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In this newsletter:
Benchtest 01.2021, Fiscus will forego N$ 640 million p.a., plans to nationalise pensions industry and more...



NAMFISA levies

  • Funds with year-end of February 2021 need to have submitted their 2nd levy returns and payments by 25 March 2021;
  • Funds with year-end of August 2021 need to have submitted their 1st levy returns and payments by 25 March 2021; and
  • Funds with year-end of March 2020 need to submit their final levy returns and payments by 31 March 2021.
Due dates for submission of tax returns extended again
 
ICAN recently informed its members that the Ministry of Finance has approved an extension of the filing deadline for 2020 individual tax returns from 1 March 2021 to 31 March 2021. In addition, the submission of 2020 provisional tax returns that were due 30 September 2020 was also extended to 31 March 2021.
 
The extension does not apply to payments of tax due but only to the filing of the returns.
 
ICAN has not received an official press release from the IRD but have confirmed this extension with the Commissioner and other officials. In addition, the new deadline of 31 March 2021 reflects as such on the ITAS eService website.
 
In terms of the Tax Relief programme, registration is required and the following information is available on ITAS under “Other services” - > “Tax relief registration”:




Pension fund governance - a toolbox for trustees
  • Download the privacy policy here...
  • Download a draft rule dealing with the appointment of the board of trustees here...
  • Download the code of ethics policy here...
  • Download the generic communication policy here...
  • Download the generic risk management policy here...
  • Download the generic conflict-of-interest policy here...
  • Download the generic trustee performance appraisal form here…
  • Download the generic investment policy here...
  • Download the generic trustee code of conduct here...
  • Download the unclaimed benefits policy here...
  • Download the list of fund service providers duly registered by NAMFISA here... 
  • Download the Principal Officer performance appraisal form here...
  • Download the revised service provider self-assessment here...

Registered service providers
UPDATED May 2020


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...


If you need any assistance with your personal financial planning, you are welcome to get in touch with Annemarie Nel (tel 061-446 073) or with Kristof Lerch (tel 061-446 042)



Dear reader

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

  • FIMA bits and bites – the fiscus will forego N$ 640 million p.a.?
  • Private sector leads SOE’s on gender equality and trails on member compensation;
  • Plans afoot to nationalise the pensions industry?
  • The 2020’s are going to be about rifle shots, not the shotgun approach of index funds!

In a Benchmark note, Benchmark Retirement Fund principal officer welcomes Sperrgebiet Mining.

In ‘News from RFS’ -

  • Staff improving the competencies;
  • RFS engages marketing manager;
  • RFS to carry out brand audit; and
  • RFS invites the public to report inappropriate conduct

In ‘Legal snippets’ read -

  • May employer appointed trustee, suspended from duty as employee, still attend trustee meetings?
  • Can the employer’s claim for refund of a bonus be deducted from a benefit?

In media snippets, read –

  • Mentally prepare for retirement: 21 tips – Part 2
  • Game over for hedge funds;
  • Regulator takes position with regard to CBI claims; and
  • Three key drivers for markets in 2021
...and make a point of reading what our clients say about us in the ‘Compliments’ section. It should give you a good appreciation of who and what we are!

As always, your comment is welcome, so open a new mail and drop us a note!

Regards


Tilman Friedrich
   


Monthly Review of Portfolio Performance
to 31 January 2021


In January 2021 the average prudential balanced portfolio returned 2.3% (December 2020: 1.9%). Top performer is Allan Gray Balanced Fund with 3.1%, while Old Mutual Pinnacle Profile Growth Fund with 1.3% takes the bottom spot. For the 3-month period, NAM Coronation Balanced Plus Fund takes the top spot, outperforming the ‘average’ by roughly 4.2%. On the other end of the scale Stanlib Managed Fund underperformed the ‘average’ by 2.8%. Note that these returns are before (gross of) asset management fees.

Read part 6 of the Monthly Review of Portfolio Performance to 31 January 2021 to find out what our investment views are. Download it here...


What to expect of global investment markets in 2021?

The inauguration of a new president of the United States has brough about quite a change to the outlook for global financial markets, particularly since he can speak with authority knowing that the Democrats now have a majority in both houses of parliament. President Biden intends to spend another US$ 1.9 trn to stimulate the US economy, and that is nearly 10% of US GDP. As the result global equity markets have responded positively to the new outlook. The SA Allshare index increased by 9.5% over the last 2 months, the SP&500 increased by 33.3%, the Dax increased by 5.2%, the Nikkei increased by 38.3% leaving only the FTSE that actually declined by nearly 25%. Similarly, the US 10-year bond yield increased by 27.1%, which for an investor unfortunately presented a severe capital depreciation. I expect that the US moves will force the hand of other developed countries to employ similar measures, not only to stimulate their economies but also to protect their currencies. The day of reckoning therefore seems to have been pushed forward by at least another year and the reversion to an equilibrium between the various asset classes is nowhere in sight. While the economies of most developing countries are still reeling under the consequences of COVID-19, the Chinese economy seems to be picking up speed and as the result global commodity prices are also on an upward trend. This of course is good news for commodity-based economies such as SA and also Namibia.
 
Read part 6 of the Monthly Review of Portfolio Performance to 31 January 2021 to find out what our investment views are. Download it here...


FIMA bits and bites – the fiscus will forego N$ 640 million per annum
 
Once FIMA becomes effective, regulation RF.R.5.10 provides that 75% of a member’s ‘minimum individual reserve’ must be preserved until the member’s normal retirement age in terms of the rules of the fund whose moneys were preserved. I wonder whether anyone at the Ministry of Finance or NAMFISA, as adviser to the Ministry of Finance, in all matters relating to pension funds, has taken the trouble to try and assess the prospective impact on the fiscus of this regulation, as all moneys preserved will now no longer be taxed at the date of termination of the member’s membership prior to preserving the capital.
 
I have tried to obtain relevant information from NAMFISA’s website to get a grip on the impact on the fiscus but unfortunately not useful information could be gathered, other than the total gross capital that exited the industry in 2016 which amounted to N$ 6.3 billion at the time. From our client data base I was able to extract all relevant information relating to our clients for 2020. This information can then be extrapolated to the pensions industry as a whole. If one escalates the 2016 figure by assumed growth in members benefits through investment earnings and contributions, I arrive at a figure of roughly N$ 8 billion in 2020. From our data base I established that of total gross termination benefits, roughly 34% related to termination benefits and only 2% of all termination benefits were actually preserved. Applying a cash pay-out ratio of 32% of all capital that exited the industry, I arrive a total cash pay-out of roughly N$ 2.5 billion per year. Assuming a low average tax rate of say 25% on this capital, the fiscus would forego about N$ 640 million per year as the result of compulsory preservation under FIMA.
 

Private sector leads SOE’s on gender equality and trails on member compensation
 
The below graph extracted from the data base of fund members administered by RFS reveals some interesting differences in the demographics of members of funds maintained by the private sector and members of funds maintained by state owned enterprises and utilities. This graph focuses specifically on the difference between male and female fund membership. The data base covers close to 35,000 active members, split roughly equally between private sector and public sector funds.
 
The interested reader will note the following facts:
  • Blue bar reflecting member enrolment in 2020: 41% of all new members enrolled by the private sector were female, compared to 37% by the public sector;
  • Brown bars reflecting membership composition at the end of 2020: 47% of all members enrolled by the private sector were female, compared to 35% in the public sector;
  • Grey bars reflect average pensionable salary at the end of 2020: the private sector remunerated female members (N$ 17,097) slightly better on average than male members (N$ 16,382) while in the public sector remuneration of female (N$ 25,486) and male members (N$ 25,144) are on par; and
  • In the private sector, female members on average pensionable salary is only 67% of their counterparts in the public sector, while pensionable salary of male members in the private sector on average is only 65% of their counterparts in the public sector! 
If the RFS fund member data base is a fair reflection of the demographics of all pension fund members in Namibia, one will conclude that the private sector is noticeably more progressive in terms of gender balance amongst their workers.

More concerning is the indication that employees in the public sector appear to be 50% better remunerated on average than employees in the private sector!

Lastly the RFS data base indicates that the private sector is about the same size as the public sector in terms of number of fund members. Measuring in terms of total assets though, the private sector represents only 20% of total industry assets, compared to the 80% of the public sector industry assets, partially due to higher remuneration in the public sector.
 

 

Plans afoot to nationalise the pensions industry?
 
As I pointed out elsewhere. Currently, private sector pension membership represents roughly 50% of total fund membership. In terms of fund assets though, the private sector only owns 20% of funds assets while the public sector owns 80% of fund assets. We also know that government is intent on setting up a National Pension Fund and that this fund is to be compulsory for all employees, as second pillar of the social security net, the first one being the stage old age grant. Years ago, when this idea was flouted, the proposed framework envisaged a salary cap of N$ 10,000 per month and a contribution rate of 12% of salary. The Thinking was, and by all indications still is, that every employee has to contribute at 12% of salary up to a monthly salary of N$ 10,000. The third voluntary pillar of social security provision would then be provided by the private sector in respect of employees earning more than N$ 10,000 per month who want to make additional provision.
 
Going by our data base and extrapolating our statistics to the total occupational pension fund membership, at least 50% of its current membership will exit private sector arrangements. Those are the members earning up to N$ 10,000 per month. Those earning more than N$ 10,000 per month, will also consider whether to remain a member of their occupational arrangement or whether to move to an individual, private arrangement as the result of their scheme having reduced in membership to such an extent that it is no longer viable to maintain the scheme. Current membership of occupational funds will reduce from 135,000 to about 65,000 and probably quite a bit less.
 
Now the industry is faced with another initiative that intends to establish an umbrella fund for all state-owned-enterprises. These entities currently have a membership of 20,000. If successful in attracting sufficient political clout, this initiative may lead to the membership of private sector pension funds to shrink further to only 45,000 members. Considering that we currently administer 35,000 members, there is no room for more one administrator, which could effectively result in the demise of the industry as we know it, in the absence of any healthy competition. The GIPF together with Kuleni will then effectively be a monopoly. It is highly doubtful that this desired outcome will satisfy pension fund members, or their employers and will thus unlikely be in the interests of the pensions industry!
 
We understand that this initiative is driven very aggressively with tight timelines, probably aimed to pre-empt FIMA. The thinking is that this umbrella fund will be administered by GIPF subsidiary Kuleni, and will be advised by the promoters of this idea. This initiative carries the characteristics of a ‘hard sale’, as it seems to exclusively focus on the pros of umbrella funds.
 
Pension funds have a very long life and trustees should rather be placed in the position where they can objectively assess the pros and the cons. Having been involved in the pension fund industry for over 40 years, I have witnessed the move from umbrella funds to free-standing funds and will share some of this history.
 
Looking back over the past 40 years of the pensions industry in Namibia, all pension funds serving the private sector in Namibia used to be umbrella funds administered by one of the South African insurance companies active in Namibia. The pension fund for government employees and predecessor of today’s GIPF was established under its own law for government employees. Similarly, the predecessor of today’s pension fund for employees of local authorities was established under its own law.
 
Commencing shortly before Namibia’s independence, a snowball was kicked off with the first employers moving out of an insurer’s umbrella fund into its employer sponsored free-standing fund. On the private sector side, it was the Ohlthaver & List group and on the public sector side it was Nampower’s predecessor, Swawek, if my memory serves me right. This snowball literally became an avalanche resulting in virtually all employers with around 200+ employees establishing their own free-standing pension fund. This avalanche also captured most state-owned-enterprises. Given that umbrella funds certainly offer economies of scale, this tidal wave into free-standing funds, happened despite the overt annual management costs having increased substantially following the exit from umbrella funds. Clearly there will have been reasons for top management of all these entities having nevertheless decided to move into their own free-standing fund.
 
Since the move occurred 30 years ago, today’s trustees in very few instances will have been involved in the decision to move into a free-standing fund or will remember the reasons for this decision. Furthermore, the environment has changed over the past 30 years, if only to a limited extent as far as the pensions industry is concerned. Pre-independence, we had 4 or 5 insurance companies who managed pension fund assets in their prudential balanced portfolios, assisted by a few insurance brokers serving as intermediary between the employer and the insurance company. Virtually all fund administration was carried out in SA; actuaries were all based in SA; Namibian audit firms did not know what a pension fund was; all assets were moved straight into SA; Namibia did not have a stock exchange and very little business for local stock brokers. As we know, this has all changed substantially. Given that the knowledge of boards of trustees relating to the pre-independence pension fund dispensation has faded over the years, in my 30-year experience, I have never heard trustees complaining that they preferred the pre-independence dispensation! I have also never seen a free-standing pension fund moving back into an umbrella fund, other than more recently, in anticipation of what FIMA will bring with it.
 
But the major changes lie ahead with the looming introduction of FIMA. Given this background it is probably a good time now for trustees to consider whether their fund should be retained as a free-standing fund, particularly in view of what FIMA will bring with it- and that will be a lot! In this endeavour trustees need to be cognisant of the fact that each coin has two sides. Both sides need to be put under the spotlight properly, to assess whether to maintain the status quo or to move into a new era. There are enough good sales people out there who will try to convince trustees of their solution, more often than not, a solution packed with own interests.
 
The trustees’ fiduciary duties, however, demand that they look after the interests of their fund and its stakeholders, to ignore the noise around them and to be wary and cognisant of the possible motives for such noises. Trustees must know what the needs of their stakeholders are and how best these needs can be met, i.e., in an umbrella fund or in the free-standing fund? Costs are obviously one factor to consider. The problem however is, that those costs that can be quantified at any point in time are typically only valid for 1 year and may change significantly from year to year. This problem is compounded where the service/ product provider has locked-in his client. Costs would typically be discounted initially in return for having the client locked-in. The other problem is, that cost is one side of a coin, the other side being benefits and that benefits are very often unquantifiable in advance. When one has foregone a benefit, one will then be able to quantify the loss with hindsight. In our industry, the most important benefits that one has to pay for, are clean member records; transparent and timely reporting; expeditious payment of benefits; technical expertise; superior, risk-adjusted investment returns; fund management skills transfer to trustees, principal officer and administrator on an ongoing basis; no cost cross subsidisation between high-risk and low-risk employers; and last but not least, customised fund structure and member communication.
 
In my experience the, unfortunately, unquantifiable benefits that one can either buy or forego, by war outweigh those costs that can initially be quantified. Take a relatively high difference in annual salary-based costs of 1% of payroll for a person whose total net retirement funding rate is a typical 15% of salary or say N$ 15 000 per annum, over a membership period of 40 years and earning a real investment return of 5% per annum. The end value of the person would be N$ 1,907,525. If the annual payroll linked management cost were now 1% of salary higher, resulting in only 14% of salary accumulating for retirement, this person’s end value would now only be N$ 1,780,356 (7% lower). Now let’s assume the real investment return was 1% higher, or 6% per annum, while the payroll linked costs were also 1% of salary higher, this person’s end value would now be N$ 2,323,406, 22% higher despite the 1% higher payroll-linked costs. To put this into a slightly different perspective. If the real investment return of 6% was achieved throughout, the annual payroll linked costs could actually be 3.5% of salary higher, to still get to the same end value. And this example just looks at 2 factors, quantifiable annual payroll linked costs vs the potential benefit of higher, but unquantifiable, investment returns. As I pointed out above, there are other unquantifiable potential benefits of initial quantifiable costs. A typical example is labour unrest resulting from poor fund administration, and I have seen this in the past. Let there be a labour outage of just one working day and calculate the potential loss that your business could prospectively incur by losing one work day. That will probably represent near 0.5% of the business’ annual turnover, and this will go straight to its bottom line as there will be no concomitant cost savings!
 
The trustees are clearly faced with a dilemma. They need to take a rational decision based on a small quantifiable factor and a whole number of unquantifiable factors. It’s a bit like driving a car looking in the rear mirror! The one hard fact is: being locked in will dispossess the trustees of the opportunity to change anything when they think the time is right and will thus have lost an opportunity to improve the fate of their fund members. Of course, the trustees will never know whether their decision would have delivered the desired improvement, but for one they can never be comfortable for having had to forego that opportunity and, with expert advice, chances are that they should be able to achieve an improvement! The alternative is, put all your trust and faith into the hands of a single party, your umbrella fund management. Will any court condone this argument?
 
At this stage and before FIMA, it is still a fairly simple process for a fund to transfer into an umbrella fund. With FIMA in place, it will be much more difficult and cumbersome to move into or out of any umbrella fund.
 

The 2020s are going to be about rifle shots, not the shotgun approach of index funds!
 
In his newsletter ‘Thoughts from the Frontline’ of 23 January 2021, John Mauldin presents a number of US market metrics that should make an investor think.
 
Consider the so-called ‘Buffet Indicator’ as per graph 6.1 (Source: Adviser Perspectives), that measures US equities as a percentage of nominal US GDP. It is at an all-time high and about as far above the ‘Exponential Regression’ line as it was at the end of 2000 when the S&P 500 dropped from its peak of 1,518 at the end of July 2000 to 815 by end of August 2002. That was a drop of 87%! It took the S&P 500 5 years to get back to the July 2000 level, i.e. by 2007, only to drop back to 735 at the end of January 2009 through the global financial crisis. That was a drop of 108% from the peak it reached at the end of April 2007. As we speak, the S&P 500 is testing the 4,000 level, evidently driven by quantitative easing that we have referred to repeatedly in earlier newsletters.
 
Graph 6.1


Similarly graph 6.2 (Source: Doug Kass) reflects a list of 15 S&P 500 metrics that are at historical highs of somewhere in the 90th to 100th percentile.
 
Graph 6.2

 
The message clearly is that the US market is in extreme territory, or as John Mauldin put it ‘valuations are at nosebleed levels’ in the US. In last month’s column, we had a table that presented a few key metrics of Europe, the UK, Japan and emerging markets (also covering the SA market), many of which similarly lead to the conclusion that all these markets are also not exactly cheap in historic context. Equities thus present a significant investment risk
 
Looking at other asset classes, treasury bills currently yield only around 4% which is not even 2% above inflation. Namibian government bonds in contrast, yield between just over 5% (GC21) and just over 13% (GC50). That may sound like a wonderful return on long-term bonds. The problem with bonds is that these yields can only be realised if one holds the bond to maturity and ignores the risk of capital loss in the event of a forced sale before maturity, should interest rates increase, as they should do, considering their extremely low levels currently. Just looking at current yields to maturity is about the same as saying, don’t worry about the share price, let’s just look at the dividend yield of a share. Very few investors, if any, can afford to hold an asset to maturity. There are always situations, e.g. retirement, unemployment or death of an individual, or the dissolution or liquidation of a fund or the employer, when one may be forced to sell the asset and the yield to maturity was then only a pie in the sky.
 
When we look at share indices, we need to realise that we are looking at a wood consisting of many different trees, some of which grow faster, others slower, some producing an exceptional crop, others a poor crop and some never make it at all. Last year the S&P 500 was up 18.4%, and an equally weighted portfolio of FAAAM (Facebook, Alphabet, Amazon, Apple, Microsoft) plus Netflix was up 55%! The contribution of that latter group to the S&P 500’s growth was 14.35%. The “S&P 494”, i.e. excluding these 6 out-performers, gained only 4.05%. By far the biggest investment risk is thus posed by those 6 shares while the balance of the index is probably at fair valuations. Currently 60 of the S&P 500 shares trade at over 10 times there annual sales compared to just under 50 just before the bubble burst in the early 2000’s. Take Tesla that currently trades at 30 times annual sales. While the average tree in the wood grew nicely, there were a handful that delivered stellar growth, the rest delivering rather mediocre growth.     
 
But even in a market that is generally expensive, there are always shares that are cheap, that are solid businesses generating great profits and paying high dividends. As John Mauldin put it in his ‘Thoughts from the Frontline’ newsletter of 23 January 2021: “The 2020s are going to be about rifle shots, not the shotgun approach of index funds.” If one does not overpay for a good company, the company and its share price should grow in line with its sector in the economy and in addition, it will pay dividends. If you need to sell it, you should be able to sell it without having to incur a loss, having bought it at a fair or cheap price. Contrast this with property as another potential asset for investment. When the economy is in the doldrums, so the property market is and it will not matter what property you hold. The difference here is that shares are highly liquid and can be traded easily, making it much easier to realise the true value of the share, as opposed to owning property and being forced to sell it when the market is in the doldrums.
 

Conclusion

Considering the state of the global economy and financial markets, it is difficult to achieve the investment returns that are implicit in typical pension fund structures, of around 6% in real terms. This is the result of the disruption of financial markets by the intervention of reserve banks after the global financial crisis and now again in response to the COVID crisis. However, there is an end to what reserve banks can do and they are at this stage left with very little ‘fire power’ to stimulate the economy. Once inflation sets in with all the easy money floating around, interest rates will start increasing while equities as an asset class will start declining. Hiding your money under your mattress bears its own risks as does speculation with investments and the investment in less common assets where it is difficult to determine a price because of the absence of an active market.
 
The good old fashioned investment principle still applies. Do not put all your eggs in one basket but diversify your risk by spreading it across assets and asset classes as widely as possible. Equities are a mirror of the real economy and remain the asset class that should generate superior returns in the long run. Economic fundamentals should improve as the COVID-19 hysteria subsides going forward. The time we find ourselves in, however, requires stock picking skills rather than the shot gun approach of index management and the focus should be on good quality, fairly valued or cheap companies with high dividend yields. The investor should thus be able to expect a real dividend yield in excess of 3%. This may be low in relation to what we have seen in years gone by, however it is still a respectable return on any equity investment. The investor should thus be able to expect a real dividend yield in excess of 3%. This may be low in relation to what we have seen in years gone by, however it is still a respectable return on any equity investment and an investment in a typical balanced portfolio should be able to generate a real return of around 5%, or around 7% in the prevailing inflationary environment
. Offshore diversification is essential and the strengthening of the Rand once again creates the opportunity for doing so. It is this principle one needs to focus on more than the timing though, as the Rand tends to rise when offshore markets also rise, and vise-versa, often negating the effect of its strengthening or weakening.
 
Tilman Friedrich is a 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 from the principal officer of a large fund
Dated 26 November 2020

“Ek is nog steeds verstom oor hoeveel hulp julle aan ons verleen.
 
Baie dankie vir die puik diens en dat julle sonder enige huiwering uit julle pad gaan vir ons.


Read more comments from our clients, here...
     


We are proud to advise that Sperrgebiet Diamond Mining (Pty) Ltd just informed us it will be joining the Benchmark Retirement Fund as a participating employer. We sincerely appreciate this gesture of confidence and trust in RFS, as fund administrator, and the Benchmark Retirement Fund and extend a hearty welcome to the company and its employees to the fold of the Benchmark Retirement Fund.
 

Our business model is not to dominate the market through a low-cost proposition. We focus on transparency, exceptional reporting and superior service. This should support and promote sound industrial relations and the employer’s employment philosophy and policy of attracting and retaining the best staff. If these objectives are important to your company and close to your heart, we should be your ideal partner in the provision of retirement benefits to your staff.
Paul-Gordon /Guidao-‡Oab joined RFS as Manager: Audit and Compliance in May 2016 and then moved into the position of Benchmark Product Manager. In 2019 he assumed the duties of Principal Officer of the Fund. Paul holds a B Compt degree from Unisa and has completed his articles with SGA and has obtained the Post Graduate Diploma in Financial Planning from Milpark Education.



Staff improving their competencies
 
Learning should never stop and “education is the greatest equaliser” – Nelson Mandela.
 
We congratulate the following colleagues for having advanced their competence in serving our clients:
  • Kristof Lerch successfully completed the CFP® Professional Competency Examination of the Financial Planning Institute
  • Paul-Gordon !Guidao-Oab successfully completed the Postgraduate Diploma in Financial Planning (NQF Level 8) through Milpark Education. 
RFS actively encourages and supports staff wishing to advance their qualifications in various ways and we are very proud of everyone successfully walking this arduous road!
 

RFS engages marketing manager
 
RFS recently engaged the services of Mrs Nadja Dobberstein as marketing manager on a part time basis. Nadja is a highly experienced and qualified marketing specialist. She has a Diploma in Advertising Management from Varsity College, Cape Town, a Managerial Development Program from USB, an Advanced Programme in Marketing Management from UNISA and a Mini MBA Workshop Certification.
 
She started her professional career with Radio Wave 96.7 FM as an Account Manager in 2007. She then moved to FNB in 2010 as a Marketing Officer where she gained valuable experience over a period of 5 years. In 2015 she moved to Weathermen & Co, a subsidiary of the O&L group as Account Director responsible for all marketing efforts of the O&L group as well as for a number of other companies. She was appointed as Managing Director of Weathermen & Co in 2018. In 2020 Nadja decided to move out of the corporate world, opening the door for RFS to engage her expert services.
 
Nadja’s experience and expertise will undoubtedly benefit RFS. We welcome Nadja heartily and look forward to a long and mutually satisfying road together in the pursuit of RFS’ interest!
 

RFS to carry out brand audit
 
Having engaged Nadja Dobberstein as our marketing manager, as one of her first projects, Nadja will engage with RFS clients and other industry stakeholders for the purpose of carrying out a brand audit. Understanding our position and perception of and in our industry, is a precondition for purposefully advising us on our journey with her into the future.
 
We are thus calling on all who may be contacted by Nadja for this purpose, to assist Nadja and RFS in better defining ourselves and in that manner being put into the position of improving our services to our clients and better meeting their needs and expectations.
 

RFS invites the public to report inappropriate conduct
 
Retirement Fund Solutions (RFS) Namibia is founded on uncompromising values which all Directors, management and staff promise to uphold at all times. As a valued stakeholder, we request you to report unethical behaviour, any misconduct, involving any officer or employee of RFS.
 
Our reporting is outsourced to an independent investigator to ensure your anonymity and preserve confidentiality.
We request that you please report any of the following:
  • Requests for payments in exchange for faster delivery of service
  • Falsifying of documents
  • False declarations
  • Soliciting of gifts
  • Bribery
  • Theft
  • Concealment of required information
  • Concealment of errors
  • Threats
  • Verbal abuse
  • Racism
  • Sexism
  • Breaches of confidentiality
  • Nepotism
  • Cronyism
  • Any other unethical conduct. 
In keeping with the company’s strict governance code of conduct, we invite stakeholders to report any misconduct by completing the form on our website at this link, that will be sent to the following contact.
 
Independent Chairperson: Audit-, Risk and Compliance Committee
 

Important administrative circulars issued by RFS

RFS has not issued any fund administration related circulars to its clients over the last month.



NAMFISA issues circular on the status of rules
 
NAMFISA on 16 February 2021, issued circular PF/Cir/01/2021 that addresses certain wrong doings in the pensions industry.

The purpose of this Circular is to provide the Registrar’s position in respect of the practice whereby umbrella funds collect purported pension contributions and provide pension benefits to employees of a prospective employer (“participating employer”) prior to the registration of rules. Rule amendments in respect of a participating employer under an umbrella fund have no binding effect before approval and registration under section 12 of the Act. Therefore, the practice of collecting purported pension contributions from and providing pension benefits to employees of a prospective participating employer prior to the approval and registration of applicable rules under an umbrella fund is unlawful.


Umbrella funds may admit into fund membership, collect pension contributions and provide the attendant pension benefits only after the approval and registration of applicable rules. Accordingly, umbrella funds are urged to desist from the above practice
 


May an employer-appointed trustee, suspended from duty as employee, still attend trustee meetings?
By Andreen Moncur B.A. (Law)
 
Where an employer-appointed retirement fund trustee is on suspension from work, is it wrong for the trustee to continue attending trustee meetings? In short, the answer is no. On the contrary, it would be wrong for the trustee not to attend trustee meetings during their suspension. The trustee will breach their fiduciary duties if they don’t.
.
 
The objective of any retirement fund is to provide:
  • retirement and withdrawal benefits to the fund’s members (employees and retired employees of employers who participate in the fund)
  • death benefits for the dependants of deceased members.
These benefits are stated in the fund rules. The fund rules also make provision for the fund to be governed by a board of trustees to attain its stated objectives. The board of trustees usually comprises trustees elected by the members and appointed by the participating employers on a 50-50 basis. As functionaries responsible for the fund’s management, the trustees hold positions of trust and owe the fund a fiduciary duty. A fiduciary duty arises when party A places its trust in party B to act in the best interest of and for the benefit of party A with the requisite degree of care. The standard of care required of a trustee is higher than that which a reasonable person would show in dealing with their personal affairs.
 
So, irrespective of who appoints or elects the board members and whether the trustees are employees of a participating employer or independent trustees, each trustee owes the same fiduciary duty to the fund members. This fiduciary duty requires the board of trustees to act independently. In particular, a trustee may not submit to any party's influence, whether the trustee’s employer, the fund members or the fund’s service providers nor be under the control of another party. As a fiduciary, a trustee is accountable for the fund’s sound governance. Sound governance requires a trustee to attend all board meetings and actively participate in all board activities. A trustee cannot allow personal circumstances nor another party to prevent them from discharging their fiduciary duties.
 
The employer cannot prevent a suspended employee who is also a retirement fund trustee from attending a trustee meeting because the Employer has no say over fund management. The fund is not an extension of the employer's business operations but is a separate legal entity. While an employer may suspend a trustee from their duties as an employee, the employer cannot suspend a trustee from office as a trustee. However, the employer can deny a suspended employee access to the employer’s premises during the suspension period. Thus, the employer can effectively hamper the trustee in carrying out their fiduciary duties since the board usually meets on the employer’s premises, often during working hours. This obstacle is easily overcome by merely moving the trustee meeting off-site or meeting online.
 
Practically-speaking, the suspension of an employer-appointed trustee may be awkward to navigate.  But legally speaking, it’s relatively straightforward. Suspension from their post does not release a trustee from their obligations towards the fund and its members. A trustee’s ability to manage the fund, including their contractual power (legal capacity to enter into contracts on behalf of the fund) is not suspended.  
 

Can the employer’s claim for refund of a bonus be deducted from a benefit?

This case deals with a complaint by SS Ratlala (the Complainant) versus Bokamoso Retirement Fund (the Fund) and Akani Retirement Fund Administrators (the Employer). Ratlala complained that the Fund had deducted an amount from his termination benefit claimed to have been refundable by the Complainant to his Employer in respect of a performance bonus.
 
While section 37A of the Pension Funds Act offers strong protection of a member’s benefit, it provides for certain exceptions, the relevant provisions in this case set out in section 37D(1)(b)(ii).
 

Section 37D(1)(b)(ii) provisions

Note that this section is verbatim the same as the equivalent section in the Namibian act.

A registered fund may-
deduct any amount due by a member to his employer on the date of his retirement or on which he ceases to be a member of the fund, in respect of-
compensation (including any legal costs recoverable from the member in a matter contemplated in subparagraph (bb)) in respect of any damage caused to the employer by reason of any theft, dishonesty, fraud or misconduct by the member, and in respect of which-
(aa) the member has in writing admitted liability to the employer; or
(bb) judgment has been obtained against the member in any court, including a magistrate's court,
from any benefit payable in respect of the member or a beneficiary in terms of the rules of the fund, and pay such amount to the employer concerned;
Facts of complaint

The complainant owed the Employer an amount in respect of a performance bonus he received but should not have received. Both the Fund and the Employer informed the Complainant that he needed to authorise this deduction from his pension benefit. Although the Complainant was aware that such a deduction was not permissible in terms of the Pension Funds Act. The Complainant provided this authorisation in writing to the Fund, in order to receive the balance of his benefit. On the strength of this authority, the Fund paid over the refund of the performance bonus to the employer and concluded that no further benefit was due to the Complainant.
 

Matter to be determined by the Tribunal

The tribunal needed to determine whether the deduction in respect of the performance bonus from the Complainant’s benefit was consistent with section 37D(1)(b)(ii).
 
In its considerations, the tribunal made reference to Rowan v Standard Bank Staff Retirement Fund and Another, which formulated the following requirements that need to be met for deducting an amount from a benefit:
  • An amount must be due by a member to his employer;
  • The amount must be due at the date of termination of membership;
  • The amount must be due as compensation to the employer for damage caused to the employer;
  • The damaged must have been caused through theft, dishonesty, fraud or misconduct;
  • The member must have furnished a written admission concerning the compensation due for damage caused; or
The employer must have obtained judgment in a court in respect of the compensation.
 

Findings of the Tribunal

The tribunal found as follows:
  • The interpretation by the Fund that the Complainant’s written acknowledgement of liability met the requirements of 37D(1)(b)(ii), was highly misplaced.
  • The refund of the performance bonus did not relate to damage suffered through the Complainant’s theft, dishonest, fraud or misconduct as envisaged in section 37D(1)(b)(ii).
  • As the result the Fund acted unlawfully and could not attach the Complainant’s withdrawal benefit.
  • The conduct of the Fund and the Employer deserves deprecation in the strongest terms.
  • As key players in the pension fund industry the Fund and the Employer (as fund administrator) are expected to apply the Act and act in utmost good faith, which was absent in this case.
Verdict of the Tribunal

The Fund was directed to pay the Complainant the withdrawal benefit with interest from date of the benefit was paid to date of payment within 2 weeks and to provide the Complainant with a full exposition.
 

Read the full determination PFA/GP/00030663/2017/MD, here...
 

Mentally prepare for retirement: 21 tips – Part 2
 
In the previous newsletter, we brought to you the first 2 tips for mentally preparing for retirement. In this newsletter we present the next 3 tips.

 “Retirement is a major life change, that not everyone is prepared for. The following guide contains excellent tips how to mentally prepare for retirement. As it is a lengthy document, it will be presented in multiple parts over the next few newsletters, so make sure you don’t miss any of these. (Note: the source of this guide in not known.)
 
To Mentally Prepare For retirement, You:
  • Start preparing in advance: 1 – 5 years
  • Think about what to do in retirement
  • Communicate with spouse & family about retirement
  • Know that retiring is a process
  • Discover your new identity & purpose in life
  • Create a plan & set goals
  • Replace work routines with new routines
  • Find a support team 
These are just a few tips, but to fully understand, you need to know more. And in this article, [the author] shares 21 tips where [he] thoroughly explains what you can do to prepare for retirement mentally in the best way possible. 
 

3. Communicate with your spouse & family about retirement plans

The biggest mistake for couples is not communicating properly what they want out of retirement. Many couples assume they share the same vision about life in retirement without talking about it. And this can lead to disappointment, conflicts, and friction and sometimes even lead to divorce because you’re not on the same page anymore.

It’s vital to discuss your hopes, dreams, and plans you have for retirement with each other. Maybe your partner doesn’t want to retire at the same time because she/ he loves their job. Or perhaps you want to move closer to your grandchildren, and you have another plan in mind. Keep each other in the loop about your desires so you both can plan for activities in retirement together. 

Another thing you should discuss with your spouse is how you’re handling matters at home. The transition can be rough, and roles are changing once you retire. So, you need to talk about how to handle alone time, together time, and household activities. If you’re the only one retiring than maybe your spouse needs to get used to the fact you’re home more often. And feels like you’re invading her/ his space. Or expects you to do more household activities than you anticipated. 

Go out to dinner and share your vision of what retirement would be like: what makes you happy or concerned and what you need to feel comfortable. Negotiate with each other and find ways to make compromises. And also discuss if you want to retire at the same time. There can be significant emotional and financial consequences of retiring at the same time that you need to be aware of.

Also, communicate your retirement plans and ideas with your family. Perhaps your children expect you to babysit your grandchildren fixed days in the week to reduce costs on childcare, but you don’t want to be tied up. You’ve worked very hard to enjoy this freedom, so make sure you set boundaries and don’t commit to activities that keep you from following your dreams.

Some couples take a 2 or 3-month honeymoon to fully enjoy their first weeks of retirement before they commit to anything else. This can be a great way to ease into retirement together and also have enough time to think and plan about what you want to do next. 


4. Check your finances

A stress-free retirement is a retirement where finances are in check. Make sure your financial plan for retirement is up-to-date, and you’re on the right track. And that includes having a budget plan for the dreams and projects you have in retirement. 

If you’ve figured out how you want to spend time in retirement, you also need to check if your financial plan backs up your fun plan. You don’t want to retire with a head full of dreams and not being able to afford it.  

You can come to a conclusion to post-pone your retirement with a couple of months or years to afford your dream. Think about if that dream is worth the extra working years or find other dreams that are less expensive if you really don’t want to work any longer


5. Try out retirement before retiring

You can tiptoe into retirement by slowly reducing your working hours or take a sabbatical a couple of months or years before your actual retirement date to try things out. This way, you can find out if the dream in your head is achievable and feel it out. 

Some retirees make a drastic life change in retirement before testing it out and come to the conclusion that it’s not what they expected it to be. And sometimes there is no turning back due to financial reasons. So testing the waters beforehand can give you a good feeling and realistic view on your retirement plans. And you can intercept and tackle problems beforehand that makes you more prepared for what’s coming and make the actual transition more smoothly. 

If you don’t want to retire fully yet, you can start working part-time to ease into retirement. You avoid burning bridges at work too soon, but also have extra free time to start some retirement projects. Or if you want to continue working but differently, you can think about working as a freelancer, consultant, or another type of job. Where you still have a paycheck and purpose in life but are in charge of your own working hours…”
 
Further parts of this interesting guide will follow in the coming newsletters.
 

‘Game over’ for hedge fund

 “Oh, how the mighty have lost fortunes. Several hedge funds like Melvin Capital and Citron Research thought they were onto something when they started to ‘short’ shares in GameStop, a brick and mortar gaming store that supposedly had an obsolete business model.
 
The thinking was that they could make money from the expected slide. But they made a big miscalculation. Instead of seeing the value of GameStop shares fall, over the past few months the share price rose and in the past few weeks it skyrocketed.
 
GameStop, which was trading at $4.21 a year ago, had risen to $18.81 by the end of 2020 and shot up to $472 on Thursday. So how did the likes of Melvin Capital, which had to be bailed out to the tune of $2.75 billion (R41.5 billion), and Citron Research get it so wrong?
 
On the surface, they had a solid investment thesis …
 
A business that sold games through stores (think Musica) would soon be upended by digital distribution rivals.

They reasoned that by ‘borrowing’ shares and then selling them at the current price, they would make money by later buying shares at a cheaper price than they had been priced at when they initially sold them. These shares would then be returned to whoever they borrowed them from.
 

In effect, the short seller sold something it did not own and planned to make money by buying shares at a lower price than they had sold them for in the future. But two things happened that they didn’t count on…”

 Read the full article by Larry Claasen in Moneyweb of 29 January 2021, here…




Regulator takes position with regard to CBI claims
 
The Financial Sector Conduct Authority in South Africa (FSCA) has now taken a position with regard to CBI claims as set out underneath. The question is: Will NAMFISA render the same support to affected parties in Namibia?“


Purpose

This Communication sets out the FSCA’s current position on certain aspects of CBI insurance cover as well as its expectations of non-life insurers and policyholders in respect of CBI claims, in order to ensure that the processing of these claims is not unduly delayed and in line with the legal certainty that has been obtained in recent judgments.
 

Position regarding legal certainty

Following recent discussions with the non-life insurers with CBI cover exposure, it was confirmed that they hold the view that legal certainty has been obtained. Insurers have proceeded to review previous and current claims to make sure that claims decisions are in line with the recent court judgments.
 

Time processes and claims requirements

The FSCA received some complaints from policyholders regarding the ‘burden of proof’ requirements for CBI claims. Insurers are reminded to consider the guidance that the FSCA issued in this regard in FSCA COMMUNICATION 34 OF 2020 (INS) and to finalise these claims as expeditiously as possible. Most importantly, insurers must ensure that policyholders do not face unreasonable post-sale barriers to submit CBI claims.
 
In order to assist policyholders with the information to be submitted to insurers for the claim assessment process, the FSCA considers it advisable for insurers to develop a set of ‘Frequently Asked Questions’ (FAQ’s) related to CBI claims and host these questions with responses that are clear and visible on their websites where it is easy for policyholders to access it. The FSCA will be engaging further with insurers on such a measure.
 
Several insurers indicated that some policyholders have only sent claims notifications to them and have not provided the necessary supporting documentation to enable them to assess the claims. Policyholders are urged to liaise with their brokers and contact their insurers urgently with the necessary information. Likewise, it is expected that insurers provide detailed guidance to policyholders in this regard as CBI claims are of a technical nature.”
 
Read the full communication of the FSCA, in Cover of 11 February 2021, here...
 

Three key drivers for markets in 2021 

“2020 was a defining and historic year, characterised by an unprecedented global health crisis and peacetime policy response. The contrast between the current economic freeze and future optimism suggests it’s darkest before the dawn, with a realistic prospect of the pandemic improving over the coming months as the global vaccination roll-out accelerates. 

Against the backdrop of a meaningful moderation in the pandemic and reduced geopolitical risk, three key drivers for markets and investment strategy in 2021 are evident.  
  1. Risk assets will remain supported:
    First, as a result of a surprisingly sharp recovery from last year’s lows, investors can expect risk assets to remain well supported by a favourable mix of economic recovery and expansionary monetary and fiscal policy… 
  2. Dominance of ‘pandemic beneficiaries’ will subside:
    Secondly, the equity market dominance of ‘pandemic beneficiaries’, such as mega-cap technology stocks, is likely to subside as the recovery broadens and new leaders emerge…
  3. ESG and sustainability themes will grow:
    Finally, as investment themes, Environment, Social and Governance (ESG) and sustainability have been growing in prominence in recent years, as investors reflect their personal values in their portfolios. However, in 2021, investors can expect this theme to be embedded across the investment landscape. Corporate reporting on sustainability is now the norm..” 
Read the full article by Graham Wainer, CIO of Stonehage Fleming Investment Management, in Cover of 27 January 2021, here...



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"Life is not a matter of holding good cards, but sometimes, playing a poor hand well.” ~  Jack London

 
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