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2020 amm invite 600
 

 

Benchtest Newsletter
issued January 2022
 
 

 
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In this newsletter
Benchtest 12.2021, Income Tax, VAT amendments, umbrella funds and regulatory intervention and more...


Jump to...
     

Important notes & reminders

    
  NAMFISA levies
  • Funds with January 2021 year-ends must submit their 2nd levy returns and payments by 25 February 2022;
  • Funds with July 2021 year-ends must submit their 1st levy returns and payments by 25 February 2022; and
  • Funds with February 2021 year-ends must submit their final levy returns and payments by 28 February 2022.
  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)
 
  Registered service providers

Certain pension fund service providers must register with NAMFISA and must report to NAMFISA regularly. Download a list of service providers registered at June 2021, here...
  Toolbox for trustees

Retirement Fund Solutions provides comprehensive support for trustees. Find a list of download documents to assist with governance and management of private funds, here...

 
 
 
FIMA standards published in the Gazette
 
A large number of ‘critical’ FIMA standards were published in government gazette no. 7713 on 22 December 2021, covering 470 pages.
 
NAMFISA invites all financial institutions, financial intermediaries, industry associations, and self-regulatory organisations to make written representations concerning the proposed standards not later than 28 February 2022. NAMFISA will consider such representations in determining whether to issue the standards as published or in a modified form.
 
Commentators must supply written representations on the template provided under Schedule 2, and submit these to NAMFISA at the Upper Ground Floor, Gutenberg Plaza, 51 – 55 Werner List Street, Windhoek, or email: This email address is being protected from spambots. You need JavaScript enabled to view it. and This email address is being protected from spambots. You need JavaScript enabled to view it.
 
Income tax and VAT amendments
 
The Ministry of Finance circulated a “layman’s draft bill” of proposed changes to the Income Tax Act and the VAT Act that are likely to go through parliament this year.


The Income Tax Act
  1. It introduces a definition of “beneficiary” and “beneficial owner” to create the framework for dividend withholding tax,
  2. It introduces a definition of “trading trust” and classifies a “trading trust” as a company. Consequently, the Act treats trading trusts as a company regarding tax rates and tax principles.
  3. It introduces a definition of “trust” to distinguish what one commonly understands as a trust from the “trading trust.”
  4. It gives legal recognition to the “Namibia Revenue Agency” for income tax administration purposes.
  5. It introduces the definition of “resident,” being only a natural person, to allow for collecting dividend withholding tax, as the tax only applies to local (or resident) shareholders.
  6. It removes the general exemption of dividends received and makes dividends taxable that a resident shareholder receives at the rate of 10% (which is a final tax) that the paying company must withhold and pay over by the 20th of the month following its deduction. It expands the tax return, allowing NAMRA to administer the collection of dividend withholding tax. Penalties and late payment interest apply as to income tax.
  7. It increases what one may contribute to retirement funds and study policies from N$ 40,000 to N$ 150,000.
  8. It changes the order of priority applicable to a taxpayer’s payment: firstly to the tax due, secondly to the interest due, and lastly to the penalty due.
  9. It introduces a cap on interest paid by a resident company to a non-resident shareholder based on a maximum debt to equity ratio formula.
  10. It adds the offense of false statements and fraud to obtain any tax refund or exemption. It increases the penalty for any listed offense from N$ 2,000 or up to two years imprisonment to three times the amount of tax payable or imprisonment of up to five years.
  11. It adds the offenses of failing to submit information and submitting a complete and accurate data return and applies a penalty of N$ 500,000 or up to five years imprisonment.
  12. It introduces requirements for rulings and their validity and obliges the Minister to issue the ruling within 60 days.
The VAT Act
  1. It gives legal recognition to the “Namibia Revenue Agency” for income tax administration purposes.
  2. It introduces a proviso for making deductions for a payment made or for the import of goods in the current or previous tax period, provided that the payment relates to the making of a taxable supply.
  3. It changes the order of priority applicable to a taxpayer’s payment: firstly to the tax due, secondly to the interest due, and lastly to the penalty due.
  4. It introduces a clause containing offenses and penalties similar to those in the Income Tax Act.
  5. It removes the definition of “asset management services” and deletes that term from the list of exempt financial services, thereby rendering it as a VATable financial services.
 

Newsletter

In this newsletter, we address the following topics:
  In ‘Tilman Friedrich’s industry forum’ we present:
  • Monthly review of portfolio performance – 31 December 2021
  • Umbrella funds – will regulatory intervention promote member interests?
  • FIMA bits and bites – what changes were affected to the standards?
  • Do not expect the Default Portfolio to outperform!
In Benchmark – a note from Günter Pfeifer read about
  • Benchmark passes the N$5 billion mark!
  • The Benchmark Retirement Fund may not withhold any benefit
In Benchmark – a note from Günter Pfeifer read about
  • Benchmark passes the N$5 billion mark!
  • The Benchmark Retirement Fund may not withhold any benefit
In ‘News from RFS’ read about…
  • RFS welcomes new team member
  • The name “Retirement Fund Solutions” made a criminal offense under FIMA!
  • Kharos Benefit Solutions welcomes DM Rail as new payroll client
  In ‘Legal snippets’ read about
  • A fund may not withhold any benefit
  • Failure to pay contributions to fund
In ‘Media snippets’ read about
  • ·Three investment themes that will predominate 2022
  • Retirement’s top 10 stress factors
  • What does a power of attorney over your financial affairs entail? (part 2)
  • Stock picks from top SA market watchers and money managers.
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 December 2021

In December 2021, the average prudential balanced portfolio returned 1.8% (November 2021: 1.8%). The top performer is Hangala Prescient Absolute Balanced Fund with 3.3%, while NAM Coronation Balanced Plus Fund with 2.2% takes the bottom spot. For the 3-months Momentum Namibia Growth Plus Fund takes the top position, outperforming the ‘average’ by roughly 1.4%. Allan Gray Balanced Fund underperformed the ‘average’ by 1.8% 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 December 2021 provides a full review of portfolio performances and other insightful analyses.  Download it here...

 
Our outlook for investment markets for 2022
 
The year 2021 produced exceptional returns for pension funds, primarily derived from equities in which funds typically invest between 60% and 65% of their total assets. Graph 6.1 depicts the returns on the various assets classes in which funds invest. The average fund produced a return of around 18%, representing a real return of around 13.5% for 2021. My expectation for 2021 was that the average fund would generate a real return of 5%, or a nominal return of 9.5%, with an inflation rate of 4.5%. My call on equities was wrong. I also cautioned that local bonds yielding between 5% (GC 21) and 13% (GC 50) at the time would only do this if an investor holds them to maturity. Looking at graph 6.1, the return a fund earned on bonds for 2021 would have only been 8.4%, and this is SA bonds. Namibian bonds, in comparison, only yielded 4.4% (IJG ALBI) in nominal terms, which equals zero % in real terms.
 
The Monthly Review of Portfolio Performance to 31 December 2021 provides a full review of portfolio performances and other insightful analyses. Download it here...

 
Umbrella funds – will regulatory intervention promote member interests?
 
There is an ongoing discussion in South Africa and elsewhere about costs and the eroding effect costs have on the benefits members will eventually receive. National Treasury in SA is on a drive to reduce costs, effectively forcing funds into umbrella funds. And now Treasury is onto umbrella funds with a paper on retirement reform proposals that focuses on umbrella funds.

One of the problems in this industry is that one cannot quantify a significant proportion of costs and cannot build them into the cost: benefit comparison.

If you choose an asset manager offering the lowest management fees, can you be sure you will secure a better outcome? Of course not, but how do you factor in future out - or underperformance? It is simply not possible!

If you choose any other service provider, such as your consultant, your actuary, your insurer, or your administrator, based on the lowest costs, can you be sure of a better outcome? Again, definitely not. How do you factor in future losses, direct and consequential, such as industrial action by your employees arising from inferior service delivery?

If you choose to move to an umbrella fund because it removes your obligation to serve as a trustee or principal officer or to designate staff at your cost to these positions, can you be sure of a better outcome? Once again, I venture to say, definitely not. How do you factor in the cost of industrial action by dissatisfied staff for the wrongdoings of a third party over which you have very little or no influence?

We believe that fees and costs are merely anecdotal. Yes, they always erode the outcome. How about if you did it yourself, assuming you want to save all costs? Would you be in a better position? This question is the crux of the matter.

We are all in occupations that serve or produce for other people. These other people, in turn, also serve or produce for others to the best of their ability. We all want to live, eat and drink, and if we don’t produce what we consume, we have to buy it from someone who does. That person makes what I consume. In return, he does not have to attend to his investment because I do this for him.

Whatever you do not do yourself, the first principle is that you will have to pay someone to do it for you. Specialisation and a functional free market mechanism ensure that consumers get value for money, not centralistic intervention to reduce costs through regulation.

Given that you cannot be a master of all trades and therefore have to rely on the free market mechanism and specialisation, the second important principle is that of ownership. A free-market economy with private ownership of production factors has proven its superiority over a centralistic economy with collective ownership. Our industry experience has repeatedly shown that this principle equally applies to the pensions industry.  Funds managed as a collective are usually dysfunctional at the expense of its members. Funds driven by the conviction of ownership of an employer or a sponsor usually function exemplary for the benefit of its members.

Unfortunately, FIMA will remove the directional and tempering influence of the employer from the management of most pension funds, and members will live to regret it.

 
FIMA bits and bites – what changes were effected to the standards?
 
We compared the pension industry-relevant standards (Chapters 5 and 10) as published in Gazette no 7713 on 22/12/2021 with the versions that were provided to the industry before and published on the NAMFISA website. We noticed the following:
 
  1. We found no changes to the wording of the clauses in the standards. 
  2. Clause references and clause numberings changed in some standards. Some of these references appear to be incorrect (possibly incorrect type-setting for the Gazette), and some appear to be corrections of incorrect clause numberings in previously published versions. 
  3. The Gazette does not include the following standard that was published previously and is on the NAMFISA website:
    • GEN.S.10.18 Fiduciary responsibilities of financial institutions and intermediaries and functionaries. 
  4. The Gazette contains the following standards that were not previously published and are also not on the NAMFISA website:
    • GEN.S.10.23 - Fees and Charges [Standard sets out fees payable to NAMFISA upon registration and de-registration of funds and fund administrators]
    • GEN.S.10.25 - Application for annual renewal of registration made to NAMFISA under this Act [Standard not applicable to retirement funds and fund administrators] 
  5. The Gazette does not include any standards relevant to Chapter 8, “Fund Administrators” (none were previously published either). Section 366(2) of the FIM Act refers to a standard dealing with the requirements for application for registration as fund administrator. Fund administrators are unable to register until NAMFISA issues this standard. 
 
Do not expect the Default Portfolio to outperform!
 
The Benchmark Default Portfolio does not aim to outperform the average of the prudential balanced portfolios over the long term. Any long-term outperformance is a coincidence. Yet, since its restructuring at the start of 2010, it beat the average prudential balanced portfolio cumulatively. It was 2.7% ahead of the average at the end of October 2021 after reaching its peak outperformance of 12.4% in March 2020. In March 2020, when COVID hit our markets, the JSE Allshare Index fell 12.8%, from 51,038 to 44,490. In April 2020, the JSE Allshare Index grew by 13.1%, continuing its trajectory to 70,475 at the end of November 2021.
 
The Benchmark Default Portfolio can underperform and outperform the average prudential balanced portfolio in the short term. Its currently more conservative structure means that it will likely beat the average prudential balanced portfolio when shares perform poorly, and it will lag it when shares perform strongly. Since the end of March 2021, shares performed strongly, and as a result, the Default Portfolio’s cumulative outperformance to the end of March 2021 declined steadily.
 
Graph 6.1 illustrates the Default Portfolio’s characteristics, as described in the foregoing. The black line in the graph depicts the return of the Default Portfolio relative to the yellow line. The yellow line depicts the average of the prudential balanced portfolios as a constant cumulative return of 100. The blue line (the JSE Allshare Index), the green line (Namibian Allbond Index), and the red line (Namibia Money Market Index) depict their movement relative to the yellow line (average prudential balanced portfolio). As shares are the biggest component of the Default Portfolio and the prudential balanced portfolios, the movement of the JSE Allshare Index has the largest impact on the Default Portfolio’s performance relative to the average prudential balanced portfolio’s performance.
 
Graph 6.1

Members who have invested their retirement in the Default Portfolio will wonder whether the black line (the Default Portfolio) will continue moving lower and even below the yellow line? As stated at the outset, it can underperform the yellow line over the short term, particularly when shares do well. So, will shares continue doing well as they did since March 2021? The reason for shares having done well is that central banks pushed lots of money into the financial system and reduced their policy interest rates. An investor now earns very little on interest-bearing investments and sometimes even earns a negative return when considering inflation. The investor can now borrow money very cheaply and invest in shares and other assets, which drives up the price of these assets. Central banks adopted these policies to prop up their economies after the COVID crisis. An economy is in trouble when the consumer stops consuming, and this happens when uncertainty and panic prevail, as we saw when COVID hit us. These central bank policies achieved their objective as high inflation rates in the developed economies indicate.
 
In response to the strong growth in the inflation rate, the US Federal Reserve has already reduced the monthly amount of money it is pushing into the system as a first step. The ECB is likely to follow. The next step is to start increasing their policy interest rates. Market commentators expect interest rate increases from next year. These central banks’ policy changes will likely reduce the return on shares relative to interest-bearing investments. This trend is likely to continue until the risk-adjusted returns of shares and interest-bearing investments reach an equilibrium.
 
Conclusion

We expect shares not to do as well in the next few years relative to interest-bearing investments, as they did over the past one-and-a-half years. Therefore, the more conservative structure of the Benchmark Default Portfolio should prevent it from dropping below the yellow line (the average prudential balanced portfolio) over any more extended period. Members with a long-term investment horizon should not feel concerned about their investment in the Default Portfolio. Members with a short-term investment horizon of up to five years whose capital is in the Default Portfolio should consider investing in other portfolios, depending on how they plan to use their retirement capital at the end of the short-term horizon. We do point out, though, your retirement in the next five years does not necessarily mean that you have a short-term horizon as you may want to arrange a pension with your retirement capital that is payable for the rest of your life! We advise that you should consult your adviser.


The Monthly Review of Portfolio Performance to 31 October 2021 provides a full review of portfolio performances and other insightful analyses. Download it here...
 
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 human resources director of a participating employer
Dated 29 October 2021
  “It is such a pleasure working with friendly, well-trained staff as well as a company that is so well organized.  Every time I have a query, you return with an answer within an hour or two – thank you.  
 

Read more comments from our clients here...
 

Benchmark

A note from Günter Pfeifer
 
 
 
Benchmark passes the N$ 5 billion mark!
 
The Benchmark Retirement Fund recently passed the N$5 billion mark in total assets and membership of close to 15,000, making it the 3rd largest fund in terms of assets and the 5th largest fund in terms of members!
 
The Benchmark Retirement Fund may not withhold any benefit
 
The Fund informs all employers’ that it may not withhold payment of a benefit except if the employer obtained a signed admission of liability and acknowledgment of debt from the member or a judgment and a compensation order against the member in any court when the member exits the Fund.
 
Employers must also note that a criminal conviction is not a “judgment” for purposes of section 37D. In a criminal case, the employer must also have obtained a compensation order issued under section 300 of the Criminal Procedure Act 51 of 1977, ordering the fund to recover damages from the member’s benefit and pay this amount to the employer at the time the employee exits the Fund. The fund cannot withhold the member’s benefit pending the finalisation of the legal proceedings after the member exited the Fund.

A fund may act only in accordance with its rules. The Benchmark Rules do not grant the Trustees the power to withhold benefits pending a court’s determination of the member’s liability to the employer. The Namibian High Court also effectively ruled that if there is no Judgment against the member when the fund must pay the member, the fund may not withhold the benefit. It may not withhold the benefit to enable the employer to obtain a judgment (refer to Old Mutual Life Assurance Company Namibia Limited v Old Mutual Namibia Staff Pension Fund and Another (PA321/05, PA321/05) [2005] NAHC 45.)

 
Important circulars issued by the Fund

The Benchmark Retirement Fund did not issue any new circular since those reflected in Benchtest 09.2021. Clients are welcome to contact us if they require a copy of any circular.
 
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 new team member
 
Elizabeth Janser, better known as Lisa, joined our permanent establishment in the Benchmark department on 12 January 2022. Lisa grew up in Keetmanshoop, where she also matriculated at the Suiderlig High School in 1999. She is currently studying for a Higher Certificate in Business and Marketing Management.
 
Lisa is an experienced administrator, having worked at Old Mutual since 2003. She progressed through the ranks from receptionist to the position of Senior Pension Fund Administrator during her career of 18 years with the company.
 
We extend a hearty welcome to Lisa and look forward to her contribution as an indispensable member of the Benchmark team and keeping her clients happy with her service at all times.

 
The name “Retirement Fund Solutions” made a criminal offense under FIMA
 
Retirement Fund Solutions Namibia (Pty) Ltd was established in 1999. At the time, the expression “retirement fund” had no legal anchoring. The term referred to defined benefit and defined contribution pension funds and provident funds. The Pension Funds Act reserves the expression “pension fund” for entities registered as a pension fund under the Pension Funds Act. Anyone using this term without being registered as such commits a criminal offense.
 
Under the FIMA, the legislator replaced the term “pension fund” with “retirement fund” without reference to established rights. It is now a criminal offense if our company uses this term in its name as it is not operating as a registered retirement fund.
 
Our objections to this change, unfortunately, fell on deaf ears. Effectively the legislator dispossessed RFS of its long-established name that has become a household name in our pensions industry. As a result, Retirement Fund Solutions is now obliged to adapt its name not to convey the impression it is a registered retirement fund.
 
We are in the process of rolling out a plan to change the name of the company and its branding and will inform all stakeholders in due course.
 
!Kharos Benefit Solutions welcomes DM Rail as new payroll client
 
!Kharos was recently appointed to administer the payroll of DM Rail, which has more than 600 employees. We congratulate the !Kharos team on this appointment!
 
RFS and Logos Business Advisory Services established the payroll company !Kharos Benefit Solutions (Pty) Ltd in 2020. For RFS, the integration of payroll and pension fund administration offers an attractive proposition that will benefit its clients who use the Symplexity payroll system or employ !Kharos for their payroll administration.

 
Important circulars issued by RFS
 
RFS did not issue any new circular since those reflected in Benchtest 09.2021. Clients are welcome to contact us if they require a copy of any circular.
 


Legal snippets

 
 
A fund may not withhold any benefit
 
In Namibia, a retirement fund may not withhold payment of a benefit except if the employer obtained a signed admission of liability and acknowledgment of debt from the member or a judgment and a compensation order against the member in any court at the time the member exits the Fund.
 
Please refer to the article “The Benchmark Retirement Fund may not withhold any benefit” under the “Benchmark” column above for further detail.
 
Failure to pay contributions to fund
 
“In a complaint received by the Adjudicator, it was complained that Tactpro Protection Services CC (second respondent) had failed to timeously register as a participating employer with the Private Security Sector Provident Fund (first respondent).
 
The  complainant  was  employed  with  the   second respondent as a security officer from 20 February 2016 to 3 November 2017.
 
Following his exit from service, the complainant became entitled to a withdrawal benefit from the first respondent. However, he had not been paid any benefit.
 
The complainant also stated that the second respondent did not pay his full salary and was not provided with pay slips. He averred that the second respondent also failed to pay its portion of provident fund contributions to the first respondent. He provided a copy of his pay slip for June 2017 which refects a  provident fund deduction of R226.85. He also provided a copy of his completed withdrawal claim form which was stamped by the second respondent.
 
The first respondent submitted that the second respondent  commenced   participating   in   it   on 1 November 2016 and was non-compliant in terms of section 13A of the Act. It stated that fund contributions were received from the second respondent for the last time in March 2017. It confirmed that the complainant became its member on 1 November 2016 and there was no record of his exit from the fund.
 
The first respondent stated that the second respondent was in arrears with contributions for the period February 2017 and April 2017 to date. It provided a contributions history which reflected contribution payments in respect of the complainant for the period November 2016 to December 2016 and January 2017. It averred that further contributions will be allocated to the complainant’s record once it received payment of the arrear contributions from the second respondent.
 
In further submissions, the first respondent stated that the second respondent did not remit the same amount of contributions deducted from the complainant’s salary as his current fund credit amounts to R0.01. This was after it was provided with the complainant’s pay slip which refects a provident fund deduction of R226.85.
 
The second respondent acknowledged that contributions were deducted from the complainant’s salary from March 2017 until June 2017, which were not paid over to the first respondent. It indicated that it deliberately and/or negligently failed to effect deductions from the complainant’s salary from  July 2017 until November 2017.
 
The second respondent stated it had a contract with the Makana Municipality and it was difficult to honour payments of salaries of employees as its client is practically bankrupt and could no longer keep up with the payment of invoices. This led to a situation where it could not honour its statutory commitments in relation to payment of contributions.
 
In her determination, Ms Lukhaimane said the second respondent acknowledged that it was in arrears  with contributions due to the fact that its client  failed to honour payments of its invoices. It undertook to remedy the situation and requested a reasonable time to do so.
 
“The issue of non-payment of invoices by clients is a real issue in this (security) industry and it normally results in the employer being unable to honour its statutory duty to pay contributions in respect of its employees.
 
“Thus, it is a systemic problem in this industry which prejudices both employer and members in terms of payment of contributions and affects the final benefit payable upon exit from service.”
 
The second respondent was ordered to pay to the first respondent the arrear contributions together with late payment interest. The first respondent was also ordered to pay the complainant his withdrawal benefit.
 
In her determination, Ms Lukhaimane said the second respondent acknowledged that it was in arrears  with contributions due to the fact that its client  failed to honour payments of its invoices. It undertook to remedy the situation and requested a reasonable time to do so”.
 
Source: The 2019-20 annual report of the Office of the Pension Fund Adjudicator.
 


Snippets for the pension fund industry

 
 
Three investment themes that will predominate 2022

“One of the great ironies of the energy transition away from coal is that it relies massively on mining companies producing metals such as iron, copper and lithium.
 
The problem is that these mining operations are shunned by financiers, which in turn is likely to slow down the energy transition, according to Chris Holdsworth, chief investment strategist at Investec Wealth and Investment.
 
Energy transition winners and losers - There is a push for the electrification of everything, which is ironically good for mining companies involved in the production of metals used in electrification, such as copper, lithium and others. This is reflected in the prices of these commodities…

The rise of ESG-focused investment - Among active fund managers, only those focused on ESG received net inflows over the last two years, part of a trend that is likely to intensify over the next decade, as passive funds continue their dominance of the investment landscape…

Pessimism about SA appears misplaced - SA equities are at a 50% discount to the US,” says Holdsworth. “The expectations for SA growth in 2022 are very modest, which is somewhat surprising given a rather robust global environment… In addition, government revenue continues to be extraordinarily strong. Government has already revised up revenue expectations in the medium-term budget, but there could be R50 billion more revenue than was expected in November 2021, in large part because of strong commodity exports…”

Read the article Ciaran Ryan in Moneyweb of 17 January 2021 here…

 
Retirement’s top 10 stress factors
 
“While the thought of retirement might be blissful, retirement itself – which can span a period of 30 years or more, depending on when you retire – can be anything but. In fact, some of the most stressful life events are destined to happen to us during our retirement years, with many being a function of ageing.
 
In this article, we explore those events that cause stress at and in retirement, and how to deal with them.
  1. The transition from work to retirement – To ease the transition, many retirees prefer to structure a phased-in retirement approach where they negotiate reduced working hours, three-day weekends, or more flexible working hours. This allows the retiree to get a feel for retirement before committing to the permanence of it.
  2. Change from saving to drawing - Ideally, retirees should work closely with an experienced advisor in the years leading up to retirement to ensure that the retirement plan is robust enough to withstand its assumptions being tested. Detailed retirement scenarios and post-retirement cashflow modelling will help give you confidence that your retirement plan can hold up over time.
  3. Death of a spouse - Ideally, your retirement plan should include what we refer to as ‘first dying and ‘second dying scenarios so that you and your spouse each have a clear financial picture of what retired life would look like without the other.
  4. Selling family home - From a resale perspective, it often makes better financial sense to sell the family home while it is still in good shape and is well-maintained rather than sell it later on in retirement when its finishes may be outdated and in need of replacing.
  5. Death anxiety - The more we experience death around us, the more real the process of dying and death itself becomes, and this can lead retirees to begin fixated on their own reducing longevity and death.
  6. Adult children emigrating - If you do have adult children who have emigrated or who are contemplating emigrating, it is essential that your own retirement plan takes account of this. Firstly, it is important to budget for overseas travel in the early stages of your retirement. Thereafter, you may want to consider budgeting for frail care or assisted living facilities later in your retirement.
  7. Running out of capital - The best way to allay these fears is to meet regularly with your advisor to review your plan and to ensure that your expenditure remains controlled and in line with your budget.
  8. Boredom and depression - When drafting your retirement plan, ensure that your hobbies, entertainment and activities are budgeted for so that you do not find yourself in a position where you are unable to afford the lifestyle you wanted in retirement.
  9. Physical incapacity - Consider giving a loved one or close friend a power of attorney over their affairs as this will make it easier for them to transact and manage their affairs, especially when it comes to standing in queues at banks, home affairs or other departments. [See also the article under “Snippets for Investors” below and in previous newsletter – editor.]
  10. Dementia - An early diagnosis will also allow you and your advisor to make provision in your plan for private nursing, home care or whatever type of care you envisage for yourself…”
Read the article by Craig Torr, in Moneyweb of 24 December 2021, here…
 
 

Snippets of general interest

 
 
What does a power of attorney over your financial affairs entail? (part 2)
 
“…Broadly speaking, a power of attorney is a written declaration by one person (the principal) to bestow powers on another person (the agent) to perform juristic acts (i.e. actions that are intended and capable of having a legal effect) on their behalf. A power of attorney is not a contract but, rather, is made possible in terms of the South Africa law of agency – the basis of which is that an agent is not permitted to perform any juristic act that the principal is incapable of performing.
 
In our country, anyone over the age of 18 who has contractual capacity is capable of granting a power of attorney. This means that the person granting the power of attorney must be legally capable of performing the acts that they are granting their agent the power to perform. In signing over a power of attorney to the agent, the principal is in effect assuring a third party that the agent has the legal authority to act on their behalf…
 
When it comes to granting someone power of attorney for banking purposes, most South African banks do not accept a general power of attorney but prefer that the principal signs a specific power of attorney drafted by the bank.
 
Where a principal provides a power of attorney authorising their agent to purchase immovable property on their behalf, the original power of attorney must be registered at the Deeds Office together with the transfer documents.
 
The need to grant someone power of attorney over your affairs can be due to a number of reasons. For instance, elderly people, especially those who are physically incapacitated and who find it difficult to attend to their affairs in person, may grant their adult children authority to act on their behalf. Moreover, people who travel regularly for work and who find themselves abroad for long periods of time may find it easier to sign over a power of attorney to a local attorney or financial advisor who can attend to their affairs while they are out of the country.
 
The process of emigration is a long and complex one, and emigrants who have already left the country but whose affairs have not been finalised locally may find that a local power of attorney can help expedite the process. That said, keep in mind that where a power of attorney was signed outside of South Africa, it is generally required that a notary public authenticates the power of attorney in order for it to be valid locally.
 
Where a special power of attorney has been granted, this mandate normally terminates automatically after the agent has performed the specific juristic Act that they have been authorised to carry out. However, while the principal to a power of attorney can revoke the mandate at any time, it is important to note that there are a number of other circumstances in which a power of attorney automatically falls away. In the event of the principal’s insolvency or death, the power of attorney will automatically fall away. This is because, in the event of death, the principal can no longer act, and the executor will take over the estate administration. Similarly, if the principal is declared insolvent, the insolvent estate is no longer managed by the principal but by the appointed trustee.
 
Most importantly, a power of attorney automatically falls away in circumstances where the principal loses mental capacity on the basis that an agent is only authorised to do that which the principal is capable of doing. If the principal lacks contractual capacity on the basis that they no longer have the mental capacity to appreciate the consequences of their actions, then the mandate automatically falls away.
 
For those that find themselves caring for parents who have been diagnosed with dementia or Alzheimer’s disease, this anomaly can be an incredibly frustrating one as they generally face a situation where they are unable to take control of their parents’ financial affairs at a time when it is most needed. Although there are other legal options available to them – such as the appointment of a curator bonis or administrator, or setting up a special trust – these options can be costly and clumsy – especially where the estate is not particularly sizeable and all that is required is assistance with day-to-day financial management.
 
Remember, where a power of attorney is terminated for whatever reason, the agent’s legal capacity to act on the principal’s behalf falls away. So, where the agent has legal capacity in terms of a valid power of attorney, they remain legally protected from any liability which arises as a result of any juristic acts that they have performed in terms of his mandate. However, in circumstances where the agent is not properly authorised – such as where the principal loses mental capacity – the agent can be held liable by any third parties with whom they have contracted for breach of authority, and the principal is absolved of any legal liability.
 
If you intend to grant someone power of attorney over your affairs or a specific aspect of your affairs, it is strongly recommended that you seek professional advice as there are inherent risks involved in granting someone power over your affairs. Further, it is important that all the legal requirements for signing a valid power of attorney are met, which includes ensuring that you have full contractual capacity at the time of signing. Your witnesses (ideally two) should be over the age of 14 and capable of giving evidence in court, unless the power of attorney is signed by a Commissioner of Oaths, Magistrate, Justice of the Peace, or Notary Public, in which case witnesses are not a requirement.
 
Keep in mind that the principal cannot be under sequestration or curatorship, and the witnesses to the document must not stand to benefit from the power of attorney.
 
Granting someone powers to manage your financial affairs is not a decision that should be taken lightly, and it is important to ensure that you have full confidence and trust in your appointed agent.” 
 
Read the full article by Craig Torr of Momentum, in Moneyweb of 7 December, here...
 
Stock picks from top SA market watchers and money managers
 
In this, the second part of a two-part feature, Moneyweb shares strategies and stock picks from five well-known market commentators and investment professionals.
 
The question was simply where they would invest R5 million today. Two possible time horizons were offered: a three-year view (to 2025) and an eight-year one (to 2030). The final proviso in this hypothetical situation is that the amount could be invested in (listed) shares or exchange-traded funds (ETFs), funds, or other asset classes. We also asked that the investment professionals be somewhat specific, rather than thematic in their approach.


See the top stock picks in Moneyweb of 19 January 2022, here...
 


And finally...

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


"I am an old man and have known a great many troubles, but most of them never happened.”
~ Mark Twain



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Whilst we have taken all reasonable measures to ensure that the results reflected herein are correct, Benchmark Retirement Fund and Retirement Fund Solutions 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.
 

 
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