2022-04

 

2020 amm invite 600
 

 

Benchtest Newsletter
Issued April 2022  
 

  
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In this newsletter

Benchtest 03.2022, compulsory preservation; the less I know, the better? And more...
  

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Important notes & reminders
    
  NAMFISA levies
  • Funds with March 2021 year-ends must submit their 2nd levy returns and payments by 25 April 2022;
  • Funds with September 2021 year-ends must submit their 1st levy returns and payments by 25 April 2022; and
  • Funds with April 2021 year-ends must submit their final levy returns and payments by 29 April 2022.
Salary sacrifices and income tax

To ensure compliance with The Act, the main considerations to take into account is to ensure that the basic salary does not decrease as this could be seen as a salary sacrifice. Although the Act does not specifically deal with salary sacrifices, it is generally held that the Namibia Revenue Agency can challenge the decrease in basic salaries under Section 95 of the Income Tax Act which deals with transactions, operations or schemes for purposes of avoiding or postponing a tax liability or reducing the amount of tax. With TCTC structures, annual increases in pension and medical aid fund contributions generally result in a decrease of the basic salary. In practice we have seen that the decrease in the basic salaries due to annual increases in pension and medical aid fund contributions are not regarded as salary sacrifices and have not witnessed it to be challenged by the Namibia Revenue Agency.

Read the PWC Tax First newsletter here…		   Retirement calculator

Use our web-based retirement and risk shortfall calculator for your personal retirement planning. Find it here...

If you need help with your financial planning, get in touch with
  • Annemarie Nel (tel 061-446 073)
  • Kristof Lerch (tel 061-446 042)
  • Christina Linge (061-446 6075)
Social security benefits increased

Subject to timely submission of the required forms, expecting mothers can now claim their full salary up to N$15,000 for a
maximum period of 12 weeks.

If you find yourself on extended sick leave, you are allowed to claim 75% of your salary (up to a maximum of N$11,250) for a period of 12 months, thereafter, only 65% of your salary (up to a maximum of N$ 9,750) can be claimed.

Read the PWC Tax First newsletter here…

Housing loan interest rate up
  • Bank of Namibia announced another 0.25% increase in the repo rate to 4.25% in April.
The increase means that retirement funds that grant housing loans to members must lift the rate by 0.25% to 8.25% from 1 May.


 
 

Newsletter
In this newsletter, we address the following topics:
  In ‘A note from the managing director, read
  • Compulsory Preservation – Will history repeat itself? 
In 'Tilman Friedrich's industry forum' we present:
  • Monthly review of portfolio performance – 31 March 2022
  • How do you invest when a global recession is looming
  • Are trustees safe to think, “the less I know, the better?”
  • FIMA bits and bites – what risks does the employer face?
  • FIMA bits and bites – funds cannot comply with regulations
  • FIMA bits and bites – this law is a minefield! 
In Benchmark – a note from Günter Pfeifer read about
  • Important circulars the fund issued 
In 'News from RFS,' read about…
  • RFS welcomes a new employee
  • RFS erecognised by NAMRA
  • RFS once again sponsors the SKW youth soccer tournament
  • Important circulars issued by RFS
   In 'News from NAMFISA,' read about…
  • More FIMA standards issued for comment
In 'Legal snippets,' read about
  • Section 37 A: The Attachment or Reduction of Pension Benefits 
In 'Snippets for the pension funds industry,' read about
  • A practical guide to offshore investments
  • Retirement: women are still at a disadvantage 
In ‘Snippets of general interest, read about
  • The most in-demand job skills in SA right now
  • Estate planning mistakes to avoid
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
  		 

Marthinuz Fabianus
A note from the Managing Director 
 

Compulsory Preservation – Will history repeat itself?

The current uproar regarding the NAMFISA draft regulation on partial compulsory preservation of pension fund capital upon the termination of pension fund membership before retirement age has aroused interest from young and old on an important pension fund matter. When articles are written on pension fund topics, they have been largely ignored by especially the younger population. Like many Namibians from all walks of life, I tuned in to listen to NAMFISA CEO’s press conference on the subject matter. The overwhelming public outcry and public interest were primarily driven by the video-recorded message of Job Amupanda, which enjoyed social media attention. As I read the remarks and comments from the audience that trickled in during the live press conference, I could not help but feel at a loss for words but was also disturbed by many of the uncivil and anger-filled comments. 

I was reminded of the hugely unpopular utterances ascribed to a former apartheid-era South African president, who insinuated that the average person of colour does not plan his life beyond a year. Sadly, the same person would have been responsible for preventing the same people from their right and fair access to education. Today, we all agree that “education is the greatest equaliser”. Founding president Sam Nuyoma hardly excluded the “fight against ignorance” from his speeches. Yet another former president, Hifikepunye Pohamba, stated, “if you think education is expensive, try ignorance”.

The pension fund concept was hugely popular shortly after Namibia’s independence. There was a lack of trust in occupational pension fund schemes, and for good reasons: pension fund membership, their contributions, and benefits were still divided along racial lines. The blue-collar workers then had good reasons to be hostile and touchy towards their employers’ pension funds. They were, for example, subjected to vesting scales, where the employer contribution was paid to them upon termination based on their years of service. Blue-collar workers were also often made to belong to provident funds, compared to their white-collar counterparts who belonged to pension funds. The difference between a pension fund and a provident fund is that provident funds allow you to access all your funds in full upon retirement. On the other hand, a pension fund will enable you to access only one-third of your pension fund savings, with the two-thirds payable in annuities for the rest of your life…

Read on, 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.
 
  
 
Tilman Friedrich's industry forum
 
 
Monthly Review of Portfolio Performance
to 31 March 2022

In March 2022, the average prudential balanced portfolio returned -1.0% (February 2021: 1.2%). The top performer is Momentum Namibia Growth Fund with 0.6%, while Hangala Prescient Absolute Balanced Fund with -2.2% takes the bottom spot. For the 3-months Momentum Namibia Growth Fund takes the top spot, outperforming the ‘average’ by roughly 1.3%. Stanlib Managed Fund underperformed the ‘average’ by 1.5% on the other end of the scale. Note that these returns are before (gross of) asset management fees.

The Monthly Review of Portfolio Performance to 31 March 2022 provides a full review of portfolio performances and other insightful analyses.  Download it here...
 
How do you invest when a global recession is looming?
 
Covid lock-downs across the world highlighted the flipside of globalisation. The fact that lock-downs disrupted global supply chains made many companies rethink their manufacturing in foreign countries. We still experience electronic components delivery delays in the motor vehicle industry and other tech industries worldwide. The apparent strategic response to these disruptions is to indigenise manufacturing. However, indigenising manufacturing is not that easy, will take time, and negate many globalisation efficiencies. As a result, the cost of goods will increase.
 
The world now faces the next challenge where the Ukraine conflict badly disrupts the production of staple foods. Food-producing countries are imposing export halts. Again, as a result, food prices are increasing. I coincidentally came across graph 6.1 in CAM Daily Brief of 11 April, showing an extremely steep increase in global food prices since 2020 when COVID struck, and the impact of the Ukraine conflict has not manifested yet!...
 
The Monthly Review of Portfolio Performance to 31 March 2022 provides a full review of portfolio performances and other insightful analyses. Download it here...
 
We Are trustees safe to think, “the less I know, the better?”
 
The board of trustees fulfills a role equivalent to a company’s board of directors. However, the trustees carry more onerous responsibilities, serving as fiduciary and custodian of members’ money. A court will apply stricter measures when assessing trustees’ performance than they would when evaluating directors’ performance.
 
Even though trustees may often feel far removed from their fund’s operations because they are all outsourced to third parties, it does not affect their fiduciary responsibilities. In practice, trustees are mostly not pension experts and are inclined to rely on their third-party experts. In addition, trustees are in most cases employed in a full-time capacity, serving on the fund’s board in an honorary, unremunerated capacity.
 
One may have much sympathy for the typical Namibian trustee’s dilemma, but it is unlikely NAMFISA or a court will have any compassion.
 
As an administrator, RFS provides to its funds’ boards comprehensive management reports built on its extensive business and fund management experience. These reports address all areas of fund management that trustees must be concerned about and to which they must apply their minds diligently.
 
Unfortunately, trustees must read, understand and digest the management reports tabled at the board meetings. While it may be nice to view information graphically, one can only present statistical information graphically. Qualitative information does not lend itself to graphical presentation, and much of our management reports’ content represents qualitative information. We encourage all trustees to study our management reports carefully in the same way that directors would study the management reports tabled at their board meetings. The adage “the less I know, the better” will not keep a trustee from jail!
 
FIMA bits and bites – what risks does the employer face?
 
Employer obligations concerning contributions

Under the Pension Funds Act, the employer only had one obligation towards the fund being payment of contributions within seven days of the month in respect of which they were deducted. Failure to pay contributions as required constitutes an offense, and the offender is liable to a fine not exceeding N$ 200 upon conviction.

Under the FIMA, the employer’s obligations and liability for fines will take on new dimensions. The company, its directors, and officers shall remain jointly and severally liable for any unpaid contributions and the prescribed interest thereon. Ay director or officer may thus face personal prosecution to recover outstanding contributions!

Employer liable for stiff late payment interest

The Pension Funds Act has no fine for late payment of contributions. Under FIMA, the employer will be liable to pay late payment interest, and the formula design presents a prohibitive penalty element. Prescribed calculation elements can change daily until the employer pays up. Due to the formula’s complexity, no fund will be able to automate this calculation. Worse, it is impossible to apply this formula other than ex post facto as late payment interest accrues daily.

Employer senior staff cannot serve in a senior capacity anymore

Current general practice is for senior representatives of the sponsoring employer to serve on the fund’s board of trustees. Mostly, trustees are not paid for their services by the fund, but the employer incurs substantial indirect costs through the lost time and productivity of these senior employees.

FIMA defines four criminal offense categories for failures of funds and their officers. I have highlighted those offenses that may but do not necessarily have criminal intent in italics. All other offenses can only be due to an unintentional administrative failure. Yet, they are made a criminal offense with potentially serious legal consequences for the employer, such as the consequence of a senior employee not being fit and proper for any public position once a court has imposed a fine. Conceivably, a senior employee may even end up in jail for administrative failures of the fund.
 
Maximum fine - N$ 500,000 or 12 months imprisonment:
  1. Contravention concerning a NAMFISA inspection;
Maximum fine - N$ 1,000,000 or 2 years imprisonment
  1. The fund did not notify NAMFISA within the prescribed period of the appointment of its principal officer;
  2. The fund does not provide a new member or beneficiary with a free copy of the rules;
  3. The fund failed to send a free copy of the rules to every member;
Maximum fine - N$ 2,500,000 or 5 years imprisonment
  1. The trustee or principal officer did not inform NAMFISA in writing of a matter that may seriously prejudice the fund’s financial position;
  2. The trustee or principal officer did not inform NAMFISA in writing within 30 days of year-end of a payment or consideration they received from the fund or a fund contractor;
  3. The board fails to send to NAMFISA and employers a copy of the valuation report within 180 days of the valuation date;
  4. The board fails on  the request of a member to provide him a copy or an additional copy of the rules, the annual financial statements, or the valuation report or fails to allow him to inspect these and make extracts at the fund’s principal office;
  5. The board, trustee, or principal officer fails to inform NAMFISA of the auditor’s appointment or his termination, or to submit annual financial statements to NAMFISA within 90 days of year-end or obstructs the auditor in performing his duties;
  6. The board, trustee, or principal officer fails to inform NAMFISA of the valuator’s appointment or his termination or to submit the valuation report to NAMFISA within 180 days of year-end or obstructs the valuator in performing his duties;
  7. The board, trustee, or principal officer fails to comply with a NAMFISA directive;
  8. The board, trustee, or principal officer fails to comply with a NAMFISA directive issued after an inspection;
  9. The board, trustee, or principal officer fails to comply with their  written undertaking relating to a NAMFISA imposed condition for the fund’s registration;
  10. The board, trustee, or principal officer discloses prohibited confidential information;
  11. The board, trustee, or principal officer knowingly or intentionally makes a false or misleading, or deceptive statement, promise or forecast, or conceals any material facts that induce a person to enter or prevent him from entering into any contract with the fund or any rights under such contract.
Maximum fine - N$ 5,000,000 or 10 years imprisonment
  1. The board, trustee, or principal officer carries on the business of a fund without being registered under FIMA;
  2. The board, trustee, or principal officer uses the designation ‘retirement fund’ without being registered;
  3. The board or fund carries on the business of a ‘retirement fund’ for more than 12 months after FIMA’s effective date without being registered;
  4. The fund carries on business other than that of a ‘fund’;
  5. The fund provides a financial service without being registered under FIMA;
  6. An existing fund provides a financial service after failing to register under FIMA within the prescribed time;
  7. The fund fails to provide information as requested by NAMFISA where NAMFISA suspects it is operating without being registered;
  8. The board, trustee, or principal officer engages in misleading or deceptive conduct concerning a financial service or makes a false representation about a financial service;
  9. The board, trustee, or principal officer carries on an irregular or undesirable practice after NAMFISA declares the practice undesirable, or the fund fails to rectify, repair, or repay any damage or consequence which arose out of such practice;
  10. The fund fails to report any change in control of the fund.  
Besides the specified penalties, section 438 provides, “where a person has contravened or failed to comply with any provision of this Act, the High Court may at the instance of NAMFISA make any order considered appropriate for the purposes of enforcing this Act or protecting the interests of clients.
 
And, to round off the FIMA amoury against offenders, section 439 provides, “NAMFISA may impose an administrative sanction referred to in subsection (4) on any financial institution, financial intermediary or other person to whom this Act applies when satisfied on available facts and information that the financial institution, financial intermediary or person…”
 
FIMA bits and bites – funds cannot comply with standards
 
We have it on good authority that NAMFISA cannot provide the final standards to industry stakeholders before the FIMA effective date (1 October 2022?). If the standards are effective on 1 October, the industry stakeholders can only apply them sometime after 1 October, once they have set up their systems and processes. Alternatively, if NAMFISA issues the final standards on 1 October, they must only be effective at a later date. The problem with the alternative is that funds cannot apply the FIMA without its supporting standards, meaning that they cannot apply the law.
 
Putting the industry into the position of being unable to apply the law would not be a good start for the new FIMA, and I hope that NAMFISA will find a practical solution for this dilemma.
 
FIMA bits and bites – this law is a minefield!
 
I acknowledge that I am not a legal expert, but I did study commercial law in my ‘hay-days’ and have been exposed to laws, their interpretation, and their application for most of my career stretching over 40 years.
 
Now, take section 5 of the FIMA (prohibition to carry on insurance or reinsurance business unless registered) and, specifically, sub-section (5)(b)(iii). Here is what this section says:
 
  • “(5) For the purposes of subsection (1), a person, in the absence of evidence to the contrary, is regarded as carrying on the business of insurance or reinsurance in Namibia, if that person performs in Namibia -
    • (a) any act the object or result of which is that another person enters into or varies a policy in which that first-mentioned person undertakes to provide policy benefits; or
    • (b) in relation to a policy referred to in paragraph (a), any act directed
    • towards -
      • (i)   maintaining, servicing, surrendering, or otherwise dealing with, or providing a loan in respect of, or on the security of, such policy;
      • (ii)  collecting or accounting for premiums payable under such policy; or
      • (iii) receiving, submitting, settling, assisting or otherwise dealing with the settlement of a claim under such policy.”
 This section prohibits any person other than the policyholder from getting involved in an insurance claim. The current practice is that brokers assist their clients with insurance claims. In the future, policyholders must deal directly with their insurance company. Who may deal with the death claim where the policyholder passed away? I am sure that NAMFISA may laugh about the question, but who are they? Only a court can conclusively answer the question. Clearly, a policyholder cannot call on his broker for assistance anymore. Imagine the 80-year-old widow whose husband just passed away now having to submit the death claim for her husband?
 
One can analyse just about every section in the FIMA. One will face challenges relating to the FIMA outlawing old established practices and creating uncertainties.
 
The FIMA is a minefield!
 
Tilman Friedrich is a chartered accountant and a Namibian Certified Financial Planner® practitioner, specialising in the pensions field. He is co-founder, shareholder, and Chairman of the RFS Board and retired chairperson, and now a trustee of the Benchmark Retirement Fund.
 
  

Compliment
 
 
From a principal officer
Dated 28 February 2022
   “Hi B,
 
Thank you for your stellar assistance to the … Retirement Fund, and specifically our Pensioners, with the annual Certificate’s of Existence exercise.
 
With the exception of 1, all required pensioners submitted their Certificates on time and will continue to receive their monthly pension payments.
 
Your continuous follow-up’s made the difference!” 		 
 

Read more comments from our clients here...
  

Benchmark
A note from Günter Pfeifer 
 

 
Important circulars issued by the Fund

The Benchmark Retirement Fund issued the following circular. Clients are welcome to contact us if they require a copy of any circular.
  • 202203 – Default portfolio change – changes to the default investment portfolio 
  • 202202 – Survivor annuity – changes to investment portfolio  
 
Günter Pfeifer is Principal Officer and was formerly a trustee of the Benchmark Retirement Fund. He holds a Bachelor of Commerce (Cum Laude). He completed his articles with Deloitte & Touche. He completed the De Beers ‘Program For Management Development’ at Gordon Institute for Business Science, and the Advanced Development Program at the London Business School. He was formerly Financial Manager of De Beers Marine.
 
  

News from RFS
 
 
RFS welcomes a new employee
 
It is a great pleasure to advise that Joyce Muaala joins our permanent staff complement on 1 May 2022 as an administrative assistant to our wealth advisers. Joyce is a born Namibian.   She gained experience in various administrative and client service positions with companies such as Trustco, Baobab Capital, and the Ministry of Health. She completed her grade twelve in 2004 at Centaurus High School.

We extend a hearty welcome to Joyce and look forward to her contribution to growing our wealth advisory services through superior service delivery!
 
RFS recognised by NAMRA
 
NAMRA recently conducted its first ‘stakeholder appreciation’ ceremony. Much to our surprise, RFS received a certificate and plaque in recognition and appreciation as the ‘Highest Contributor Central Regional Office’ and for the contribution to positively impact the livelihoods of Namibians.
 
  
     
 
 
 RFS once again sponsors the SKW youth soccer tournament
 
Youth sports and education are the main focus of RFS sponsorship. RFS has supported youth soccer tournaments since 2005. It has been sponsoring the SKW Your Soccer Tournament since 2008, investing nearly N$ 400,000 in developing soccer talent and fitness of Namibia’s youth in line with the famous credo “mens sana in corpore sano – a healthy spirit in a healthy body.”
 
Here are a few impressions from the tournament held at the SKW soccer fields from 1 to 3 April.
  
 

Sponsoring RFS directors Kai Friedrich and Sharika Skoppelitus handing over RFS’ sponsorship to Vincent Molzahn, SKW Club Manager.
 
 
Important circulars issued by RFS
RFS issued the following circular. Clients are welcome to contact us if they require a copy of any circular.
  • RFS 2022.03-03: Requirement by Inland Revenue for tax identification numbers.
  


News from NAMFISA
 
 
More FIMA standards issued for comment
NAMFISA has issued further FIMA standards in Government Gazette # 7784 dated 11 April 2022. The following are relevant to the retirement funds industry:
 
  
Standard/ Regulation # Standard/ Regulation Title
Standards Chapter 10: General
GEN.S.10.18 Fiduciary responsibilities of financial institutions and intermediaries and functionaries
Standards Chapter 5: Retirement Funds
RF.S.5.26 Governance of retirement funds
RF.S.5.27 Manner and form of application, by a registered fund, for cancellation of registration, or variation of the conditions subject to which registration was granted
Standards Chapter 8: Fund Administrators
ADM.S.8.1 Manner and form of application for registration of a fund/ society administrator
ADM.S.8.2 Form of certificate of registration for a fund and society administrator
ADM.S.8.3 Manner and form of application for cancellation or variation of registration of a fund/ society administrator
 
 
As per the Government Gazette, one must submit any comments to NAMFISA within 60 calendar days of the publication date, i.e., by 10 June 2022.
 
  
 

Legal snippets
Bio Break 
 
 
Section 37 A: The Attachment or Reduction of Pension Benefits
 
Introduction

According to the National Treasury Retirement Fund Reform paper, South Africa has recognised its low savings rate, and as a result employees frequently approach their employers with requests for study or other short-term loans (other than housing loans). In return employees undertake that in the event of their employment terminating, with an amount still owing in respect of the loan, the employer may recover the outstanding amount from the benefits that will become payable to them from their retirement fund. Conveniently, employers are inclined to accept retirement benefits as the best guarantee that they will recover what is owed to them. The question is whether, in terms of section 37A of the Pension Funds Act (Act), a fund can pay to a third party (the employer) a member's benefits or a portion thereof on the instruction of that member, when it becomes due and payable (but not yet paid)?
 
Section 37A

Section 37A deals with the protection of pension benefits payable to a member. The rationale is to ensure that retirement benefits are utilised in order to provide for a member's livelihood until his or her death and in the event of his or her death, prior to retirement, that the benefits are utilized for the maintenance of his or her beneficiaries. The aforementioned rationale is in line with the broader policy objectives of the South African Government’s retirement funding policy.
 
Section 37A provides that the right to a benefit, the benefit itself or a right in respect of a contribution, may not be: reduced; transferred; ceded; pledged; hypothecated; attached or subject to any form of execution. Reduction and transferring do not have any specific legal meaning. Ceding, pledging or hypothecating all involve the "giving over" of a right to a benefit, as a discharge for a debt. Attachment, execution and judgments in terms of section 65 of the Magistrates Court Act are all concerned with a member's estate.
 
Scope of protections

Section 37A(1) prohibits retirement benefits being used as security for debts owed by a member to a third party. The section permits a fund to withhold or suspend payment of benefits should any attempt be made to transfer, cede, pledge or hypothecate the member's benefits. Should a member commit any of the prohibited acts in section 37A(1 ) such commitment will not be enforceable. Furthermore, amending the rules of a fund to permit payment of a reduced benefit to the member cannot circumvent section 37A.
 
Prevailing Views

Notwithstanding the protection in section 37A, there are two prevailing schools of thought in relation to whether a fund can pay a member's benefits or a portion thereof, on the instruction of that member, when it becomes due and payable, (but not yet paid) to a third party. The views of the two schools of thought are summarised below:
 
School of thought one
 
According to this school of thought, section 37A ensures that, by all means, benefits reach a member or his or her dependants or beneficiaries. However, once the benefit reaches the member the protection offered by section 37A ceases and there is no longer a justifiable basis on which to regulate how the member chooses to spend the money. In Smith v Smith en ʼn Ander [1992 ( I ) SA 415 (T)], the court held that section 37A did not prevent the member from dealing with his benefits once payment had been made to him/her by the fund. The test for when benefits lose their legislative protection was outlined in the English case of Jones & Co v N Laventy [1909 (2) KB 1029], where Derby J stated that "In my opinion a pension, when it has been paid to the person entitled to it ceases any longer to be pension, it has lost its character of pension, just like dividends which after payment lose their character of dividends. It becomes part of the pensioner's ordinary money".

That the benefits must reach the member for his enjoyment, is also supported by the fact that the legislature has sought to exclude from the estate of a member all retirement benefits, whether they have accrued or not. until such time that they have actually been paid into the estate and mixed with the member's other assets. Section 37A prohibits any dealing with the right or benefit in any way that would result in the entire benefit not reaching the member. Payment of money from the benefits of an employee to an employer for money that is due in terms of an agreement would be regarded as a reduction or transfer in terms of section 37A.
 
However, according to this school of thought, a fund can discharge payment to a member by paying such benefits to an agent appointed by the member. On the principles of agency, payment to the member's agent would constitute payment to the member. The agent may, after receiving payment from the fund, discharge certain debts on the member's behalf (including money owed to the employer). Such an arrangement would not be in contravention of section 37A and does not undermine the objects of the section.
 
School of thought two

According to this school of thought, a fund is prohibited by the terms of section 37A from recognising a claim by a third party for payment of a benefit which is payable to the member. However, payment by a fund to a third party of a member's benefits in satisfaction of the member's debt does not constitute an infringement of section 37A. In order for such payment to be valid, it must be made on the instruction of the member and it must not be made pursuant to any right granted by the member to the third party.
 
The rationale for this approach is that, if a member instructs the fund to pay his/her creditors (which may include the employer) on his/her behalf, his/her benefit is not thereby reduced, transferred, ceded, pledged or hypothecated. The right to receive the full benefit still vests in the member. At the member's sole discretion, part of the proceeds of the benefit is applied in reduction of his or her debt. The member still receives the full benefit of the amount payable to him/her.
 
In order to avoid a contravention of section 37A. the following is suggested:
  1. the instruction to pay the member's creditor must emanate from the member himself and not from the creditor:
  2. the instruction must take the form of an unambiguous mandate to the pension fund, revocable at the election of the member; and
  3. there is clear and indisputable written proof of the member's instruction to the fund.
Conclusion
 
It is apparent that both schools of thought accept that section 37A protects pension benefits until they have been paid to the member whereafter they cease to be protected. In essence the member must enjoy the retirement benefits. A fund cannot recognise a third party's claim to the benefits.
 
The distinction between the two schools of thought is that the first school invokes principles of agency in terms of which once the agent receives payment, it may pay the benefits or a portion thereof to the employer. On the other hand, the second school suggests that payment by a fund, on instruction of the member, to an employer in satisfaction of the member's debt does not constitute an infringement of section 37A. A further distinction is that the first school uses 'a middleman' whilst in terms of the second school the fund pays the benefit directly to the employer on instruction of the member. The common thread is that the member must enjoy the use of the proceeds from his fund. "Enjoyment" in this context may include settling his or her debts.
 
Source: June 2006 Pensions World.”
  


Snippets for the pension fund industry 

 
 
 A practical guide to offshore investments

“A look at options available to investors, how South Africans can access these and the impact product choice can have on offshore portfolios.

1. Offshore unit trust
An offshore unit trust works the same as a local unit trust, where investors pool their funds together and purchase units in a portfolio consisting of a single or various underlying asset classes.

2. Offshore exchange-traded funds
Similar to unit trusts are exchange-traded funds (commonly known as “ETFs”). The main difference is that ETFs are bought and sold via a stock exchange like a share.

3. Offshore exchange-traded notes
Exchange-traded notes (commonly known as “ETNs”) are exchange-traded debt instruments. The investor lends money to the issuer of the ETN (usually a bank) and then receives a return based on the movements in a specific benchmark.

4. Offshore share portfolio
An offshore share portfolio works the same as a local share portfolio but instead of only having access to shares listed on the JSE, investors now have access to the full spectrum of globally listed companies.

Important to note, is that from a taxation and estate planning point of view, the above investment options can be expensive and/or ineffective if accessed directly…”
 
Read the article by Mart-Marie de Jongh of Gray Swan Financial Services in Moneyweb of 9 March 2022 here…
 
Retirement: women are still at a disadvantage

 “Here’s how women can improve their financial position in retirement

Women at work are still at a disadvantage in terms of promotions and earnings, creating a long-term negative impact on their retirement. One reason for this is that women, statistically, simply live longer and must save more during their working lives. Added to this, women often do not contribute enough money to their retirement funds owing to less pay or being denied promotion, having to take a break in their career to raise a family or simply being a single parent with limited financial support.
 
A relevant question to emerge is how women can improve their financial position in retirement. The first and most important rule that can improve women’s income in retirement is signing up for a retirement fund as soon as they can. If you can do it from your very first paycheque, so much the better.

Build an emergency savings fund of more than six months’ income in addition to your retirement savings. To do this is tough, but if you can stick to it and save an amount equal to all your spending for a year on necessities such as food, housing, transport, and insurance, you should be able to handle tough times as proven by Covid-19.
 
Your employment-based retirement fund will most likely not give you the required income to replace your normal salary at retirement. This fact is largely ignored by most, but did you know you may increase your contributions to any employment-sponsored retirement fund or to a retirement annuity fund in order to achieve a more effective income at retirement (replacement ratio)?…”
 
Read the article by Wouter Fourie - Ascor® Independent Wealth Managers 9 March 2022 here…  
 
  

Snippets of general interest
 
 
The most in-demand job skills in SA right now
 
“Jobs portal CareerJunction has published its Employment Insights for February 2022, showing which job skills are most in-demand in South Africa right now… n each sector, several roles have been advertised more frequently.

Marketing +10%
  • Product management
  • Events and coordination planning
Sales +3%
  • Real estate / property agent
  • Commodities / financial service agent
  • Account management
Finance +1%
  • Internal auditing
  • External auditing
  • Payroll and wages
  • Treasury
  • Financial analysis
  • Financial services consulting
  • Bookkeeping
  • Other financial advisories
CareerJunction said that cost & management accounting, change management and business development are the top three most scarse skills at present.
 
On the other side, CareerJunction also recorded a decline in hiring activity in the medical and health, manufacturing and assembly, and businesses and management sectors…”
 
Read the article by Staff Writer in Businesstech of 28 March here…
 
Estate planning mistakes to avoid 

“Estate planning can be complex, and any mistakes can have far-reaching consequences for those you leave behind. If you’re in the process of developing or updating your estate plan, here are some common errors to be aware of and to avoid:
  1. Not understanding your matrimonial property regime: When setting out to develop your estate plan, one of the first factors to take into consideration is the nature of your matrimonial property regime.
  2. Providing incorrectly for your minor children: If you intend to leave a financial legacy for your minor children, keep in mind that children under the age of 18 have no contractual capacity and are incapable of inheriting. If you bequeath cash directly to your minor children, these funds will likely be administered by the state-owned Guardian’s Fund until your children reach the age of majority.
  3. Dealing with insurance policies and retirement funds in your will: Remember, the proceeds of your life insurance policies where you have nominated beneficiaries, as well as your retirement benefits, are assets that fall outside of your deceased estate and, to avoid confusion, it is advisable to make no mention of them in your will.
  4. Getting a beneficiary to witness your will: A common mistake made by those drafting their will is to get their beneficiaries – often a spouse or adult child – to witness their will, which amounts to a fundamental estate planning error.
  5. Not updating your will after your divorce: Divorce can be an enormously traumatic process and it’s only understandable for a person to forget to update their will after the divorce order has been granted.
  6. Not dating your will: Although dating your will is not a requirement for validity, the consequences of not dating your will can be detrimental to your overall estate plan.
  7. Getting your beneficiary nomination wrong: Correctly nominating your beneficiaries in your life policies is important to give full effect to your estate plan, especially where you intend to use life policies to create liquidity in your estate.
  8. Not providing for the bequests made in your will: Before making financial bequests in your will, it is important to understand how the laws of succession operate.
  9. Leaving fixed property to multiple heirs: Bequeathing immovable property to multiple heirs may seem like a good idea, but the practical implications are often far from ideal.
  10. Having conflicting wording in your codicil: If, for whatever reason, you intend to add a codicil to your existing will, be very careful that the wording of your intentions in the codicil is fully aligned with the intentions set out in your will.
  11. Not providing for the residue of your estate: Failure to include what is known as a ‘left-overs clause’ can negatively affect your estate planning.
  12. Not keeping your tax affairs up-to-date: One of your executor’s first jobs is to report your deceased estate to Sars [NAMRA], keeping in mind that the taxman has the first claim to your estate.
  13. Not having a will for your foreign assets: Whether or not you require an offshore will is dependent on several factors, including the type of asset, in which jurisdiction it is held and its value…” 
Read the article by Eric Jordaan - Crue Invest (Pty) Ltd  in Moneyweb of 22 March 2022 here…		  


And finally...
 
 
Great quotes have an incredible ability
to put things in perspective.

"Those who cannot remember the past are condemned to repeat it.”
~ George Santan


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Disclaimer

Whilst we have taken all reasonable measures to ensure that the results reflected herein are correct, Benchmark Retirement Fund and RFS Namibia (Pty) Ltd do not accept any liability for the accuracy of the information and no decision should be taken on the basis of the information contained herein before confirming the detail with the relevant portfolio manager.