme at University of Stellenbosch and various short courses including a macro-economic policy course which he completed at the International Training Centre of the ILO in Turin, Italy. Marthinuz also serves as trustee on the board of the Benchmark Retirement Fund and is a member of the board of the Retirement Funds Institute of Namibia. Marthinuz also served as a Commissioner on the Social Security Commission from 2015-2017.
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
As the result of the sharp decline in global equity markets the current AGP series declared a bonus of minus 5% for April. Furthermore, its BSA reserve level has dropped to between minus 15% and minus 20%. Due to these developments, Old Mutual took a unilateral decision to commence a new AGP series to be referred to as the 2020 series as opposed to the current series now referred to as the 2007 series. We suggest that the current policy covering the investor’s current AGP investment is a contract between Old Mutual and the investor. We suggest that a contract cannot unilaterally be amended by one contracting party without having consequences for that party and offering the remedy to the other contractual party to either be placed in a position as if the contract had not been breached or accepting the breach and its repudiation by the other party, without incurring any penalties when dissolving the contract.
The decision Old Mutual has taken, will have repercussions for the Fund, its members and its service providers, most likely including cost implications, but may also not be executable from an administrative point of view under certain circumstances.
Old Mutual is presenting the introduction of the new AGP portfolio series as having been taken in the interests of investors. We believe this may not necessarily be true for all investors and it also depends on the perspective one takes. The outcome will be different when one looks at it from a member’s perspective and from the Fund’s perspective and when one looks at it from an existing or a new member’s perspective and from an existing or a new investing Fund’s perspective. The principle as always in life is, where someone benefits, someone else will have to ‘pick up the tab’.
If any Fund does object to the action Old Mutual is taking, it is advisable that the Fund obtains legal opinion urgently and be guided by this opinion in dealing with this matter further on.
Download the Old Mutual letter, here...
Lockdown: Govt relaxes rules for more businesses to trade
Mines, refineries, ports, certain call centres, DIY stores and ‘essential’ repair service businesses may now operate. Is this a belated April fool? For Namibia yes. However, this is what is happening in SA where government is on a path of gradually relaxing lockdown rules as reported in Moneyweb of 17 April 2020.
Will our Namibian government follow suit since it seems that it has been following SA closely in the rules it proclaimed?
Unemployment security or National Pension Fund – are our priorities flawed?
So here we are - overrun, overcome and overwhelmed by COVID 19 that is wreaking havoc in the Namibian economy. In a panic response we ordered a lockdown with measures going further than many developed countries took. Our ambition seems to be to lead the rest of the world not recognising that we do not have the resources or the reserves of developed countries and that our social environment is vastly different from that in these countries.
Now we are scrambling to find ways how to cushion the impact on our people, trying to coerce employers, who in many instances do not know how to survive this self-made economic disaster, to keep their employees in service one way or another, be it on reduced remuneration. Government of course does not have the resources to offer any meaningful reprieve.
Under these circumstances, it is probably not far-fetched to ask the question – should we be chasing a National Pension Fund, or should we by now rather have had a national unemployment insurance fund? Surely in terms of needs of the working population, unemployment insurance should carry much higher priority than a National Pension Fund – and I admit, this is now with hindsight. But it’s not too late to reconsider. We do not have a National Pension Fund yet.
Unfortunately, I am afraid, personal egos more often than not play the deciding role when policy decisions are taken. We rather single-mindedly carry on pursuing the National Pension Fund and building our personal empire, willingly accepting that this will seriously undermine the existing industry!
Corona virus – Trevor Noah interviews Bill Gates
Trevor Noah interviewed Bill Gates on fighting the Corona virus on 2 April 2020. We have transcribed this interview. You can download the transcription here...
It is quite an interesting revelation, particularly when you read between the lines.
Here is one question: “When you look at that balance between the economic penalty and the human penalty, there are some who have argued that the economic penalty will over time equal the human penalty. Now, you are one of the few people in the world where you actually have enough money to tell us about whether or not an economy shifting in this way or another way is going to cause mass deaths. But how do you think we should be looking at this? Because, yes, there is an economy and yes, there is human life. But what, where do you think the truth lies?”
Bill Gates responds as follows: “Well, there isn't a choice where you get to say to people, ‘don't pay attention to this epidemic’. You know, most people have older relatives. They're worried about getting sick. The idea of a normal economy is not there is a choice. About 80 percent of people are going to change their activities. If you get the other 20 percent to go along with that nationwide, then the disease numbers come will flatten. Hopefully in the next month and start to go down, hopefully in the month after that. And then when they've gone down a lot, then in a tasteful way, using prioritized testing, you can start to reopen a lot of things like schools and work. Probably not sports events, because the chance of mass spread there is quite large. And so to get back economically, taking the pain extremely now and telling those who wouldn't curb their activities. No. You must go along with the rest of society and not associate in a way that we have exponential increase in these cases. That is the right thing, even though it's extremely painful, it's unheard of. And you know, their particular businesses that it's catastrophic for, that's the only way you get so you can feel like you can say to the entire population. Ideally in the early summer, if things go well. Yes. Now please do resume. And we are through testing, making sure that it won't spread and some very, very big way. So, people will need the confidence that the system is working and smart people are making decisions and overoptimistic statements actually work against that.”
So Bill Gates is saying that 80% of people will go along, the 20% balance will just be forced to go along! How does he know in any event that 80% will go along? How does he know what someone would say if he/ she were to choose between picking up Corona and losing his/ her job, particularly someone on the lower end of the income spectrum who is unlikely to ever find a job again? He is described a philanthropist but is this attitude no rather that of a misanthropist?
He is also saying that in the month after the curve starts to flatten and when the infection curve has then flattened down a lot, one can start to reopen a lot of things, but not sports events. He is thus looking at a 3-month period from when the curve flattens... and he seems to know it all and have all the answers, making reference to one doctor only, without the world ever having gone through such experience! Watch this space!
The interview can be watched on Youtube, here...
NAMFISA showing no mercy?
Whilst everyone is urged to reach out, support and assist to counter the impact of the serious consequences of the lockdown, it seems the regulator is not inclined to relax on rules and regulations. Its circular PF/CIR/1/2020 in response to the challenges the industry is facing, affords only the concession to submit the COA, due 30 April, 30 days later than usual.
Even if the argument may have been that (so far) the lock down was only for a period of 3 weeks and hence a 4 week-extension for the COA report should suffice, it ignores the reality. The reality is that business is spending a lot of time, energy and money to make arrangements and to adapt to the lockdown consequences. Working from home is much easier said that done as we experienced. Working from home at best requires staff to adapt to the new situation. This brings with it substantial inefficiencies over an extended period. Then one finds that IT is not delivering as expected. A large number of staff remotely trying to log into the business server simultaneously, often leads to a frequent break-down of connections with a loss of time and efficiencies.
Any fund intending to reduce its contribution in an effort to save the company from demise is informed that there is a statutory route to follow for reducing the contribution rate but funds are cautioned to comply with the requirements NAMFISA has set, and these are within its discretion. These requirements mean that a lengthy process has to be followed. The employer must take a formal decision to reduce its contribution rate, must make the necessary arrangements with its employees and must then approach the fund to take the necessary steps to give effect to this decision. The trustees will have to take a resolution to reduce the contribution rate and instruct its service provider to prepare the necessary rule amendment. Since there are only a handful service providers serving hundreds of funds they will be overwhelmed with such request from their clients and will not be able to churn out these rule amendments within a few days. In the mean-time funds must satisfy themselves that the employees were informed about the reduction in the contribution rate. Once this is all in place, the prescribed documentation pack has to be submitted to NAMFISA which in turn is likely to be overwhelmed by the number of applications it needs to process. Once NAMFISA has granted approval (and this is what it entails nowadays although the Act talks only about registration), the amendment must be submitted to Inland Revenue for tax approval. Since a rule amendment is null and void unless registered by NAMFISA, and for all intents and purposes also by Inland Revenue, by the time approval is granted the lockdown is likely to have been lifted and a number of employers would have gone down already.
For fund service providers, routine work in general will experience delays of significantly more that the time lost directly as the result of the lockdown. Most of the audit work cannot be carried out during the lockdown and will be delayed as the result of the delays in executing routine work and in preparing for the audit. Trustee meetings had to be cancelled. Company officials have to focus on keeping their businesses from going under and cannot divert their attention to their responsibilities as trustee of their pension fund as if nothing happened.
In the meantime, no concession was made with regard to any of the other statutory reporting. And yes, NAMFISA does not have the authority to make such concession, but it could have petitioned the president via its line minister to suspend the relevant statutory requirements in terms of the powers granted to him under the state of emergency.
The Johannesburg Stock Exchange has given listed companies two additional months to submit their financial statements. Namibian pension funds in contrast got no reprieve from the regulator so far. As pointed out in ‘Recommendations to relieve Corona distress’, industry has petitioned the Minister of Finance for distress reprieve and it is to be hoped that the president will proclaim the relief pleaded for.
The problem of growth
The impact of the various financial crises and ongoing austerity and uncertainty has taught the global financial markets that growth should not be taken as a given. Every curve has its 'ups and downs'.
Growth is a function of productivity and consumption. When these are called into question, trades that foresee growth become questionable themselves.
The current uncertainty has far reaching implications, which we touch on in the item on Cyprus, below.
Avenues of growth still exist, and economists believe that recession is cyclical, so growth will resume. However, we must not take it for granted, and we must understand, that as capacity for consumption diminishes, growth will be hard-won.
Find a note in our March 2013 newsletter that is equally relevant in this time of lockdown!
Will there be life after Corona?
By now we are all acutely aware of the sharp decline in global financial markets. The JSE Allshare Index declined by 33% from 57,084 at the end of December to 38,267 at the time of writing this column. Earnings of the index were 6.34% at the end of December while the dividend yield was 3.9%. If the underlying companies were able to maintain earnings at that level, earning should currently amount to 9.5% and dividend yield should amount to 5.8%. To put this into a more common context, if you let your house of N$ 2 million generating a return of 6.34% your rent would amount to N$ 10,600 per month. If you were to continue earning the same rent but your property agent tells you that the value of your house has dropped to N$ 1,3 million, why should you be concerned about this drop in value. Supply and demand should result in the market adjusting upward again in time to come.
Now let’s look at an investor who invests offshore. The S&P 500 index declined by 29% from 3,217 at the end of December to 2,284 at the time of writing. However, the Rand: US$ exchange rate at the same time weakened from 13.98 to 17.7. The value of the index at the end of December for a local investor would have amounted to N$ 44,974 while it now amounts to N$ 42,196, representing a decline in value of ‘only’ 6%. Something one can live with, I suppose. This once again shows the value of diversifying one’s investment across the globe. As readers will know, pension funds typically have invested around 30% offshore as the result of which one can expect the decline in value of pension fund investments to be ‘only’ in the region of 25% for the first quarter to the end of March.
The problem at this stage is that the sharp decline of financial markets in consequence of the Corona pandemic is now exacerbated by the measures that have been taken by countries across the world in an effort to curb the spread of the virus. These have already had a seriously negative impact on economies across the world and we are only at the beginning stage of these measures in the western world and in Africa. Things will get much worse economically once countries move into a lock-down. All businesses will experience a decline in income and for many this will be so drastic that they will not survive. One commentator believes that the US economy will shrink by 24% in quarter 2 of 2020! That is a dramatic decline bound to lead to many business casualties, not only in the US but across the globe. Business in general will have to reduce staff and overhead costs. Employing the rental house analogy again, if your rent now drops to a return of 6.34% of the market value of your property that declined to N$ 1.3 million, your rent will decline by nearly N$ 4,000 to N$ 7,000 per month. If your rental income just covered your interest obligation towards the bank prior to the crisis your loan would have been N$ 1.1 million at the pre-crisis interest rate of 11.25%. As the result of the reduction in the interest rate to now 10%, you would now have to pay interest of ‘only’ N$ 9,000 per month but you now need to pay an amount of N$ 2,000 out of your pocket, on a salary that is likely to have declined sharply as well. The same scenario will of course apply to most businesses. Some of the loss of revenue will be permanent where it compensated for consumption that cannot be deferred, while deferred consumption will eventually result in the recovery of lost revenue. By the rental house analogy, if your house was vacant for a while, it represents a permanent loss of revenue, however if the housing market recovers to it pre-crisis levels, your loss in value of the house would have been of a temporary nature only. Working less hours for all intents and purposes implies a permanent loss of income unless you took leave now to avoid a reduction in working hours.
Investments of course create productive capacity. For the time this productive capacity is not employed or employed unproductively, revenue that could have been generated is forfeited. This may once again represent a short-term permanent loss of revenue or it may represent deferred revenue. The impact of a loss of revenue for the investor is a loss of dividends, and a loss of capital growth relating to retained revenues. It can be foreseen that it will take quite a long time for the economies to recover from this shock. Investors in businesses that closed down will have lost their total investment. At the same time the closing down of businesses means that the surviving businesses will be able to deploy their full capacity again sooner.
An interesting and somewhat encouraging picture emerges from the graph below that I copied from John Mauldin’s ‘Thoughts from the Frontline’ newsletter. It reflects the incidence of Corona cases in relation to the movement of the Chinese CSI 300 index from the beginning of January to the middle of March. The slump in the index occurred at the peak of Corona incidence. As the incidence declined the market recovered sharply. Since it staged this recovery, it slumped once again to around 3,600 at the time of writing, lower still than it was at the peak of the Corona crisis, now probably driven by bad news coming in from the rest of the world. (To read this interesting newsletter, download it here...) Note that you can subscribe at no cost if you follow the link in the newsletter.
As for my case, you are likely to spend a great deal of your time and thoughts on what measures you should take to lessen the blow this is undoubtedly going to have on you, your investments and your business, and you are likely to also feel overwhelmed. The media attention given to this crisis is deafening and unprecedented, dwarfing the attention Greta Thunberg enjoyed for a while and any other pandemic we had before and that never reached the expected magnitude, such as swine flu and bird flu. With so much media attention it is inevitable that the man in the street will reach conclusions that are not justified or appropriate, in the absence of any frame of reference At this link you can examine the total number of cases and the death toll as the result of various contagious diseases. Note that the fatalities from Corona varies widely and one needs to investigate further to establish the reasons but it is likely linked to the quality of the health care systems in the various countries. One should put these figures into the context of the respective exposed populations and of the normal annual flu for a proper appreciation of what these figures are really telling us. Italy for example is a country with a very high fatality rate. I understand that the rate of resistance to antibiotics in Italy is 26% whereas it is only 0.5% in Germany. Iran is another country with a high fatality rate. Iran is subjected to sever international sanctions which probably contribute to its experience. In Wuhan the fatalities in absolute numbers is high but fatalities are less than 5% of its cases.
Not being as disciplined and authoritarian as China, the rest of the world will take a lot longer before the number of new infections will start to subside. It took China about 6 weeks going by the above graph. The rest of the world is likely to take two to four times as long, probably anything between 3 months and 6 months. The peak in China was reached after about 2 weeks. The rest of the world may probably only reach its peak by somewhere between end April and end May. We may thus only see a slow recovery in financial markets from the second half of this year. By then our tourism industry would have missed its main season for 2020.
If the Chinese experience with the Corona virus and its impact on the economy is anything to go by, the world economy will start recovering from the second half of 2020. However, it will be a slow recovery until it gets into pre-crisis full swing again. Many people will have lost their job and many businesses will have closed down. To rebuild the lost capacity will take some time.
In light of our expectation of a recovery in the second half of 2020, investors should grant their investments one to two years to recover. This is a short-term in most investors’ lives unless you have to retire. Where you can or are allowed to switch investment portfolios, this is not the right time to move from a high risk to a low risk portfolio as this would merely realise the unrealized losses the investment has incurred – the horses have bolted. It serves no purpose to close the gate now. Given that timing is a play most would lose out most of the time, this is rather a time to move from a low-risk to a high-risk portfolio. Be prepared for a further decline in financial markets – we would not expect anything as dramatic as we have experienced in February and March. Best is not to watch the markets for the next 3 to 6 months. If you urgently do need funds, rather consider repatriating foreign investments than realizing substantial losses locally. If you are due to retire and are forced to sell cheap, buy cheap again into a high-risk portfolio so that you can benefit from any recovery in the markets.
Try to defer your retirement if your employer allows, before your cash in your one-third commutation from a high-risk portfolio that has already suffered a loss or move your money to a preservation fund until things have recovered. Best is not to resign from your employer now – any income even if it is less than before and some certainty is infinitely better than no income and no certainty. There will be life after Corona!
|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.
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:
Elbie Taljaard in fact had a first service period of nearly 13 years before leaving us for ‘greener pastures’, just to re-join 9 months later again. She is thus approaching a total of 20 years’ service with RFS!
- Faith Tjombe
- Elbie Taljaard
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:
Annual financial statements must be submitted within 6 months of the end of the financial year.
- COA return that was due 30 April now needs to be submitted by 31 May (effectively by 29 May). It emphasises though that the subsequent returns need to be submitted within 30 days of end of quarter.
At the same time NAMFISA emphasises the following:
- “...Fund trustees are advised to exercise prudence in the management of the fund assets in the best interest of the fund and its members...”
- “The requirements of regulation 13(6) (exceed reg 13 limits by less than 5% due to market value movement) and 13(14) (applying for exemption from observing reg 13 limits) must be observed. However, funds may apply for exemption. “...Such application or notification should clearly and comprehensively set out sufficient compelling reason as to why the exemption is being sought or how the passive breach occurred”
- Funds wishing to alter their contributions rates must submit a rule amendment. Trustees are cautioned though
- to pay contributions within 7 days of the end of the period in respect of which they are due;
- to inform members about such amendment and to submit proof that members have been informed.
- Actuarial valuation reports must be submitted within the prescribed time of 12 months of the end of the financial year.
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.
Source: S&P Dow Jones Indices
|S&P 500 largest daily losses
|| % move
Source: S&P Dow Jones Indices
|S&P 500 largest daily gains
|| % move
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:
Read the full article by Nicole Fritz in BusinessDay of 1 April 2020 here...
- whether the action they have demanded of the government will actually work,
- whether the cost of it will be worth paying, and
- whether the cure is worse than the disease.”
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