|In this newsletter:
Benchtest 09.2020, COVID to save the world, circumventing Reg. 13 and more...
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 Kai Friedrich’s administration forum read about:
In 'On fund governance' –
In ‘News from RFS’ -
In news from the market place read about –
In ‘News from NAMFISA’ read about:
In ‘Legal snippets’ read -
As always, your comment is welcome, so open a new mail and drop us a note!
Monthly Review of Portfolio Performance
to 31 September 2020
In September 2020 the average prudential balanced portfolio returned -1.5% (August 2020: 0.9%). Top performer is Old Mutual Pinnacle Profile Growth Fund with -0.3%, while NinetyOne Managed Fund with -2.2% takes the bottom spot. For the 3-month period, NAM Coronation Balanced Plus Fund takes the top spot, outperforming the ‘average’ by roughly 1.8%. On the other end of the scale Allan Gray Balanced Fund underperformed the ‘average’ by 2.2%. Note that these returns are before (gross of) asset management fees.
Take note that we have added a new graph 3.5.3 which reflects the returns of low risk special mandate funds, being the Capricorn Stable Fund, the Sanlam Absolute Return Fund and the Sanlam Active Plus Fund.
The Monthly Review of Portfolio Performance to 30 September 2020 provides a full review of portfolio performances and other interesting analyses. Download it here...
It’s tough times for any investor!
It’s tough times for any investor, particularly someone planning to retire within the next 5 years or having retired already. Conventional investment wisdom as implicit in the management of investments in prudential balanced portfolios, will find it hard to deliver positive real returns. Many an investor may feel enticed to take bigger risks in their investment decisions and invest more speculatively in the hope of these investments yielding the desired returns. Few will factor in the true risk properly, if at all.
In the past, wars proved to provide an escape from a desperate situation. Who is prepared to speculate on a war once again solving our prevailing problems and presenting a global economic and financial reset?
Investment managers of these portfolios should rather cast their nets further and find more ‘unconventional’ investment opportunities without venturing into highly risky and speculative investments. This requires some lateral thinking but it offers a significant opportunity to ‘win the race’ if one is first out of the blocks.
Read part 6 of the Monthly Review of Portfolio Performance to 30 September 2020 to find out what our investment views are. Download it here...
FIMA bits and bites
Last but not least, as a pensioner, you will lose confidence in taking your own decisions as you grow older. In a retail product you will then increase your dependence on your broker ever more, while many institutional products offer default options that the managers manage in the best interests of the member/ pensioner and that can relieve the member/ pensioner of the responsibility to take decisions when he no longer has the confidence or knowledge to do so. As a pensioner you must ascertain that you are at peace with the party/ies in whose custody your retirement capital is. You cannot afford and do not want to lose sleep over this.
New CoA guidelines issued by NAMFISA
NAMFISA has provided some clarity around classification of investments in accordance with Regulation 13. It also provided clarity on some line items on the Balance Sheet and Income Statement.
In addition, NAMFISA has introduced a few new validation rules in the CoA return, which will prevent the user from submitting the return if the validations are not true:
Take the simple example of Asset Manager A that only allocates interest earned on their investment statements on the first day of the next month. RFS as administrators accrues for the interest in the current month, where it was earned. The investment consultant however receives the investment information directly from the Asset Manager A, which excludes such interest for the month.
Accordingly, the investment information inserted by the investment consultant will differ from the amount recorded in the fund’s Trial Balance and accordingly the Balance Sheet will not balance.
Principal Officers and fund service providers need to work together closely to ensure that all these potential problems are identified upfront and resolved amicable to ensure that the return can be submitted timeously.
Successful FIMA webinar series concluded
The last 2-hour webinar of a series of 6 was presented to participants on 13 October. Enrolment exceeded all expectations which indicates that stakeholders are now starting to realise that FIMA will soon be upon us and that one needs to know what is coming.
Once FIMA is in place it will be much harder to make changes to funds and their structures but there is still a window of opportunity right now.
On average over 100 individuals participated in these 6 webinars. Insightful feedback was obtained from 37 participants upon conclusion of these webinars that overwhelmingly rated the feedback questions on the webinars either 4 (= good) or 5 (= excellent) out of 5. Only 3 out of 148 ratings were a 3 (= satisfactory). From this one can only reach one conclusion and that is participants were overwhelmingly impressed by these webinars.
The organisation of the webinars, their content and the presenter were of high standard. The feedback from an official gives testimony to the general assessment of participants where it states:
“…I just thought I would then by e-mail thank all involved in bringing this webinar to the Namibian pension funds industry. It was a good effort and well executed. The expertise of the presenter shone through. It was a very valuable experience for the team to experience first-hand how the Bill is perceived and understood.
Once again thank you and well done.”
…and just to make the point that the successful execution of such occasion is not ‘a piece of cake’ as the saying goes. Here is feedback on a conference recently held in SA
“…I was kicked out at 11 am, in spite of phoning FPI Office and put through to someone, I am still locked out.
The entire system seems to have crashed.
Will provident funds survive the FIMA
Current situation under the Pension Fund Act
The Pension Funds Act does not include a definition of ‘provident fund’. The Pension Funds Act defines a ‘pension fund organisation’ as any association of persons established with the object of providing annuities or lump sum payments for members or former members of such association upon their reaching retirement dates, or for the dependants of such members or former members upon the death of such members or former members.
A provident fund is however defined in the Income Tax Act, which states that a provident fund means any fund (other than a pension fund, benefit fund or retirement annuity fund as defined in the Income Tax Act) which is approved by the Minister in respect of the year of assessment in question. The Income Tax Act then further stipulates how the benefits under a provident fund should be taxed, which will not be further elaborated on in this document since this would be the same under the Pension Funds Act and the FIM Bill.
Provident funds under the FIM Bill
A provident fund is specifically included in the definition of ‘fund’ in the FIM Bill:
‘Fund’ is defined in section 249 of the Bill as ‘a retirement fund or a beneficiary fund, and includes any other fund or class of funds prescribed by regulation’.
Regulation RF.R.5.1 ‘Funds and classes of funds for inclusion in the definition of “fund” in section 249’ stipulates in section 2:
The following funds and classes of funds shall be included in the definition of “fund” in section 249 of the Act-
(a) pension funds;
(b) preservation funds;
(c) provident funds; and
(d) retirement annuity funds.
Section 1(3) of Regulation RF.R.5.1 states that a provident fund has the meaning ascribed thereto by the Income Tax Act, 1981 (Act No. 24 of 1981)’.
The FIM Bill allows payment of lump sums on retirement
Existing provident funds will be registered under FIMA as defined contribution retirement funds.
The definition of defined contribution fund in section 249(b) of the FIM Bill states that ‘any benefit payable on retirement must be fully secured through an annuity policy owned by the fund or purchased in the name of the member or paid to the member in accordance with such other form of payment that is permitted under the standards’;
RF.S.5.11 ‘Alternative forms for the payment of pensions of defined contribution funds’ in section 2 (d) states that ‘this standard applies to the balance of a member’s individual account or retirement income account that is available for conversion into a retirement income after the payment of such portion thereof as a lump sum, provided that such amount as may have been paid as a lump sum was paid according to the rules of the defined contribution fund and, further, subject to the payment of such lump sum being limited to any maximum amounts specified in any applicable legislation, regulation or subordinate legislation’.
Therefore section 2 (d) does allow the payment of lump sums. This is provided that the rules of the fund allow it. Other applicable legislation such as the Income Tax Act did not change.
At a meeting with NAMFISA on 16 July 2020, NAMFISA confirmed that no changes are envisaged to the status quo of provident funds currently.
Compulsory preservation is introduced via Regulation RF.R.5.10, but this applies up to date of retirement and does not affect the payment of lumpsums of provident funds at retirement.
As per NAMFISA, at retirement, under the FIM Bill and current other applicable legislation (e.g. Income Tax Act), provident funds can pay out 100% lumpsum on retirement.
It therefore does not seem that NAMFISA has any intention to remove provident funds (but they mentioned that they cannot say how the Minister views this who can also manage this via the ITA).
A provident fund can offer the same benefits and payment of benefits under the FIM Bill compared with the Pension Funds Act provided that the benefits and payment of benefits are set out in the rules of the fund and provided that there are no changes affecting benefits and payment of benefits in other applicable legislation such as the Income Tax Act.
Compliment from an HR officer of a Benchmark client
Dated 19 December 2019
“Môre G en J
Van my kant af net 'n groot dankie vir die jaar se saamwerk, dit was 'n plesier om sulke diens en standaarde te sien.”
Read more comments from our clients, here...
Status of ITAS project
RFS concluded the project of uploading all monthly returns for the period 1 March 2019 to 29 February 2020 on ITAS in respect of all funds it administers.
Unfortunately, after we uploaded all tax files it was revealed that Inland Revenue will question the allocation of pensions received under ‘income from employment’. This is the section in the ITAS upload file that provides for pensions paid. It was now revealed though that it should be reflected under ‘annuities’ in the upload file as the pensions end up as ‘income from employment’. This miscommunication means that ITAS has to delete all files we have uploaded already and that we will have to upload all files once again.
While the deletion and uploading will happen in the background between Inland Revenue and RFS, taxpayers should not be affected and should be able to submit their returns for the 2020 year of assessment. After submission of the return during the time of deleting all files and RFS uploading them again, taxpayers may get a notification that their return is incomplete, until RFS has uploaded its files again. We envisage that this process should be complete within a week of Inland Revenue having deleted all files. The period during which such messages may be generated should thus not be for much longer than a week.
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, also referred to as corporate memory. 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 foster 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 member celebrated her 20-year work anniversary at RFS! We express our sincere gratitude for her loyalty and support over the past 20 years to:
Old Mutual acquires PwC Research Services (Pty) Ltd
Old Mutual Life Assurance Company (South Africa) Ltd announced on 13 October that it had acquired PwC Research Services (Pty) Ltd. The more familiar name to many employers of this PwC enterprise will probably be its Remchannel remuneration survey and the company is due to be renamed Remchannel (Pty) Ltd under the Old Mutual auspices.
In the announcement, Old Mutual assures clients of Remchannel that strict data privacy will be observed. Download the announcement here…
!Kharos Benefit Solutions welcomes new payroll client
!Kharos Benefit Solutions welcomes Aucor as new payroll client with effect from 1 October.
!Kharos Benefit Solutions (Pty) Ltd is a joint venture between Logos Holdings (Pty) Ltd and Retirement Fund Solutions Namibia (Pty) Ltd. The company offers payroll and HR administration solutions. !Kharos brought ‘Symplexity’, a web- and cloud-based payroll and HR management and administration platform to Namibia.
New COA guidelines
NAMFISA recently issues a new COA guidelines with validation rules that were incorporated since the previous version.
These guidelines downloaded here…
Reporting of late payment and non-payment of contributions
In accordance with the directive PI/PF/DIR/02/2014 issued by the Registrar, Principal Officers are required to submit information as pertains to the non-payment or late payment of pension contributions in contravention of section 13A of the Pension Funds Act to the Registrar within 1 month, from the date of contravention.
In order to ensure consistent, adequate and efficient transmission of S13A data, the Registrar has created a standardized form to be utilized by Funds (who are reporting non-compliance) when submitting the said information. The said report should be made via ERS by completing the form below, within 1 month from the date of contravention of the section 13A.
(a) CoA: PF Section 13 A
Can Inland Revenue recover outstanding tax debts from your bank account?
The adjudicator elaborated that while BM was successfully convicted by a criminal court it must be determined whether or not his conviction amounted to a judgment as envisaged in section 37D(1)(b)(ii). The criminal conviction, which was based on the requirements of criminal law did not amount to a judgment in respect of compensation. Section 37D(1)(b)(ii) requires a judgment that, firstly determines liability, and secondly, determines the monetary value of the liability. A criminal conviction without compensatory order does not amount to a judgment as envisaged in section 37D(1)(b)(ii), despite the fact that extensive investigation may have been carried out that may have lead to the court accepting the accusations against a person, such conviction only finds the person concerned guilty as charged. It does not say whether the person is liable to compensate the employer and if so how much he is liable to pay. Only where a compensatory order was sought and granted in terms of the Criminal Procedures Act, would the employee become liabile to compensate the employer. Only in such instance may the fund deduct the amount of the liability towards the employer from the persons pension fund withdrawal benefit.
Although this article is referring to retirement in the US, it does contain universal retirement wisdom that should be heeded by anyone about to retire. Read the full article by Michelle Fox in CNBC of 28 September here...
One rare leadership trait for success
“Warren Buffett says success will come after you learn this 1 rare leadership trait. To entrepreneurs and working professionals everywhere, this may be your secret weapon.
…One of his best pieces of advice is rather counterintuitive. It relies on Father Time as the "friend of the wonderful business." Plainly stated, it is having the faith to believe that good things will happen to those who wait. Here's Buffett:
“No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant….”
To entrepreneurs getting a business off the ground, instant gratification is a mere pipe dream. That speaks to Buffett's point; he's a firm believer in the important lesson of thinking long term.
The long and hard journey and trials of 14-hour days and sleepless nights will eventually yield results and pave the way to success, making the journey that much sweeter. The operative word to make that happen boils down to one rare trait: patience.
Other research also found that patient people tend to experience less depression and fewer negative emotions and can cope better with stressful situations.
Additionally, they feel more gratitude, more connection to others, and experience a greater sense of abundance. That goes a long way when you're building a business….”
Read the full article by Marcel Schwantes in Inc.com of 15 October 2020 here…
Incarceration is not an excuse for not timeously dealing with tax matters
“The court judgment in the case of Joseph Nyalunga versus Sars (South African Revenue Service) had to consider whether being in jail is a good enough excuse for someone not to have fulfilled their tax obligations, such as objecting to an assessment or furnishing Sars with information.
On the other hand, it raises the problem that those with access to funds, even criminals, can delay justice for a very long time…
In 2013, while Nyalunga was incarcerated, Sars sent him an ‘intention to audit letter’ regarding “possible under-declaration of taxable income”. Later that year, Sars issued an ‘audit findings letter’. Nyalunga was provided with the opportunity to provide further information. Nyalunga did not respond, and Sars issued the ‘finalisation of audit letter’.
Nyalunga responded to that, informing Sars that he was still in prison and couldn’t provide any documents.
Sars raised an assessment in late 2013 for the years 2006 to 2013, and Nyalunga was given 30 days from the date of his release (April 8, 2014) to object to the assessment.
Briefly, Sars obtained a tax judgment in the amount of R15.2 million on June 23, 2014. During 2016, the sheriff unsuccessfully attempted to execute the warrant against Nyalunga.
In 2018 the sheriff managed to attach goods, and Nyalunga then brought an urgent court action…
Nyalunga said he could not participate as a normal taxpayer as he was incarcerated, also arguing that Sars’s procedures and processes were unfair.
The court found that incarceration is not a good enough reason for the delay in Nyalunga’s review application, and that it would not be in the interests of justice to overlook the delay…
The applicant was required by the Tax Administration Act to first exhaust all internal processes before he made the application to review. The applicant did not raise any objection to the assessment.
The court found that on the basis that Nyalunga had not submitted any tax returns, and that he had failed to raise an objection to the estimated assessments raised by Sars, and that three years had lapsed since the assessment (in fact, four years), the assessment has prescribed.
The review application failed and the assessment stands…”
Read the full article by Barbara Curson in Moneyweb Select of 6 October 2020, here…
Great quotes have an incredible ability to put things in perspective.
"He who has a why to live for can bear almost any how.”
~ Friedrich Nietzsche