2023-04

 

2020 amm invite 600
 

Benchtest Newsletter

Issued April 2023   

 
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In this newsletter

Benchtest 03.2023 – FIMA consultation feedback, the less I know, the better and more...
  

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Important notes & reminders
    
  NAMFISA levies
  • Funds with April 2023 year-ends must submit their 2nd levy returns and payments by 24 May 2023;
  • Funds with October 2023 year-ends must submit their 1st levy returns and payments by 24 May 2023;
  • and funds with May 2022 year-ends must submit their final levy returns and payments by 31 May 2023.
Repo rate increases once again

The Bank of Namibia announced an increase in the repo rate from 7% to 7.25%. The interest rate on funds’ direct loans will increase to 11.25% effective 1 May 2023. Loan repayments must be adjusted accordingly.

Registered service providers

Certain pension fund service providers must register with NAMFISA and report to NAMFISA. Download a list of service providers registered as of June 2022, 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)
  • Christina Linge (061-446 6075)
Toolbox for trustees

RFS provides comprehensive support for trustees. Find a list of download documents to assist with governance and management of private funds, registered as of June 2022, here...
 
 

Newsletter
In this newsletter, we address the following topics:
  In 'Tilman Friedrich's industry forum' we present...
  • Monthly review of portfolio performance – 31 March 2023
  • What keeps me awake at night
  • FIMA bits and bites – NAMFISA provides consultation feedback
  • Are trustees safe to think, “the less I know, the better?” 
In Compliments, read...
  • A compliment from an HR administrator
In ‘Benchmark: a note from Günter Pfeifer’, read about…
  • Call on fund members to register on BC
In 'News from RFS', read about...
  • RFS welcomes a new employee
  • RFS sponsors Namcol achievers
  • RFS cosponsors girls’ netball tournament
  • RFS sponsors SKW youth soccer tournament
  • Annemarie Nel scoops another award
In 'News from NAMFISA', read about...
  • NAMFISA provides consultation feedback
In News from RFIN, read about…
  • RFIN and other interested stakeholders address parliamentary committee on the FIMA
   In 'Legal snippets,' read about...
  • Interesting legal principles established in recent tax case
  • No risk benefits when contributions are unpaid
In 'Snippets for the pension funds industry,' read about...
  • What does recession mean for your portfolio?
  • Seven worst mistakes for retirement planning
In ‘Snippets of general interest', read about...
  • Financial worries: living paycheck to paycheck
    New global ranking of all 26 universities in South Africa
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
  		 
Tilman Friedrich's industry forum
 
   
 
Monthly Review of Portfolio Performance
to 31 March 2023

In March 2023, the average prudential balanced portfolio returned 0.3% (February 2023: 0.2%). The top performer is Hangala Capital Absolute Balanced Fund with 2.4%, while M&G Managed Fund with -1.1% takes the bottom spot. For the three months Namibia Coronation Balanced Plus Fund takes the top spot, outperforming the 'average' by roughly 1.4%. M&G Managed Fund underperformed the 'average' by 1.0% 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 2023 provides a full review of portfolio performances and other insightful analyses.  Download it here...
 
What keeps me awake at night
 
What keeps me awake at night is whether the US has accepted the decline of its Dollar as the global reserve currency or if it will go all out to prevent it from happening, and what the possible consequence of the latter will be. The US never shied away from waging war to protect the Dollar, witness what happened to Libya as one of the latest test cases. Libya was a small county, but now it is China and a whole string of other countries that have expressed urgency in de-dollarisation.
 
The worst-case scenario will be if the US intends to maintain the US Dollar’s status. It will have to take on China and do so sooner rather than later, as China is hell-bound to build its military capabilities. A pointer to the US’s intentions is when NATO will continue to push into Russian territory. It would mean that no security guarantees were given to China, and China would be next in line. That would, of course, cause major global disruptions in all spheres of life. In such an event, it will be best to avoid exposing one’s investments to unforeseeable risks offshore and instead invest at or close to home.
 
From an investment and business point of view, the best case scenario is that the US has accepted the decline of its Dollar as a global reserve currency, and the de-dollarisation and deglobalisation trend will not cause massive disruptions one needs to be concerned about. However, foreseeing the consequences of this trend should guide one’s investment decisions.

The Monthly Review of Portfolio Performance to 31 March 2023 also reflects the editor’s views on current developments and their impact on investment markets. Download it here...
FIMA bits and bites – NAMFISA provides consultation feedback
 
 I have repeatedly expressed my concern and reservations in this newsletter about the procedures followed in formulating the Financial Institutions and Market Act (FIMA). At least the Act went through the parliament, even though it received no technically founded attention. Unfortunately, the Act extends legislative powers to NAMFISA, making it the judge, the jury, and the executioner!
 
It was given the power to penalise its subject unilaterally, which not even the parliament has. Under these powers, NAMFISA may issue standards, directives, guidelines, rules, or other subordinate measures. If NAMFISA is satisfied that any subject failed to observe any such standard, directive, guideline, rule, or another subordinate measure, it may impose an administrative sanction of diverse nature on any financial institution, financial intermediary, or another person to whom this Act applies, including a financial penalty of not more than N$ 10 million! Note that such a penalty must be paid to NAMFISA, creating a self-interest for NAMFISA! The delinquent can only appeal a penalty to the Appeal Board.
 
At the beginning of April, NAMFISA informed the public that it had completed phase 4 of the consultation process, which it chose to employ. It uploaded representations from industry participants together with its response. It either accepted or rejected the representation. Where it accepted a representation, it amended the relevant standard. It now uploaded the final standards on its website.
 
Now, when one is required to comment on complex technical matters in a prescribed, written format, and NAMFISA responds to them, three possible scenarios can arise. Scenario one is that the commentator and NAMFISA, in its response, did not say what they meant to say. Scenario two is that one party misunderstood what the other wanted to say. Often the commentator would have brought the practical impact into his comment that NAMFISA will unlikely have. However, since NAMFISA is ‘at the top of the food chain,’ its wish prevails and ends up in the final standard as the new law, based on its understanding.
 
To exemplify what these scenarios can lead to, I cite a few examples from the comments on Chapter 5 and NAMFISA’s responses that lead to the final standard.
  1. Regulation RF.R.5.8 - The protection of unpaid contributions and the rate of interest payable on contributions not transmitted or received

    Industry representation:
    Clause 7 requires that late payment interest is to be credited to the affected members’ records.

    Late payment interest (LPI) should be recorded separately from the members’ interest earnings and should be credited to the fund’s reserve account instead of to the affected members’ records due to the following:

    Currently, even if the employer pays late, contributions are updated and invested as if the employer paid on time (as per the Funds’ Rules). As a result, late payment of contributions does not impact the member negatively.

    LPI could be much higher or lower than the actual investment return. Crediting the affected members’ records with the LPI thereby causes inequity among those members and the other members participating in the fund.

    NAMFISA response:
    Rejected - The interest is paid as a result of the late transmission of contributions which if the contributions were timely received by the fund and invested, same would have seen growth. Thus, it’s just fair that interest be credited to the affected member’s records.

    Suffice also to note that a fund reserve account is generally an account that members have no absolute entitlement to receive credit.

    Editor’s comment:
    Since the Minister issues regulations, I was surprised that NAMFISA decided not to entertain the industry representation.

    A pension practitioner will have noticed that NAMFISA’s response ignores the issue raised in the industry representation, possibly for not understanding the comment made or not understanding how pension fund administration systems handle contributions. It creates an untenable situation for fund administration systems. The standard would now force fund administration systems and processes to be changed at substantial costs without any benefit to the member. It is doubtful if administration systems can accommodate such changes. Manual workarounds that introduce risks, time delays, and costs must be devised. Had the industry been able to discuss its concern with NAMFISA and a technical expert in the line ministry, acting as an adjudicator, one should have been able to come to a reasonable solution.
  2. RF.S.5.26 – Governance of Retirement Funds

    Industry representation:
    The clause prescribes that the board must evaluate its performance annually and this would place extra duties on time-constrained boards. It is proposed that evaluations should be conducted every 2 years.

    NAMFISA response:
    Rejected - The point of departure is why board evaluation is important. Annual board evaluation will ensure that the board is able to address its shortcoming so as to ensure that it delivers on the mandate.

    Editor’s comment
    The industry representation is reasonable and based on practical experience with board business. NAMFISA rejects it out of hand and makes no attempt to compromise without a substantive reason.
     
  3. RF.S.5.26 – Governance of Retirement Funds

    Industry representation:
    The standard requires the board to continuously have and maintain skills and understanding of the fund’s business to be able to fulfill their role as trustees.This is not always practically possible in practice, especially when dealing with members elected Trustees who might not have the knowledge or skills to fully discharge their duties as required but were nonetheless elected to the board by the members of the Fund. On the flip side of the coin, the appointment of independent trustees would increase the costs of the board fees for the fund, and this might have a major impact, especially for smaller standalone funds.

    NAMFISA response:
    It is expected that all Board members to be trained and gain the required skills, where trustees do not themselves have the required expertise, they must ensure they get appropriate, and experts advise.

    Editor’s comment:
    NAMFISA expects all board members to be trained or to get appropriate and expert advice. I am unaware of any efforts being made to offer training on the skills the FIMA requires. There cannot be experts until appropriate graduate and post-graduate training is made available. Once such training is available, the first experts will be produced only after at least three years. In the interregnum, trustees are placed in the unenviable position of being held accountable for acting without the required skills and training.
     
  4. RF.S.5.26 – Governance of Retirement Funds

    Industry representation:
    The language used in the standard, in general, is not plain and simple as required by the FIMA.

    The Standard should therefore be written in a language and with the use of ordinary words that would enable the general public to understand and make sense of the provisions contained in the standard when reading the standard.

    NAMFISA response:
    Rejected - Clause 2 of the Description of Plain Language provides for Funds to whom it is applicable, the same is not applicable to legislation.

    Editor’s comment:
    NAMFISA expects trustees to produce everything in plain language. Should it not consider it as its obligation, too, to promote understanding and to lead by example?
     
  5. RF.S.5.26 – Governance of Retirement Funds

    Industry representation:
    The clause makes reference to the following specific terms: “legitimate interest”, “expectations”, and fund’s “stakeholders” which are not defined in the definitions clause of the standard.

    The concepts highlighted should therefore be defined in plain and simple language for any reader of the standards to be able to understand whether they would fall into any categories highlighted therein.

    NAMFISA response:
    The words used should be understood in the context and given their dictionary meaning. Words with special connotations are the ones defined

    Editor’s comment:
    Stakeholders are concerned that they may fall foul of so many requirements based on undefined terms, which would place them at the mercy of NAMFISA. NAMFISA as the legislator of standards can hand down administrative penalties up to N$ 10 million. It seemingly wants to keep a free hand by not defining the expected outcomes but listing the required inputs in vague terms.
Conclusion:

The issuing of standards and regulations is an administrative process and, in my humble opinion, should meet the requirements of administrative justice. In many cases, NAMFISA overruled reasonable suggestions on standards and regulations without offering substantive reasons or affording the industry to be heard. As Judge Thomas Masuku stated in a recent case dealing with administrative justice, “Decision makers are not allowed to intern the reasons for impugned decisions in the bosom of their souls or the vaults of their esteemed offices. Reasons for decisions must be furnished at the time a decision is made.”

I would argue that this principle should equally apply to the process of issuing standards and regulations as the industry will be affected by the decisions, in some cases severely affected!

The legislative process regarding standards does not provide for an unbiased expert reviewing representations and NAMFISA’s response to them. In contrast, NAMFISA instigated the FIMA, the Minister reviewed it (in theory) and tabled it in the parliament. The parliament had the power to amend it. In the case of NAMFISA-issued standards, there is no Minister and no parliament or other party fulfilling similar roles. NAMFISA is the instigator, the Minister, and the parliament in one party regarding the standards.
 
With the changes and new standards issued, the number of compliance requirements we identified increased from just over 600 to 758! It goes beyond anyone’s imagination and substantiates the fact that FIMA does not constitute a move from compliance to risk-based supervision but rather the opposite!

Something has gone seriously wrong with this monstrous new law. We should stand back now and ask ourselves, “Is this what Namibia can afford and needs and what we want to achieve?” I fear that we have gone so far down the path and have invested so much energy and resources that we will rather close our eyes and carry on, whatever the consequences may be!
 
Are trustees safe to think, “The less I know, the better?”
 
Trustees of pension funds have a crucial role to play in safeguarding the interests of their members. Unlike directors of companies, they have a fiduciary duty to act in the best interests of the members and to manage the funds prudently. The courts hold trustees to a higher standard of conduct, and they may face legal consequences for breaching their duties.

Although trustees may not be experts in pension fund management, they cannot shirk their responsibilities by relying solely on third-party experts. They must actively engage with their fund's operations, ask pertinent questions, and make informed decisions. RFS, as an administrator, provides comprehensive management reports to the funds' boards, which cover all aspects of fund management. These reports are designed to assist trustees in making informed decisions.

However, it is essential that trustees carefully read and understand the reports tabled at board meetings. While graphical representation of statistical information is helpful, qualitative information is often challenging to present graphically. RFS encourages all trustees to study their management reports carefully to fully comprehend the fund's operations and make informed decisions. Trustees must remember that their ignorance of the fund's operations is not a defence against any wrongdoing.

In summary, trustees should take their fiduciary responsibilities seriously and actively engage with their fund's operations. RFS provides comprehensive management reports to help trustees fulfill their obligations, but trustees must read and understand these reports to make informed decisions. Trustees cannot afford to be complacent or ignorant of their fund's operations, as it may have legal consequences.
 
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
 
 
Compliment from an HR administrator of a participating employer
Dated 15 February 2023
   “Dear R
It is my pleasure to refer potential clients.  We have had such good service from you over the years.
Kind regards,
E” 		 
 

Read more comments from our clients here...
  
Benchmark: a note from Günter Pfeifer
   
 
Call on fund members to register on BC
 
The trustees of the Fund encourage all members who have access to a computer or own a cellphone to register on Benefit Counsellor (BC). You can do so in a few simple steps, by doing the following: save the number +261 61 446 000 as a contact and name it ‘Pension Fund’, then send a message “Hi” via SMS or WhatsApp to your new contact ‘Pension Fund’. Follow the instructions you will be given.
 
If you want to access it via your computer, follow the instructions you will be given in this link www.benchmark.benefitcounsellor.com
 
The Benefit Counsellor is a communication platform for fund members. You can view your benefits, and your contributions, read about the latest fund developments, see what you can expect at retirement, establish how much tax you would have to pay, and much more. The BC platform offers incentives for getting other Fund members to register.
 
Try it, you will be surprised how informative and user-friendly this platform is.

 
Important circulars issued by the Fund

The Benchmark Retirement Fund did not issue any circular after circular 202304 – ‘death benefits questions and answers’. Clients are welcome to contact us if they require a copy of any circular.
 
Günter Pfeifer was the Principal Officer and a trustee of the Benchmark Retirement Fund for many years. He holds a Bachelor of Commerce (Cum Laude). Günter completed his articles with Deloitte & Touche in Windhoek. 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

We are delighted to announce that Cizelle Gonçalves will be joining our permanent staff as a private fund portfolio manager, on May 1, 2023. Cizelle graduated from David Bezuidenhout School in 2000, and has been married with two children. With over 17 years of experience in the industry, Cizelle began her career at Metropolitan (MMI) in 2006 and has held various positions, most recently as a Team Leader Employment Benefits, before joining RFS.

We warmly welcome Cizelle to the team and look forward to her contribution in helping our private fund clients to rest easy, knowing that RFS is attending to their funds' business. We are confident that Cizelle's expertise and experience will be a valuable addition to our team and we wish her all the best in her new role.
 
RFS sponsors Namcol achievers
 

RFS Administrators proudly sponsored outstanding Namcol learners who excelled in their academics, offering a total of N$22,000 in generous cash prizes to celebrate their achievements. The winners ranged from the best accounting Grade 11 and 12 achievers to the best overall Namcol achiever, each receiving well-deserved recognition and cash prizes ranging from N$2,000 to N$3,500. Fidel Malumani, the best overall achiever for this year, received a whopping N$6,000 in cash!

For the past 12 years, RFS has contributed to this inspiring event, donating a total of N$177,500. Leana Rickets, RFS's client manager, was delighted to hand over the prizes and offer words of encouragement to the winners.

RFS is committed to promoting education and supporting the development of young people. By sponsoring these cash prizes, RFS hopes to encourage Namcol learners to strive for academic excellence and to celebrate their accomplishments when they achieve their goals.
 
RFS cosponsors girls’ netball tournament
 

RFS’s social responsibility programme primarily promotes youth sports and education. It recently cosponsored the Windhoek Gymnasium girls under 17 A team's participation in the SA Prestige Netball Tournament held in Pretoria from 27-29 March 2023. The tournament featured 18 school teams from across South Africa. The Windhoek Gymnasium team performed impressively, finishing in 6th place overall.

Among the young athletes selected to represent Windhoek Gymnasium at the tournament was Remona Fabianus, daughter of RFS's managing director. In the team photo, she can be seen standing in the back row, third from the left.
 
RFS sponsors SKW Youth Soccer Tournament

The SKW Youth Soccer Tournament is an annual event that takes place in Namibia, and it is one of the largest youth soccer tournaments in the country. This year, it took place from 31 March to 2 April. The tournament aims to develop soccer talent and promote physical fitness among Namibia's youth. RFS has been sponsoring the tournament since 2008 and has invested nearly N$500,000 in the event over the years.

The tournament provides a platform for young soccer players to showcase their skills and compete against each other in a friendly and supportive environment. It also helps to foster a sense of community and teamwork among the participants.

Overall, the SKW Youth Soccer Tournament is an important event for promoting youth sports and education in Namibia, and RFS's continued sponsorship of the tournament reflects its commitment to supporting the development of young people in the country.
Here are a few impressions from the tournament held at the SKW soccer fields from 1 to 3 April.
 
 
 

Annemarie Nel scoops another award
  
RFS Manager: Retail, Annemarie Nel, was awarded a certificate for her outstanding performance and contribution by Metropolitan Namibia.
Annemarie, in the middle, flanked by Ingah Ekandjo on the left and Amanda Rosemund on the right.
 
Important circulars issued by RFS
 
RFS did not issue any circular after circular 2023.02-01 – ‘new standard forms’. Clients are welcome to contact us if they require a copy of any circular.
 
  
 
News from NAMFISA
 

 

NAMFISA invites comments on levy gazette
 
NAMFISA invites all stakeholders to comment on the levy gazette 6438 of 10 October 2017, which codifies the current levy structure. The intention is not to increase or decrease current levies but to improve its efficiency and ease of adherence.
 
Comments must be submitted on or before 30 June 2023.
  • Download the NAMFISA invitation here...
  • Download the gazette here…
  • Download the template for submission of comments here…
NAMFISA provides consultation feedback
 
NAMFISA informed the public that it completed phase 4 of the public consultation process regarding standards and regulations.
 
Responses on how the representations/comments were addressed are now available on the NAMFISA website. Click here for the Retirement Funds comments.
 
The updated Retirement Funds Regulations and Standards have been uploaded on the NAMFISA website. Click here for the Retirement Funds Regulations and Standards.

 
  
News from RFIN
 

 

 
RFIN and other interested stakeholders address parliamentary committee on the FIMA
 
“The Retirement Funds Institute of Namibia along with the Retirement Fund for Local Authorities and Utility Services in Namibia and a group of other interested parties formed a committee and made a formal submission to the Parliamentary Committee regarding the impact of the FIMA in its current form with Standards and Regulations.
 
Key concerns were highlighted which included the relevance of FIMA to Namibia  specially against the backdrop that FIMA was result of consultations conducted with a Canadian consultant in collaboration with NAMFISA. We should keep in mind that Canada, as a developed country, has some social benefits that alleviate the poverty on their countries that we, as Namibians, do not enjoy at this point in time.

The committee then tabled a high-level overview of the risks imposed by FIMA on the Employer groups and the Boards of trustees by pointing out that many employers are now considering closing down their funds and members losing the only form of savings that many of them might have throughout their lifetimes.

The penalties and fines and their excessive nature seemed to be punitive and not corrective as would have been the approach under a purely risk-based supervision approach. Amounts between N$1 million and N$10 million are being thrown around and this might just be the cue for many competent individuals to not serve as a result of the personal liability attached to Trusteeship under these circumstances. Yet, there are no repercussions mentioned of how the industry can keep NAMFISA accountable for the delivery of their own set time standards.
 
The contentious matter of risk benefits for which many members of such funds are the only form of risk cover they enjoy was also tabled as the guarantee of the funds would entail funds having to build large levels of reserves, which would essentially have to be funded either by the Sponsor or the Fund, but ultimately the fund remains the accountable institution.

Having presented, the committee seemed to understand the need to have FIMA relooked at and that for the future the committee would revisit the positions under FIMA, but the interested parties still need the clarity to be provided.

Be that as it may, RFIN will continue to keep the industry up to date of feedback which would then be shared on an ad hoc basis to ensure that everyone had a fair opportunity to properly scrutinize the document and hence remain up to date with the key developments pertaining to these matters.”
 
From the RFIN Review newsletter 1 of 2023. Download the newsletter here…
 
RFIN trustee training
 
The Retirement Funds Institute in Namibia offers extensive training to trustees and management committee members.
 
If you are a new trustee or have not had refresher training for a while, find the RFIN training calendar here…
 
 
  
Legal snippets
 
 
Interesting legal principles established in recent tax case
 
In a judgment delivered on 10 March 2023, in the case Bachmus Oil and Fuel Supplies (Pty) Ltd and others v the Commissioner of Inland Revenue and others, Judge Thomas Masuku defined a few interesting legal principles.
  1. Administrative justice - Reasonable administrative conduct for the purpose of article 18 of the Namibian Constitution places on an administrative official or body a duty to act fairly and reasonably, give reasons for administrative decisions at the time of the decision or soon after being requested and must rationalise its decision. These reasons must fully respond to the nature and circumstances of the matter at hand. Such reason cannot be given ex post facto once the decision has been taken on review in court papers and cannot be changed subsequently.

    The reasons given must be adequate, contain an explanation in clear and unambiguous terms of why the decision was made, and provide an explanation of the law implicated therein and findings of fact on which the conclusions were premised.

    Persons aggrieved by an administrative decision may seek redress before a competent court.

    The point was made that we now live in a pervasive culture of justification as opposed to a culture of justification.
     
  2. When the law mandates the Minister to exercise certain powers and functions, the Minister may delegate some of these to officials.
     
  3. When the Minister (or a delegated employee) determines a person’s tax liability under section 95 (scheme aimed at avoiding, postponing or reducing a tax liability) –
    • All three conditions listed under subsections (a) to (c) must exist and
    • The Minister must afford ‘audi’ to the person affected by the Minister’s decision, i.e. allowing the party to make representations.
    • The decision must meet the prescriptions of article 18 of the Namibian constitution.
    • The invocation of section 95 imputes bad faith and dishonourable motives of the taxpayer, and therefore, reasons must be given for its invocation. 
No risk benefits when contributions are unpaid
 
“The Maluti A Phofung Municipality (“employer”) was a participating employer in the Sanlam Umbrella Pension Fund and Sanlam Umbrella Provident Fund (“funds”). Due to the employer’s failure to pay contributions in terms of section 13A of the Act, the funds decided to terminate the employer’s participation on 27 February 2018 with effect from 1 October 2017.
 
The funds informed the employer and the members that the reinsured group risk benefits (such as death and disability benefits) were no longer applicable and that should a claim arise during the period of non-payment, the funds will not be able to pay the insured benefits. The funds indicated that it was made clear in the communication that members and their dependants would have to approach the employer to recover any damages suffered due to the employer’s failure to make payment of the contributions. The employer requested that the termination of its participation be cancelled.
 
The funds stated that although they accepted the employer’s request to cancel the termination, it was reiterated to the employer that risk benefits have been terminated and no claims will be admitted. As the risk benefits terminated on 1 October 2017, the special rules applicable to the employer had to be amended to remove the risk benefits. The employer’s special rules were amended with effect from 1 October 2017 to remove all risk benefits. The employer commenced paying contributions, including arrear contributions.
 
The employer then provided to its employees a group life assurance benefit of four times the annual salary, which became effective from 1 October 2018, a year later. The complainant is the son of a member of the fund who died on 14 September 2018, i.e., before the group life assurance benefit became effective. On 8 August 2021, the complainant submitted a complaint to the Adjudicator alleging that due to the employer’s non-compliance, the deceased’s beneficiaries forfeited the risk benefit.

The Adjudicator held that the rules of the fund are binding and that the special rules applicable at the time of the deceased’s death provided that the death benefit is equal to the member share, i.e., the risk benefit portion had been removed. The deceased passed away before the effective date of the group life assurance benefit, and his family members were precluded from claiming such benefits. The Adjudicator held that the employer cannot be held liable for a benefit that was no longer provided for in the rules of the fund and the special rules applicable to it. This was a matter beyond the jurisdiction of the Adjudicator, and it was for the employer and the deceased’s family members to resolve via other means. The complaint was accordingly dismissed.”
 
From the South African Adjudicators 2022 Annual Report
 
Editor’s note: It appears that the umbrella fund would have amended the rules with backdated effect because contributions are paid in arrears, and a failure to contribute would only be known 7 days after the end of the month in respect of which they were due. In Namibia, NAMFISA would not register a backdated rule amendment to remove the risk benefits. In the case reported above, the date of the rule amendment is immaterial and would have been long before the member passed away. The claim, therefore, has not arisen under the rules of a fund, placing the complaint beyond the Adjudicator’s jurisdiction that is restricted to pension funds.
  


Snippets for the pension fund industry
 
What does recession mean for your portfolio? 

“Schroders analysed 50 years of data to see how various assets have performed when economic growth is in decline.

With the US economy looking more resilient than many had anticipated, the recent turmoil in the banking sector has added fuel to the debate on whether there is going to be a soft landing or a recession.

We’re on the side of the latter and still expect a recession is going to happen this year given the sheer pace of policy tightening by the Federal Reserve (Fed).

With this in mind, how should investors position their portfolios to seek shelter from the impending recessionary storm? Although every recession is unique and there is no guarantee that history is to be repeated, it is useful to understand how different asset classes have behaved during past downturns.
 
Safety first - but don’t miss the re-rating in the market

More generally, the performance of risk assets has been even worse during recessions over the last 30 years due to the heavy losses incurred during the Global Financial Crisis…


 
How have equity sectors performed during previous recessions?

With equities typically in the red during recessions, the more defensive sectors in the US such as consumer staples and health care have on average delivered the strongest returns...

Defensive sectors generally have a lower beta relative to the market, such as consumer staples, health care, utilities, and real estate. In comparison, cyclical sectors typically have a higher beta relative to the market such as industrials, energy, financials, technology (tech), materials, consumer discretionary and communication services.


Defensive equity styles have been the winners - but don’t ignore small caps

During previous recessions, the more defensive strategies have been the style winners (table 2). It seems that investors have looked for shelter in quality stocks that have strong balance sheets and stable cashflow…
 
Commodities don’t do well in recessions

Commodities typically get weighed down during recessions with the worst performing sectors being energy and industrial metals as they are most sensitive to changes in economic growth...”
 
Read the full article by Kondi Nkosi, country head of Schroders SA, in Cover of 12 April 2023, here...

Seven worst mistakes for retirement planning
 
There are many mistakes you need to avoid in order to retire comfortably. But of these hundreds of mistakes, here are the 7 worst mistakes you must avoid at all costs.
  1. Underestimating medical expenses
  2. Post-retirement spending spike
  3. Keeping too many cars
  4. Moving house
  5. Getting sold or scammed
  6. Putting savings in the wrong place
  7. Retiring too soon 
In this and the next newsletters, we will examine these seven worst mistakes and what you can do about them.
 
In this and the next newsletters, we will examine these seven worst mistakes and what you can do about them.
 
3. Keeping too many cars

Sometimes, keeping a second car makes financial sense. It may have better gas mileage, bigger in size so that you can fit the whole family.

But having an extra car that you seldom use can be very bad for your finance as well. It adds up to the cost of your maintenance, taxes, or simply occupying space that can be better used.

How to Fix

If you have a vehicle, you don’t really need and is collecting dust, consider giving it to your grandchildren or charity and take a tax write-off.

This simple act will save you hundreds every month on gas, insurance, and repair costs.
The other option is to rent out your second vehicle which you seldom use. Getting a few hundred dollars per month for renting out your vehicle will definitely help you with your retirement expenses.

For those, who seldom drive, not owning a vehicle and considering using public transportation can also help to save the environment. Some may even consider walking or biking for the added health and fitness benefits.
 
4. Moving House

Moving to an area with a lower expense can be beneficial for retirees to help them retire comfortably. But some moves can lead to unexpected circumstances that the retiree will regret in the future. 

Scenarios
  • There are some retirees who sell their homes and downsized, only to discover that they are paying much higher property taxes in their new but smaller homes.
  • Others moved to an area with lower property taxes but higher transportation and food costs, because the new area requires more traveling and fewer shops available.
  • Going to live in an area where it is pleasant for couples but lonely for a single person can be quite sad, in the event of the death of the other half.
Perhaps the most common scenario is the inconvenience of moving to an area that you know nothing about. You have to adapt to your old age which leads to your retirement life being less than comfortable.
 
How to Fix

Proper planning will probably be the best way when getting a comfortable retirement life.

Before choosing the area to move to for retirement, investigate carefully all the different costs or problems you may face. Talk to the retirees who are living there and get to know what is the problem they are facing.

Before choosing where to move to retire, you may want to consider these few factors:
  • Accessibility to age-related medical care
  • Availability of public transport
  • Ease of access to common shops
  • Cost of living
  • Cost of travel to visit your friends and children
  • Availability of a social community for support and social life
  • Availability of an economy that allows you to work part-time in case you change your mind
  • Availability of a senior service
Discuss with your adult family members before making any big decisions. Pay close attention to the resale value of the house as well. If you are unsure of your plan, you may want to consider a temporary move to your new area while renting out your current home. Should you change your decision in the future, you will still have a place to stay.
 
5. Getting sold or scammed

We know most people are honest and nice. But it is always better to be more careful than getting scammed by those who are less honest out there. Some scams may not be as obvious as you may think.

When you are retired, your needs change. Some of the financial products and services you bought when you are young may no longer make sense.

For example, if you have bought your life insurance for the purpose of replacing lost income for your dependent, you may no longer require it anymore.

Older adults are almost always the target of some untrustworthy individuals who will sell annuities, insurance policies, and investments that may not be the best fit for their customers.

For your record, frauds, and scams aimed at older individuals are on the rise.

How to Fix

Perform an annual review of all your insurance policies to see if they still make financial sense. Consult a reputable financial advisor to help you in the process.

Get a fiduciary financial advisor to help you in the process and not just any other self-proclaimed financial advisor.

A fiduciary financial advisor is to abide by fiduciary duty which is by law, that he or she will have the ethical obligation to act solely in your best interest.

Your financial advisor will help you analyze the risk and benefits of each type of policy you hold and give you advice on which will give you the most benefit.

Be extra careful with anyone who is trying to sell you anything. When the deal sounds too good to be true, it is too good to be true.

Lastly, don’t make any financial decisions under pressure. If you are in doubt, it is your gut feeling telling you ‘No’. Make all financial decisions carefully and slowly.” 
 
Read the article by Eric Jordaan of Crue Investments in Moneyweb of 23 February 2023, here…
 
 
  

Snippets of general interest
 
 
 
Financial worries: living paycheck to paycheck

“Living paycheck to paycheck might not seem so bad at first. It means that you are on top of bills that you can cater for your cost of living without having to borrow. However, if that’s all you have, there’s no way to look to the future, you can’t really afford to save any money, there's no real security with the money you currently have.

This kind of situation results in there being no savings to fall back on in case of emergency and lands you into a cyclic trap of waiting for the next salary to clear debts, buy essential items and feel in control of your money.

In general, and due to the increasing effects of the rising interest and inflation rates, most of the working class have limited space in their budgets and stand to suffer tremendously should a financial emergency arise.

A great starting point for taking control of this situation is having a financial plan. That’s right, you need to have a driving force behind making a change in your financial life and eliminating financial worries. The plan will detail your goals and you will have direction of where you want to be and start working towards that.”
 
Read the full article by Justine Dominigues in the Brief of 28 March 2023, here…
 
New global ranking of all 26 universities in South Africa
 
“Webometrics’ latest global ranking of universities in 2023 has ranked all of South Africa’s universities based on the quality, quantity, and access to their web content, using open data…

Using webometrics, the group focused the 2022 ranking on three main indicators:
  • Visibility: The number of external networks (subnets) linking to the institution’s web pages ( weighted 50%)
  • Transparency or Openness: The number of citations from the Top 310 authors, excluding the top 30 outliers (10%)
  • Excellence: The number of papers amongst the top 10% most cited in each one of all 27 disciplines of the full database over the last five years (40%)For South Africa, 123 higher learning institutes were ranked, falling between 246th and 29,531st in the world. South Africa has 26 public universities, including 12 traditional universities, six comprehensive universities, and eight universities of technology. All universities feature in the rankings.
The University of Cape Town (UCT) was the top-ranked university in the country, following the same trend seen in other university rankings.

UCT is followed by the University of the Witwatersrand, Stellenbosch University and the University of Pretoria. These were the only universities ranked within the top 500 globally…”

Read the full article by Staff Writer in Businesstech of 5 March 2023, here...
 
  


And finally...
 
 
Funny anecdotes

ATTORNEY: Do you recall the time that you examined the body?
WITNESS: The autopsy started around 8:30 p.m.
ATTORNEY: And Mr. Denton was dead at the time?
WITNESS: If not, he was by the time I finished.

From a book called 'Disorder in the American Courts' and are things people actually said in Court, word for word, taken down and now published by court reporters who had the torment of staying calm while these exchanges were actually taking place.


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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 Fund Administrators (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.