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In this newsletter:
Benchtest 08.2021, impact of FIMA on fund transfer, insuring risk benefits and more...



NAMFISA levies

  • Funds with September 2021 year-end must submit their 2nd levy returns and payments by 25 October 2021;
  • Funds with March 2021 year-end must submit their 1st levy returns and payments by 25 October 2021; and
  • Funds with October 2020 year-end must submit their final levy returns and payments by 29 October 2021.
FIMA stalled?
 
We cannot report any further progress, and it appears the Act is currently with the Ministry of Justice. I would think that it must also still go through Inland Revenue’s hands. From the tax perspective, FIMA certainly would require a thorough review and amendments.


Home office expenses and your tax return

In a letter to the Institute of Chartered Accountants of Namibia of 21 September 2021, NamRA acknowledges that –
  1. the Income Tax Act “…allows the deduction of expenditure and losses actually incurred in Namibia in the production of income, provided that such expenditure and losses are not of a capital nature”;
  2. the Income Tax Act disallows the deduction of “…domestic or private expenses, including the rent of or cost of repairs of or expenses in connection with any premises not occupied for the purposes of trade of any dwelling house or domestic premises except in respect of such part as may be occupied for the purposes of trade”;
  3. in the tax case “…KBI vs. van der Walt the court held that in order for the expenditure of a home study of an employee to be in the production of income, it was not necessary for the taxpayer to be bound by the terms of an employment contract to maintain a study at home. The taxpayer merely had to show that the expenditure was incurred bona fide for the more efficient performance of his duties”;
  4. the Income Tax Act recognises “…that employment constitutes a trade”. 
“However, NAMRA is not in a position to issue a practice n0te at this stage due to insufficient information on facts related to distinctive employment arrangements. Employees who want to claim home office expenses are advised to request for a ruling from NamRa. Requests will be evaluated on a case-by-case basis based on full details and relevant proof of expenditure incurred by the employee”.


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 June 2021


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 this newsletter we address the following topics:

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

  • FIMA bits and bites – key points to consider when joining another fund after FIMA
  • An inconspicuous NAMFISA circular suddenly causes havoc amongst pension funds
  • Preservation fund, retirement annuity fund, and the IT Act
In our Benchmark column, read about…
  • Important circulars issued
In ‘News from RFS’ read about…
  • Important circulars issued
  • RFS sponsors Namcol achievers
In ‘Legal snippets’ read the ‘Adjudicator determination on death benefit in C Diener vs. PSG Wealth

In media snippets, read –
  • SA mulling a Social Security Fund
  • New insights into trust and ethics among advisors and fund managers
  • SARS exercised unreasonable discretion in disallowing penalty
  • Three reasons you are losing the war for talent

...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 August 2021


In August 2021, the average prudential balanced portfolio returned 1.2% (July 2021: 1.9%). The top performer is Old Mutual Pinnacle Profile Growth Fund with 2.3%, while Hangala Prescient Absolute Balanced Fund with 0.5% takes the bottom spot. For the 3-months Old Mutual Pinnacle Profile Growth Fund takes the top spot, outperforming the ‘average’ by roughly 1.6%. Hangala Prescient Absolute Balanced Fund underperformed the ‘average’ by 1.6% 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 August 2021 provides a full review of portfolio performances and other exciting analyses. Download it here...


Understanding Benchmark Retirement Fund Investments

This series of articles aims to provide background and guidance on investments to assist Benchmark Retirement Fund members and employers taking charge of their fund investments. It covers the following topics:

  1. Parties to a fund and their roles and responsibilities
  2. Investment choice and return objectives
  3. Investment range and portfolio composition
  4. Performance characteristics of asset classes and portfolios
  5. The default portfolio
  6. The default portfolio vs the smooth growth portfolio
  7. Income replacement ratio and contribution rates
  8. Selection of investment managers
  9. Combining investment portfolios and when to switch
  10. Investment manager risks and manager diversification
  11. Performance measurement
In the previous four newsletters, I covered the first eight topics. In this newsletter, I will cover the remaining topics “Combining investment portfolios and when to switch,” “Investment manager risks and manager diversification,” and “Performance measurement.”

Follow this link to the monthly Performance Review and read paragraph 6
.

FIMA bits and bites – key points to consider when joining another fund after FIMA

FIMA will raise the goalposts for funds, trustees, and service providers materially. Compliance failure under FIMA may lead to imprisonment of up to 10 years and penalties of up to N$ 10 million. In certain instances, even trivial administrative shortcomings can result in imprisonment. Boards of trustees currently often comprise the employers’ senior management members, and imprisonment would automatically disqualify the senior management member from filling any senior position at the employer. As a result, many employers and trustees are contemplating a move to an umbrella fund. We would advise that funds better carry out their decision to move to an umbrella fund before FIMA becomes effective.

Funds must take note of the following few key points applicable once FIMA is in place:
  • The fund first has to register under FIMA;
  • The fund first has to comply with extensive new requirements of FIMA;
    • FIMA has around 600 compliance requirements under chapters 5, 8, 10, and 11;
  • The process for transferring business -
    • The board of trustees will be solely responsible for all decisions, while currently, the employer still plays a crucial role in the decision to transfer to another fund;
    • The board carries extensive statutory liabilities that are mostly not applicable currently
    • The process is much more demanding, time-consuming, and costly than it currently is;
    • Employees can stop the process, which they currently cannot.
Current Requirements under the Pension Funds Act
  • The fund must submit a section 14 transfer application to NAMFISA. The application requires that -
    • The rules of both funds must provide for a transfer of business;
    • The participating employer must give his written consent;
    • The fund must inform the fund members of the differences and changes;
    • The P.O. and the chairperson of the transferor fund must declare that the application is complete;
    • The P.O. and the chairperson of the transferee fund must declare that the application is complete;
    • Both funds must submit their actuary’s certificate in the prescribed format;
    • Both funds’ P.O’s must submit a certificate in the prescribed format;
    • Trustees have a common law duty to treat members fairly but no criminal liability.
Requirements under FIMA
  • Preliminary requirements:
    • The fund must register within 12 months of the FIMA enactment;
    • The fund rules must meet all the FIMA requirements;
    • The Fund must meet all the FIMA requirements from the date of its enactment (including all the requirements of regulations and standards);
    • The Fund must establish several policies (communication, code of conduct, outsourcing) and ensure compliance with these policies.
Next month’s newsletter will discuss the requirements specifically relating to an application to transfer to another fund.

An inconspicuous NAMFISA circular suddenly causes havoc amongst pension funds

When Namibia became independent, Namibia took over the South African laws applicable to Namibia at the time. One of these laws was the Pension Funds Act, and South African pension fund management practices also continued, based on the same laws.

For longer than I care to remember, South African and Namibian funds offered death- and disability benefits. In most cases, insurance companies did and still reinsure these benefits. Rules would refer to the fact that these benefits are reinsured and are subject to the insurer’s terms and conditions, limitations, and exclusions. Except for the GIPF, funds in Namibia are too small to carry any death or disability risk. In a pure defined contribution fund, the fund would not have any reserves to absorb any difference between the benefit it has to pay and the insurance recovery. Namibian funds may still maintain a reserve for such purposes, but FIMA prohibits defined contribution funds to maintain a risk reserve. South African defined contribution funds are not allowed to carry such reserve.

In 20017 NAMFISA issued circular PI/PF/Cir/01/2017. This circular served to advise funds that no Board of Trustees is permitted to abdicate any of its powers, duties, or responsibilities... in the process of outsourcing certain functions to service providers... The Boards of all Funds are further advised that they will be held fully responsible for action taken by a service provider or other person on behalf of the Fund.”

Since the beginning of this year, NAMFISA no longer accepts any reference to the fund’s insurance policy. All-of-a-sudden it requires full disclosure of the insurers’ terms and conditions, restrictions, and exclusions, arguing that a general reference to the insurance policy is an abdication of the board’s powers and that the trustees must take all decisions regarding death benefits. This requirement derives from NAMFISA circular PI/PF/Cir/01/2017 that it issued nearly five years ago!

NAMFISA also quotes section 11(d) of the PFA. Section 11 (matters the rules must include) states the following in subsection (d): “the conditions under which any member or other person may become entitled to any benefit and the nature and extent of any such benefit;” Therefore, according to NAMFISA, rules must reflect all terms and conditions, limitations and exclusions. NAMFISA goes further and effectively outlaws the exclusion of causes relating to civil commotion, strikes, and labour unrest, arguing that these are the member’s constitutional rights. Whether NAMFISA will apply the same logic to insurance companies is not known yet. NAMFISA now acts as custodian of any law in the Republic of Namibia, including its constitution. It extends its reach even further. It argues that any reference in the rules to an insurance policy means that the fund is undertaking insurance business. It supposedly contravenes section 10 of the PFA. That section allows funds to only carry on pension fund business, as defined in the PFA.

Effectively from one day to the next, pension funds are now accused of doing business illegally. For the past eight months, NAMFISA has been declining many, if not most, applications to register rule amendments and rules. Many funds are paralysed, very often to the detriment of the member.

In practice, funds cannot mirror all the insurance company's terms and conditions, limitations, and exclusions in the fund’s rules. When assessing any claim, insurers must apply their expertise and exercise discretion, and anyone questioning the insurer can refer the matter to court. Consider COVID-19, which was declared a pandemic. We know that such pandemics occur infrequently. Insurers suffered severe losses from this pandemic. They will not have taken a pandemic into account when they set their premiums. It also does not make sense to price in occurrences that happen rarely. The insurer would rather exclude such surprises in the future. How is pandemic defined so that rules can include this term? International conventions may have defined this term, but there will be many other terms for which no convention exists. The question then is whether the insurer applied reason in its interpretation of a term.

If a fund is large enough, it can self-insure life events. Else, it must purchase insurance coverage from an insurer. Whether large or small, any fund can only carry an element of risk through building up a reserve. Building up a reserve implies cross-subsidisation between member generations and is not fair to those members that do not benefit from the reserve while others are benefiting from the reserve. Any risk beyond what the fund effectively self-insures, the fund must place with an insurance company. The trustees are grossly negligent if the fund does not insure the excess risk and can end up in jail under FIMA. The moment a fund purchases insurance for excess risk from an insurance company, it must ensure that no further liability can arise. It must ensure that it does not offer a benefit that the insurer does not cover. The fund must then insert a copy of the policy in the rules or ensure that the rules generally refer to the policy. From a user’s perspective, there is little difference between these two alternatives. It’s a question of studying the insurance policy addendum of the rules or studying the separate policy. Most members are not affected by the terms of the risk cover and would not want a set of rules containing a copy of each insurance policy.

On the contrary, no member would have the courage to study rules comprising of hundreds of pages. Pension funds do not attempt to satisfy the needs of each member but are group arrangements aimed at satisfying the needs of a majority of members at an affordable cost.

The retirement funds industry is facing a serious challenge since the beginning of the year. It is as if the government introduced a new law, although nothing actually changed. NAMFISA’s interpretation of 50-year-old sections of the PFA is now causing havoc in the pensions industry. Unfortunately, the current state of affairs is suffocating the industry without benefitting the member. It is causing frustration, undue delays, and additional, unproductive work for NAMFISA and the industry.   

NAMFISA should first consult the industry and consider its inputs before instituting new requirements or issuing a circular to avoid such situations. If these inputs conflict with NAMFISA’s views, NAMFISA should obtain a legal opinion on its submissions and the submissions made by the industry. The legal opinion should then become the basis for a circular. Before officially issuing the circular, NAMFISA should obtain industry inputs on a reasonable time frame to implement any changes the circular will require. Finally, NAMFISA should issue an official circular to the industry.


Preservation fund, retirement annuity fund, and the IT Act

The Income Tax Act, Act 24 of 1981 currently only offers two arrangements for individuals to make tax-deductible contributions towards retirement. Firstly, an individual may make tax-deductible contributions to a pension fund or a provident fund arranged by his employer and where the individual is obliged to contribute. Secondly, an individual may make tax-deductible contributions towards a retirement annuity fund as agreed with the fund under a policy (issued by an insurance company) or under a contract (issued by the fund).

The importance and the value of retirement provision are recognised globally, and most countries make provision for one or more pension arrangements. The Melbourne Mercer Global Pensions Survey succinctly highlights the challenges faced by global pensions systems. “Pension systems worldwide, including social security systems and private sector arrangements, are now under more pressure than ever before. Significant ageing of the population in many countries is a fact of life. Yet this is not the only pressure point on our pension systems. Others include:
  1. The low-growth and low-interest economic environment;
  2. The lack of easy access to pension plans;
  3. Government debt which affects the ability  to pay benefits in pay-as-you-go systems [e.g., the Social Old Age Grant];
  4. The need to develop sustainable and robust income products as retirees seek more control and flexibility over their financial affairs.
As significant pensions reform is being considered or implemented in many countries, it is important that we learn together to understand what best practice may look like, both now and into the future.”

Namibia also experiences most of the challenges highlighted in Global Pensions Survey. COVID exacerbated the situation, as we know. Many employers and their staff took a contribution holiday that may significantly impact the ultimate retirement outcome for the members affected.

Our pension system is very similar to that of South Africa. Namibians may currently only deduct N$ 40,000 from tax regarding pension savings contributions and study policies. In contrast, SA allows the taxpayer to deduct up to 27.5% of the individual’s annual income, limited to no more than the actual contributions made. SA only caps the tax deduction at R 350 000 per annum. In addition, SA pays a higher social old age grant of R 1,890 compared to only N$ 1,300 in Namibia.

The Global Pensions Survey ranks SA in position 28 of 40 surveyed countries, and Namibia ranks lower. Namibia, therefore, has good reason to consider every option for further encouraging and improving retirement provision. The Income Tax Act is one available tool to achieve the goal of enhancing taxpayers’ retirement provision.

While in employment with compulsory participation in the employer’s retirement fund, there is no real need and often no scope to enhance employees’ retirement provision. When leaving employment, employees may and often do preserve their accumulated retirement capital in a preservation fund. By exempting a transfer of such withdrawal benefit to any other tax-approved fund, the Income Tax Act does encourage taxpayers to preserve rather than withdraw their retirement capital. Having exited from the retirement fund, the employee may join another employer where retirement fund membership is compulsory and continue building his retirement capital. However, should he not join another employer with a retirement fund, the employee would have to subscribe to a retirement annuity fund if he wanted to continue saving up for retirement. Compared to pension- or provident funds (including preservation funds), most retirement annuity funds are less flexible and, often, the member incurs high initial fees. It would also require the unnecessary membership of two funds if the employee preserved his capital from his previous retirement fund in a preservation fund.

Preservation funds and retirement annuity funds are ‘retail’ products aimed at their members saving up for retirement not linked to employment. In contrast, pension- and provident funds are institutional arrangements requiring an employer-employee relationship. When the Income Tax Act introduced provident funds, it would appear that the focus was solely on the preservation of retirement capital outside an employer-linked arrangement. However, as a retail product, a preservation fund lends itself to receiving ongoing contributions after the member preserved his retirement fund capital in this preservation fund. This arrangement would complement the retirement annuity fund. The employee would not have to belong to yet another fund for saving up for retirement. He would have a more flexible and cost-effective arrangement and more choices, encouraging competition in the retail market.


The government should consider expanding the scope of preservation funds as part of its tax policy review for the reasons set out above. To achieve this goal, the government should amend the definition of “preservation fund” along the lines of the definition of “retirement annuity fund” so that a member of the preservation fund can make ongoing, tax-deductible contributions to his preservation fund. It requires that the government also expands other sections of the Income Tax Act that refer to “retirement annuity fund” to include “preservation fund.”
 
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 a former fund member
Dated 18 August 2021

“Thank you soo much…without your assistance, I would have stuck with this process. ITAS called me they said everything is in; order you can go ahead with your process Mrs… God bless you.  Regards.

Read more comments from our clients, here...


 
Important circulars issued by the Fund

RFS issued the following fund administration-related circulars to its clients over the last month.

The Benchmark Default Portfolio - Annual newsletter. Download it here...

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.
 


Important circulars issued by RFS

RFS issued the following fund administration-related circulars to its clients over the last month.
  • Circular 2021.08-12 – RFIN Timetable for industry consultations on FIMA regulations and standards.
RFS sponsors NAMCOL achievers

Education is the key to prosperity in any society. To RFS, all forms of education take centre stage in our sponsorship programme. In this endeavour, RFS supports school sports events in various codes. More recently, RFS provided funding for the renovation of the historic hostel building of Privatschule Grootfontein. RFS’ former managing director was one of the founders of Projekt Lilie in 2005, which RFS has supported ever since. For the past ten years, RFS has also sponsored prize monies for NAMCOL achievers.

RFS’ director Rauha Hangalo handed  over the prize monies of between N$ 2,500 and N$ 5,000 to this year’s NAMCOL achievers, in the presence of Dr. Harold Murangi, CEO of NAMCOL and other officials.

This year the following Namcol students excelled in their academic performance:
  1. Best PETE candidates – Petrus Tileni, Kondjeni Kakuuai, Peter Kafuro and Letta Andreas
  2. Best NSSCO Accounting Candidate –  Julia Mbawo Toroli
Best overall NAMCOL candidate –  Peter Kafuro Best Overall Performance in NSSCO Accounting –  Julia Mbawo Toroli



National Pension Fund – where do we stand?

Industry representatives recently called a meeting with the Social Security Commission to establish the status of the National Pension Fund. Unfortunately, the SSC did not provide any concrete information other than confirming that the project is still underway and it will make available the information in good time. The SSC would not comment whether it is looking at a DB or a DC fund or on the contributions or benefits that members would enjoy.



Industry meeting cancelled
 

NAMFISA cancelled the industry meeting scheduled for 15 September, as there were no agenda points from its and industry participants’ side.
 

Adjudicator determination on death benefit:

This case deals with a complaint by C DIENER (“the Complainant”) v PSG WEALTH RETIREMENT ANNUITY FUND (“the Fund”) AND PSG LIFE LIMITED (“the Administrator”)

Facts of complaint

The deceased completed a beneficiary nomination form in favour of his estate. He was a PSG Wealth Retirement Annuity Fund member with a benefit of R 1.7 million and a Discovery Retirement Annuity Fund member with a benefit of R 3.1 million. The complaint addresses the allocation the Fund’s trustees made as follows after they identified all surviving persons:

 
Person Relationship Allocation %
The Complainant Life partner 80
C Diener Biological child 5
I Naude Biological child 0
J Naude Biological child 5
T Roos Biological child 0
SH Naude Mother 10

The trustees revised their allocation per the above table after establishing how much the Discovery Retirement Annuity Fund allocated to these beneficiaries. Whereas they initially allocated 21% to SH Naude, they reduced that allocation to 10% after they got the information from the Discovery Retirement Annuity Fund

The Complainant provided the following arguments against the allocation:
  1. The Discovery Retirement Annuity Fund awarded R 626,000 to SH Naude.
  2. The Discovery Retirement Annuity Fund awarded R 154,000 each to C Diener and J Naude.
  3. The Discovery Retirement Annuity Fund awarded R 2,100,000 to the Complainant.
  4. The trustees of the Fund should not consider the Discovery Retirement Annuity Fund decision.
  5. The trustees must take into consideration that she is 57 years old and nearing retirement.
  6. SH Naude has six children who are still supporting her, and the deceased did not provide the majority of support to her.
  7. D Diener and J Naude are still young and employed.
  8. The deceased mentioned to her that he wanted her to have the retirement annuities.
The Administrator responded to the Complainant’s arguments as follows:
  1. The Fund is entitled to consider Discovery’s decision as it impacts the dependants’ financial circumstances.
  2. The Fund reduced the allocation to SH Naude due to Discovery’s distribution to her.
  3. The Fund considered the Complainant’s age and the many-year life partnership.
  4. The Fund also considered Discovery’s allocation to her and that she is employed and received various other benefits from the deceased’s estate.
  5. When the Fund reduced the allocation to SH Naude, they considered that her other children contribute to her support.
  6. The Fund concluded that SH Naude is not able to work and is a vulnerable dependant.
  7. D Diener was factually dependant and lives rent-free in the deceased’s property, and received various other benefits.
  8. The Fund ignored the beneficiary nomination form.
  9. Considering the deceased’s nomination and his will, the Fund established that the contents thereof conflict with the Complainant’s allegation that the deceased wanted her to have the annuities.
Matter to be determined by the tribunal

The tribunal must determine whether the Fund allocated the death benefit fairly and equitably to the beneficiaries.
 

Findings of the Tribunal

Citing section PFA  37C, the tribunal pointed out that the board must conduct a thorough investigation to determine the beneficiaries and decide on equitable distribution and on the most appropriate payment mode. More specifically, it must consider the following factors:
  1. the age of the dependants;
  2. the relationship with the deceased;
  3. the extent of dependency;
  4. the wishes of the deceased as per nomination form or his last will; and
  5. the financial affairs of the dependants, including their future earnings capacity potential.
In the distribution process, the board must consider all relevant information, and ignore all irrelevant information, and not rigidly adhere to a policy or fetter its discretion in any other way.

The tribunal considered that the PFA recognises three dependant categories: a legal dependant, a non-legal dependant, and a future dependant. It pointed out that there is no legal duty to support a non-legal dependant, but there is a legal duty to support a spouse and children. Factual dependants must prove their dependency. The tribunal agreed that the Complainant qualified as a legal dependant as they shared the same residence and were mutually dependent on each other. The deceased thus had a duty to support the Complainant. The Fund allocated a portion to the two major beneficiaries D Diener and J Naude, under section 1(b)(iii) [this section was introduced in SA but does not apply in Namibia].

The tribunal found that Discovery allocated a significant portion to the Complainant. As a result, she is in a far better position than all other beneficiaries. Section 37C’s object is that dependants are not left destitute by the member’s death and that the Complainant was not left destitute. The Complainant aimed to defeat the purpose of section 37C with her complaint, and the tribunal condemns her conduct as demonstrating the dependants’ greed. The tribunal concluded that the Fund considered the dependants’ financial circumstances and that the Complainant’s needs are properly catered for from the benefits she received from the deceased’s estate, the portion the Fund allocated to her, and the Discovery allocation. The tribunal confirmed that the deceased nominated his estate but that the death benefit does not form a part of the deceased’s estate unless there are no dependants and nominees. Since there are dependants, the nomination failed to act as a guiding tool to assist the Fund.

The tribunal found that the Fund considered relevant factors, ignored irrelevant factors, and did not fetter its discretion. It is therefore satisfied that the Fund allocated the benefit properly.


Order of the Tribunal

The complaint cannot succeed and is dismissed.

Read the determination here…

    

SA considering to introduce Social Security Fund
 
“The Department of Social Development has released a green paper on comprehensive social security and retirement reform for 2021. We note that it is largely similar to previous proposals dating back to 2012.

In brief, the proposal is to create a centralised National Social Security Fund managed by government. This fund intends to provide basic benefits for all qualifying citizens up to a threshold, including all employees from within the private sector. In addition, citizens can choose to top up their retirement benefits using an occupational or individual arrangement.

In practice, this means that most existing members will become dependent on government through the National Social Security Fund for their retirement and insurance benefits rather than through an occupational or individual scheme as is currently the case. We argue that such a route may result in reduced benefit security due to a number of deficiencies in the proposed system.”
 
The author raises the following arguments against the proposal, which are to a large extent also applicable to Namibia.
  1. It removes competition to the detriment of members
  2. South Africa has already made significant progress in enhancing retirement funding
  3. The proposed scheme requires substantial technical expertise to administer
  4. The proposal introduces unfunded benefits in the National Social Security Fund
  5. It introduces material systemic risk to South Africans’ retirement funding aspirations 
  6. Higher taxes from contributing members would subsidise the contributions of low-income earners
Read the full article by John Andersen of Alexander Forbes in Cover of 20 August 2021, here…

Note: These developments in SA are of great interest to us in Namibia as the Social Security Commission and government are also mulling the introduction of a National Pension Fund on a very similar basis. The Department of Social Development withdrew the proposal again, but the discussion in SA is unlikely to end.
 

New insights into trust and ethics among advisors and fund managers
 
“Coronation is dead right – ‘trust is earned’. That’s the fund manager’s marketing tagline. Last week it probably ‘unearned’ a huge chunk of trust.
 
On Friday, Fin24 provided details of a letter Coronation had sent to its clients describing how one of its managers had profited from exploiting a “pricing inefficiency”.
 
The letter, which related to the “legal and transparent” trades done by now-former executive Adrian Zetler, highlighted just why so many ordinary investors do not trust the investment community.
 
These ordinary investors comprise pensioners or employees who generally do not have the skills or resources (including time) to constantly track markets. They rely on extremely well-paid financial advisors and fund managers to fill that critical gap.
 
Rightly or wrongly many investors suspect that one way or another – always legal of course – their fund managers and advisors are benefitting unduly at their expense; this is the eternal ‘agency’ problem.
 
It may be just a few cents here and there for every share or unit trust involved, but for the ‘perpetrators’ all these cents add up to a very nice low-risk profit.
 

In the letter, Coronation explains that Zetler, who had been with the company for 11 years, resigned in January after the company took legal advice and launched an inquiry into his trading activity in some of Coronation’s unit trusts. The investigation went back three years. It emerged that Zetler had been involved in the trades since March 2020…”
 
Read the full article by Ann Crotty in Moneyweb of 20 September 2021, here...

 


SARS exercised unreasonable discretion in disallowing penalty

“…The taxpayer, Peri Formwork Scaffolding Engineering (Pty) Ltd, paid the PAYE collected of R10 648 340.93 over to Sars on Monday, January 8, 2018, when the payment was ostensibly due on Saturday, January 6, 2018. In terms of the Tax Administration Act, the payment should have been made on the Friday…

The taxpayer argued:
  • That it had experienced cash flow problems. The taxpayer’s bookkeeper was expecting payments from debtors in early January, which did not materialise. The PAYE was due and payable to Sars within seven days after the end of December 2017.
  • That it immediately took steps to raise the funds, and managed to raise in excess of R5 million. The weekend delayed the receipt of funds into the taxpayer’s bank account to the Monday, at which point the taxpayer immediately paid Sars.
Sars’s arguments
  • Sars dropped the Tax Court’s reference to a provision in the Fourth Schedule to the Income Tax Act which had been repealed in 2011, but which led to the Tax Court’s finding that a taxpayer had a fiduciary duty to Sars in collecting the PAYE and paying this over to Sars.
  • In the High Court, Sars submitted that Paragraph 2(1) of the Fourth Schedule establishes a “relationship between Sars and the various taxpayers who happen to be employers”.
  • Sars then expanded on this relationship, and submitted to the High Court that the relationship between the taxpayer and Sars is “akin to a fiduciary relationship in that the taxpayer is required to act for the benefit of Sars”.
High Court findings
  • The High Court disagreed with Sars’s contention that there was a fiduciary relationship between the taxpayer and Sars, opining that there have been “various distinctions between the accountability of a trustee to his beneficiary and the accountability of a debtor to his unsecured creditor”.
  • The High Court referred to the 2016 judgment of Grayston Technology Investment and Another v S, where the full bench was of the view that “Grayston stood in the shoes of an agent in respect of either a statutory or civil law obligation of debtor and creditor, pursuant to which relationship it attracted an obligation to pay over in specie to Sars or to account for the money actually received or its proceeds”.
  • The High Court clarified that the taxpayer was not precluded from utilising the PAYE money or obliging it to be ring-fenced…”
Read the article by Barbara Curson in Moneyweb of 9 September 2021, here…

Three reasons you are losing the war for talent

“…Business leaders just can’t seem to fill their personnel pipeline. Many of those leaders, however, fail to realize that the “good people” they seek may be already on their payroll or have recently departed for a company that treats them better.
Those leaders don’t have a recruiting problem; they have a retention problem… So, how can you win the talent war with the talent you already have? Whether you lead an entire company or a small team, you can start by avoiding these three common pitfalls.
  1. Stop complaining about millennials - they need new challenges, but those are plentiful in growing companies. If you create an environment in which employees can continuously learn new things… Give your future leaders a seat at the table and innovation will follow…
  2. Stop preaching that it’s all about culture - It’s not those carefully worded value statements on those posters in the breakroom. It’s not your open-door policy, annual picnic, or holiday canned food drive…Can it be accurately measured by an annual survey?... Redefine culture as an outcome: the sum of how people behave every day. Your entire organization will gain clarity and alignment around the actions that matter most.
  3. Don’t recognise staff solely based on their numbers - today’s KPI-obsessed employers focus on metrics, instead of the actions that precede them. It’s like a sports coach fixating on players’ stats instead of the actual plays that lead to wins…Encourage management to start observing their employees “in action” every day. Empower them to intentionally “catch” people doing things right, and recognize their actions in real-time…
Read the article by Matt Robinson, in FastCompany, here…



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