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2020 amm invite 600
Benchtest Newsletter
Issued July 2022
 
 
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In this newsletter

Benchtest 06.2022, BRF’s new P.O., FIMA and law making in Namibia and more...

Jump to...

Important notes & reminders

    
Postponement of the FIMA

The Minister announced that the effective date of the FIMA will no longer be 1 October 2022.

NAMFISA levies
  • Funds with July 2021 year-ends must submit their 2nd levy returns and payments by 23 September 2022;
  • Funds with January 2021 year-ends must submit their 1st levy returns and payments by 25 August 2022; and
  • Funds with August 2021 year-ends must submit their final levy returns and payments by 31 August 2022.
Repo rate up again

The Bank of Namibia announced another increase in the repo rate from 4.25% to 4.75% on 15 June. The interest rate on direct loans will thus increase from 8.25% to 8.75%.
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)
Toolbox for trustees

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

 

Newsletter

In this newsletter, we address the following topics:
In 'Tilman Friedrich's industry forum' we present...
  • Monthly review of portfolio performance – 30 June 2022
  • Global investment markets are not rosy!
  • The FIMA – did it go through an appropriate law-making process?
  • Small employers losing group risk cover
  • NAMFISA circular on permissible deductions
  • FIMA bits and bites – do you really have a year to comply? 
In 'Benchmark – a note from Günter Pfeifer' read about...
  • Benchmark announces appointment of new principal officer
  • Benchmark Retirement Fund and RFS welcome new employers
  • Important circulars issued by the Fund
In 'News from RFS' read about…
  • Long service awards compliment our business philosophy
  • Staff improving their competencies
In 'News from NAMFISA' read about...
  • Commencement of the FIMA postponed
  • NAMFISA circular on permissible deductions
In 'Legal snippets,' read about...
  • The Flexible Land Tenure Act and Housing Loans - part 2
  • The Income Tax Act and your retirement fund contributions
In 'Snippets for the pension funds industry,' read about...
  • The new pension case South African workers and businesses should know about
  • How much is enough for retirement in South Africa?
In ‘Snippets of general interest', read about...
  • What are the implications of dying intestate?
  • Before nominating your executor, know what the job entails
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 30 June 2022

In June 2022, the average prudential balanced portfolio returned -3.7% (May 2022: 0.4%%). The top performer is Allan Gray Balanced Fund with -1.9%, while Momentum Namibia Growth Fund with -5.2% takes the bottom spot. For the 3-months Allan Gray Balanced Fund takes the top spot, outperforming the 'average' by roughly 4.0%. NAM Coronation Balanced Plus Fund underperformed the 'average' by 3.3% 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 30 June 2022 provides a full review of portfolio performances and other insightful analyses.  Download it here...
 
Global investment markets are not rosy!
 
The prospects for global equity markets, including our local markets, are not rosy. Coupled with the global political turmoil, local investors must expect foreign investors to withdraw from the local markets for safe havens. Their support of local equities and other assets should wane, which will impact our local currency negatively, as one has already seen. At the same time, the increasing global interest rates negatively impact fixed interest assets.

Although the general backdrop to investments is negative, investment markets always offer opportunities arising from the political turmoil and shortages resulting from the Ukraine crisis and the sanctions the West instituted against Russia. Interestingly, 'politically correct' investments are likely to fall out of favour creating opportunities with alternatives. Europe, for example, will reduce the focus on climate-neutral energy as it is forced to return to fossil fuels and nuclear power, and scorned military technology industries will regain popularity.
 
The Monthly Review of Portfolio Performance to 30 June 2022 also reflects the editor’s views on current developments and their impact on investment markets. Download it here...
 
The FIMA – did it go through an appropriate law-making process?
 
After the negative media coverage on ‘compulsory preservation’ set off by Job Amupanda’s FaceBook posting, a member of parliament complained that parliament was not consulted properly.
 
Having followed FIMA’s parliamentary process closely, it is clear that the FIMA went through the prescribed official process, but the process is clearly lacking. How else can a parliamentarian complain about inadequate consultation?
 
The law-making process requires that the sponsoring ministry presents a draft layman’ bill to the cabinet setting out the problem the bill will resolve for the cabinet to authorise the process to continue. In the case of the FIMA, its objects are to consolidate and harmonise the laws regulating financial institutions, financial intermediaries, and financial markets in Namibia; and to provide for incidental matters. That sounds great but should such vague indicators convince the cabinet to throw out everything in place without asking what went wrong under the existing dispensation? To my mind, the law-making process is defective to the extent that the cabinet would not know what the new law would fix. As I mentioned in a previous newsletter, the FIMA’s consolidation and harmonisation of all non-banking financial institutions might serve NAMFISA well, but it makes everyone else’s job considerably more complex and challenging.
 
The next step in the law-making process requires public consultation. In a previous newsletter, I expressed my opinion that no meaningful public consultation took place on the FIMA. The process, to my knowledge, did not include trade unions at all and ignored industry stakeholders’ most serious concerns. The process then envisages that the sponsoring Minister must receive the public’s submissions and comments. Even if the Minister did receive the public’s suggestions and comments, it is unlikely that he would have been able to deal with them meaningfully due to their overwhelming volume. Once again, it reveals another deficiency in the process, resulting from the extraordinary size and complexity of the FIMA.
 
After the conclusion of the public consultation, the layman’s bill goes through a lengthy process involving the cabinet committee on legislation, the law reform and development commission, and the directorate of legal drafting ending up as a bill ready for submission to the national assembly. I venture to say that the FIMA did not follow this process. The FIMA is the product of Canadian consultants working in collaboration with NAMFISA, who engaged them. I pose the question: is it appropriate to use foreign experts for drafting legislation because we do not have the expertise? We might pass and implement a law we do not understand or appreciate its consequences and are incapable of administering because of lacking expertise. As another law-making deficiency: has anyone taken the trouble to assess whether Namibia has the means of applying such a law, i.e., something like an environmental impact study?
 
The Minister must now confirm the draft bill or instruct its amendment, and once he is completely satisfied, the attorney general must certify the bill. Because of its complexity and size, I question whether the Minister had the requisite expertise in-house or had to rely on NAMFISA? It raises a deficiency in our democracy where a law is so complex and extensive that the sponsoring Minister must rely on his executing agency to make a new law.
 
The Minister now introduces the bill in the national assembly for its first reading in the form of a short introduction. A second reading follows when the national assembly will debate the bill’s principles. The Minister must explain why the bill is needed. The recordings of this debate indicate that there was little debate and no discussion on the bill’s principles. The minutes recorded only a handful of cosmetic changes. Of course, the FIMA covers many principles, being an omnibus law covering all non-banking financial institutions that separate laws previously covered. Both houses of parliament considered this 400-page bill in a single session. The absence of robust debate on the FIMA indicates that the parliament was overwhelmed by its volume and complexity. It suggests a deficiency in the law-making process when parliament has to consider such huge and complex laws without the tools to evaluate them.
 
To be fair to parliamentarians, where would you start to question anything if a 400-page document is presented to you for consideration in batches of clauses due to time constraints? For any bill in the class of the FIMA, the standard law-making process appears inappropriate. The law-making process should provide the tools to the parliamentarians to do justice to their purpose of representing the interests of their constituencies. Instead of focusing on the technical aspects of a bill, they should focus on the principles and procedural aspects. Parliamentarians do not have the technical expertise to evaluate such a bill meaningfully. They must rely on the law-making process for the technical soundness of any bill. I have not seen any document setting out the numerous principles of the FIMA and assume that parliamentarians also never so one other than the simple one-pager on the objects of the bill. I raise a few: the changes in the disposition of death benefits; the risks employers and trustees are facing; removing employer’s claim on benefits; excessive penalties and fines; extremely tight reporting timelines and many more. Parliamentarians are not informed about the consultation process, the constituencies covered, and the outcomes. Such information should offer meaningful pointers they can relate to and focus on for a better product and for doing justice to their mandate.
 
Small employers losing group risk cover
 
In a previous newsletter, I reported on NAMFISA’s recently developed position that the Pension Funds Act does not allow trustees to ‘abdicate’ their responsibilities and prohibits retirement funds from doing insurance business. This view contradicts established industry practice over the past 30 years plus, underwritten by NAMFISA all along. NAMFISA’s new view is based on how it interprets the law. Many industry experts disagree with this interpretation. Unfortunately, NAMFISA enforces its interpretation by refusing to approve any rules or rule amendments where the fund offers insured benefits.
 
Funds are now removing all insured benefits from their rules, which has undesirable consequences for the industry, fund members, and their beneficiaries. Many small employers cannot insure group risk benefits as insurers apply minimum thresholds for providing insurance cover, stripping their members and members’ beneficiaries of the cover they enjoyed. Losing group risk cover negates much of what the industry has achieved for small employers. Furthermore, when funds offered insured death benefits, the trustees disposed of the benefits in the best interests of the beneficiaries, and the benefits enjoyed the special protection of the Pension Funds Act. Lastly, I foresee many small employers will question their participation in a retirement fund if the fund only pays out of the member’s retirement savings, for what it will cost them.
 
Considering that NAMFISA is applying its untested interpretation, it is regrettable that this interpretation should disadvantage many employees and their dependents.
 
NAMFISA circular on permissible deductions
 
In this circular, NAMFISA restates the provisions of the Pension Funds Act relating to deductions from benefits as envisaged by Sections 37D(b)(ii)(aa; bb). So far, so good; no one will take exception to that. It proceeds by interpreting the PFA to mean that a fund may not deduct from a benefit for housing loan debt or a guarantee by the employer unless the fund rules explicitly allow this. Unfortunately, NAMFISA does not indicate on what legal precedent its interpretation relies. It is worth pointing out to funds or employers that we have seen a seasoned legal opinion that NAMFISA’s interpretation is incorrect.
 
Challenging NAMFISA’s interpretation will be costly and take long to conclude. For these reasons, it is unlikely that anyone will go this route, and NAMFISA knows this!
 
NAMFISA also does not say on what legal precedent it relies on scorning the practice of affording an employer reasonable time for obtaining a judgment against an employee for fraud, theft, dishonesty, or misconduct. In a recent case in South Africa reported below in “The new pension case South African workers and businesses should know about” the court found that the delay was caused by various factors and could not be solely attributed to the conduct (or lack thereof) by the employer. It means that an employer must have a fair chance to institute legal action against an employee, and not doing so would render Section 37D(b)(ii)(bb) futile.
 
FIMA bits and bites – do you really have a year to comply?
 
As soon as the Minister publishes the FIMA effective date in the government gazette, all funds must comply with its prescriptions, whatever their rules may state. Although the FIMA affords funds 12 months to submit FIMA-compliant rules, any rule that is inconsistent with the FIMA is unlawful, and the fund may not follow such a rule. It places funds in an awkward position and will likely lead to many misguided challenges by stakeholders against funds for not following their rules. To avoid a conflict between the fund’s rules and the FIMA, trustees must attempt to change those rules that conflict with the FIMA soonest!
 
You better stay at home and lock your doors when it is getting rowdy on the streets!
 
A few years ago, I suggested in this column that asset managers must consider the global political environment in their investment decision. I addressed my concern with some of these managers. They responded that it is more important to focus on investment fundamentals as one cannot predict political developments. Once the political upheavals fade, investment fundamentals will prevail once again.
 
I am not sure one can ignore the political environment but accept that the time horizon impacts one's approach. For investors, the time horizon is 40 years at most. If political upheaval does not settle within that time horizon, the investor may have a serious problem. In such a scenario, the investment principles become irrelevant to the investor.
 
Today's political system has been established over the past 75 years. Most alive today only know this system and may think it can never change. However, life changes continuously, sometimes slower, sometimes faster. Over the past 75 years, the political system has changed, but generally gradually and in a very controlled fashion, except if one dared to challenge the U.S. hegemony. The steady changes resulted from the U.S.'s economic and military dominance, which it employed to set the global political stage and establish itself as the global hegemon.
 
However, I believe that Russia and China are not content with the U.S.'s hegemony. Having been pushed into a corner by the U.S. and Nato, Russia decided to make a stand in Ukraine, for good or for bad. China knows that if Russia falls, it will have the U.S. and Nato at its backdoor with land access. I am convinced that China will not let this happen if it can help it. No doubt this is why President Putin predicts that the current world order will be unhinged and replaced with a multipolar system. The next few years will show whether his prediction is true or whether the West will emerge victoriously to firmly establish U.S. hegemony for the next hundred years. It does not look like the parties to this East-West conflict have any intention to give way and find a compromise which means that we may have world war three. The first possible outcome of the conflict is that we will have a world controlled by the U.S. and dancing to its tunes. This scenario speaks for focusing investments on the U.S. and its allies and withdrawing all exposure to Russia and China as they will suffer for a long time. Another possible outcome is that the conflict will break America's hegemony through a truce or event its total defeat. Under this scenario, a new international order will take long to establish, possibly longer than any investor's long-term horizon. We will experience a lot of uncertainty, but there should be a lot of investment opportunities in the East, while the West will lose its glamour.
 
The horror scenario of another world war will have significant implications for investors and investments across the globe. How should the investor respond? Well, you better stay at home and lock your doors when it is getting rowdy on the streets. That is a natural response and is equally applicable to your investment considerations. Laws we rely on to protect our wealth and interests will suddenly become irrelevant. If you followed how the West froze Russia's foreign currency reserves, there is now talk of confiscating them to assist Ukraine. Similarly, foreign property of Russian citizens is being confiscated across Europe and America in breach of all international conventions. The world has become unpredictable in every respect, and it can easily impact your foreign investments.
 
Africa has nothing to do with this East-West conflict and should try to stay out of it. Unfortunately, Africa is endowed with natural resources and may get into the sights of those who need such resources for this conflict.
 
Conclusion
 
The main theme for investors is the potential for a major global military conflict between the East and the West. It will be tough for any investor to get away unscathed. Few countries will be spared. Africa and South America are probably well-placed to get away without too much damage, provided they do not allow themselves to get coerced into the conflict. Investors can also consider neutral countries like Switzerland or investment havens like the Bermudas.
 
As inflation is running red-hot, a fixed interest investment is a sure way to lose money. In these times, one must stay out of the crossfire, meaning that one should not invest where there is a risk that the investment may get sucked into the conflict. "A bird in the hand is worth two in the bush"! Commodities should fare well during the conflict we are fearful of. Amongst those countries will be Namibia and, hopefully, South Africa too, meaning that "local is lekker"!
 
As I regularly point out, diversification is the key to successful investment. That does not mean that one should not channel your investments into asset classes and assets less exposed to risk, such as the risks I am referring to above. Under the prevailing environment, commodities, basic consumer goods representing life necessities such as clothing, food and beverages producers, health care providers, and the energy sector should hold out good prospects.

 
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 the chairperson of a large fund
Dated 1 November 2021
 “Wow! I am impressed R and compliment RFS on the progress. I think this [new reporting] makes so much more sense…”  

Read more comments from our clients here...

Benchmark: a note from Günter Pfeifer
 
 Benchmark announces appointment of new principal officer

The Board of Trustees resolved to appoint Mrs. Sophia Amoo-Chimunda as Principal Officer of the Benchmark Retirement Fund from 1 July 2022.
 
 
Mrs. Amoo-Chimunda will take over from Günter Pfeifer, who has been serving as Principal Officer in the interim while the Fund was recruiting an independent Principal Officer, as required by the Financial Institutions and Markets Act.
 
Mrs. Amoo-Chimunda is a legal practitioner with some 16 years’ experience in pension, labour, contract and financial services laws. She has been serving as an Independent Principal Officer of the Protektor Namibia Preservation Funds and is still serving as Independent Principal Officer of the Roads Authority Employee Retirement Fund as well as the Old Mutual Namibia Retirement Annuity Fund. She serves as an Independent Trustee on the board of the Napotel Pension Fund.
 
From 2007 to 2010, Mrs. Amoo-Chimunda was employed at NAMFISA, initially as legal advisor and eventually as Manager Pensions and Friendly Societies.
 
The Fund welcomes Mrs. Amoo-Chimunda. It looks forward to the wealth of experience and industry-related knowledge she brings along, which will equip the Fund to continue serving its members and stakeholders, as well as transitioning to the new legislative environment.
 
Benchmark Retirement Fund and RFS welcome new employers

We are pleased to advise that the following businesses joined the Benchmark Retirement Fund as a participating employer recently:
  • Acunam Technology Group
  • Conti-Trade
  • Strategic Actuarial Partners Namibia
  • Quantum Accounting & Tax Services 
We sincerely appreciate this gesture of confidence and trust in RFS, as fund administrator, and the Benchmark Retirement Fund and extend a hearty welcome to these businesses and their employees to the fold of the Benchmark Retirement Fund. Our business model is not to dominate the market through a low-cost proposition. We focus on transparency, exceptional reporting, and superior service. It should support and promote sound industrial relations, the employer’s employment philosophy, and its objective to attract and retain the best staff in a competitive labour market.
 
If these objectives are essential to your company and close to your heart, the Benchmark Retirement Fund is your ideal partner for providing retirement benefits to your staff.

 
Important circulars issued by the Fund

The Benchmark Retirement Fund issued the following circular. Clients are welcome to contact us if they require a copy of any circular.
  • 202204 – Proposed compulsory preservation  
  • 202205 – Change of principal officer 
Günter Pfeifer 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
 
Long service awards complement our business philosophy
 
RFS’ business is primarily about people and only secondarily about technology. Every time a fund changes its administrator, it loses substantial fund information and knowledge. Similarly, every time the administrator loses a staff member, our clients lose corporate memory. As a small Namibian organisation, we cannot compete with large multinationals technology-wise because of global IT systems' economies of scale and sophistication. We differentiate ourselves through excellent personal service and commitment to our clients, and IT systems that are more flexible, versatile and adaptable and more appropriate for the Namibian environment. We are proud of our staff retention as we know that it is the key to our success!
  • Riduwone Farmer celebrated his 5th work anniversary on 3 July 2022!
We are proud of what you have achieved for RFS and express our sincere gratitude for your loyalty and support over all these years. We look forward to your continued dedication and commitment to the company, its clients and your colleagues!
 
Staff improving their competencies
 
Learning should never stop and “education is the greatest equaliser” ~ Nelson Mandela.
 
RFS actively encourages and supports staff wishing to advance their qualifications in various ways, and we are very proud of everyone successfully walking this arduous road!
 
We heartily congratulate -
  •  Annemarie Nel for obtaining a bachelor’s degree in Leadership Management at the University of the Free State (UFS) through part-time studies.
  • Elizabeth Janser for obtaining a Higher Certificate in Management, specialising in Business Management through part-time studies at Southern Business School.
Important circulars issued by RFS
 
RFS issued the following circular in June. Clients are welcome to contact us if they require a copy of any circular.
  • RFS circular 2022.07-07 – Confirmation of registered service providers’
  • RFS circular 2022.07-08 – Cash management arrangement
 

News from NAMFISA

 
Commencement of the FIMA postponed
 
NAMFISA’s public notice of 11 July advises as follows:
 
“...The Minister of Finance needs to determine the date by which FIMA comes into operation. In this regard, the public is informed that FIMA will not come into operation on 1 October 2022 as it was previously envisaged. The date on which FIMA will come into operation will be communicated to the public at the appropriate time...
 
Public and industry input on the subordinate legislation to the FIMA have been received, and feedback on these comments will be communicated during the last quarter of 2022...”
 
NAMFISA circular on permissible deductions
 
NAMFISA issued circular P.F./Circ/01/2022 that deals with permissible deductions under section 37D(b)(ii)(aa and bb) of the Pension Funds Act. The circular superseded the previous circular PI/PF/03/2005 and NAMFISA revoked that circular.
 
In this circular, NAMFISA mentions fund practices relating to section 37D(b)(ii)(aa and bb) that it considers the trustees not exercising their discretion properly, and thus being in breach of their duty of good faith towards members and their fiduciary duties. NAMFISA cautions funds to pay out benefits “...within the shortest possible time frame.”
 
The practices NAMFISA scorns in the circular are –
  • A deduction for an outstanding housing loan to or housing loan guarantee by the employer unless the rules specifically allow it.
  • A deduction for fraud, theft, dishonesty, or misconduct that caused a loss to the employer, where the member signed an admission of liability not envisaged in section 37D(b)(ii)(bb).
  • Withholding a benefit payment to afford the employer time for instituting legal proceedings. 
Industry meeting moved
 
NAMFISA moved the pension funds industry meeting from 4 August to 27 July and will be held at NIPAM, Executive Hall. An agenda is still to be sent out.

 
Legal snippets
 
 The Flexible Land Tenure Act and Housing Loans - part 2
 
The Flexible Land Tenure Act (Act 4 of 2012) creates two alternative forms of land title that are simpler and cheaper to administer than conventional property title and provide security of title for persons living in informal settlements and who are provided with low-income housing.
 
In last month’s article, we looked at the two alternative forms of title provided for in the Act. In this newsletter, we will consider whether retirement fund members may offer their title under either of these two forms of land title as security for a pension-backed housing loan.
 
Section 19(5) of the Pension Funds Act reads as follows:
 
  • “(5)(a) A registered fund may, if its rules so permit, grant a loan to a member by way of investment of its funds to enable the member-
    • to redeem a loan granted to the member by a person other than the fund, against security of immovable property which belongs to the member or his or her spouse and on which a dwelling has been or 'will be erected which is occupied or, as the case may be, will be occupied by the member or a dependant of the member;
    • to purchase a dwelling, or to purchase land and erect a dwelling on it, for occupation by the member or a dependant of the member; or
    • to make additions or alterations to or to maintain or repair a dwelling which belongs to the member or his or her spouse and which is occupied or will be occupied by the member or a dependant of the member.
Both starter title rights and land hold rights seem to comply with the requirements of section 19(5) (a) of the Pension Funds Act in that the holders of such rights have the right to use the property for occupational purposes of the purchaser thereof.
 
The Pension Funds Act does not define “belongs.” This means the word should carry its ordinary meaning. The Oxford Reference Dictionary defines “belong” as “(with to) to be the property of; to be rightly assigned to as a duty, right, part, etc.”.
 
It seems that the holders of starter title rights will probably not be allowed to register a bond over their property. Section 9(1)(e) of the Flexible Land Tenure Act stipulates that the holder of a starter title right has the right to transfer their rights to any person (whether that person is the heir of the holder of those rights or whether the transfer is another transaction by law). The holder of such rights does not become the owner of the starter title; he only acquires certain rights.
 
In the case of land hold title rights, section 10(5) of the Act stipulates that certain transactions may only be performed by registration in the land hold title register. These include: the transfer of land hold title rights to another and creating or cancelling a mortgage or any other form of security for a debt executable on the plot concerned. Therefore we are of the opinion that only holders of land hold title rights and owners with full ownership will qualify for direct or indirect housing loans in terms of the Pension Funds Act
 
The Income Tax Act and your retirement fund contributions
 
With the impending introduction of the FIMA, many funds are considering moving into an umbrella fund. In that way, they will avoid the onerous obligations and mitigate the risks that the FIMA presents to funds and their trustees. One of the questions employers and employees will ask is how does the transfer to an umbrella fund affect my contributions?
 
Firstly, on member contributions, section 17(1) of the ITA provides as follows:
 
“17(1) For the purpose of determining the taxable income derived by any person from carrying on any trade within Namibia, there shall be allowed as deductions from the income of such person so derived -
(n)(i) subject to subsection (2) [which limits the aggregate contribution to a pension fund, provident fund, retirement annuity fund and certain insurance policies to N$ 40,000 in a year of assessment; which is due for an increase to N$ 150,000], any sum contributed during the year of assessment by way of current contributions to any pension fund or provident fund by any person holding any office of employment where the making of such a contribution is a condition of the holding of such office or employment;”
 
Conclusion

Provided the contributions meet the requirements reflected in section 17(1)(n)(i) there in no question that a move to an umbrella fund will place the employee is a different position as far as his contributions are concerned.
 
Secondly, on employer contributions, section 17(1) of the ITA provides as follows:
“17(1) For the purpose of determining the taxable income derived by any person from carrying on any trade within Namibia, there shall be allowed as deductions from the income of such person so derived –
(o)(i) any sum contributed by the taxpayer during the year of assessment for the benefit of the taxpayer’s employees to any pension fund, benefit fund or provident fund: Provided that –
(i)...
(ii) if the contributions (including lump sum payments) made by the taxpayer in respect of any employee during any year of assessment to such fund exceed an amount equal to ten percent of the approved remuneration of such employee for such year of assessment, and the Permanent Secretary is satisfied that the aggregate of such contributions and the total remuneration accrued during such year of assessment to such employee in respect of his employment by the taxpayer is excessive or unjustifiable in relation to the value of the services rendered by such employee to the taxpayer... only so much of such contributions as appears to the Permanent Secretary to be reasonable, but not less than an amount equal to ten percent of the approved remuneration of such employee for such year of assessment, shall be allowed to be deducted under this paragraph.
 
Conclusion

NamRA has discretion in determining in respect of any employee whether the employer contribution above ten percent of the approved remuneration of the employee is unjustified in its opinion. If so, NamRA can disallow any contribution above ten percent of the employee’s ‘approved remuneration.’ NamRA must approve the rules of every fund. These rules only reflect the employee and employer contribution per member category. They do not reflect the employee’s approved remuneration. Therefore, NamRA has to apply its discretion to disallow any portion of an employee’s employer contribution at the employee’s tax return level. It does not depend on the fund’s rules but NamRA’s factual evaluation of the employee’s situation.
 
The Income Tax Act (ITA) sections above do not distinguish between free-standing and umbrella funds. The ITA treats both in precisely the same way. Therefore, employees of a free-standing fund are in no different position regarding their and their employer’s contributions to the fund, whether they belong to the free-standing fund or an umbrella fund. The ITA is clear and leaves no room for interpretation.


Snippets for the pension fund industry

The new pension case South African workers and businesses should know about
 
 “...The employee based his claim that he be paid his pension monies on the fact that the delay in finalising the action that the employer was taking against him was unreasonable. However, the court found that the delay was caused by various factors and could not be solely attributed to the conduct (or lack thereof) by the employer. It also emphasised the duty of the employee to not contribute to any delay,” ENSAfrica said.
 
“The court considered the employee’s contention that he required the money to meet his existing financial obligations, but found that, if the employee was paid the pension monies, he would (on his own version) use the money for these obligations and thus leave Telkom with no recourse. Any judgment that Telkom secured against the employee would therefore be of no value.”
 
The High Court granted the interim interdict to Telkom. This confirmed the possibility of an employer successfully, and at least temporarily, precluding a pension fund from paying benefits in terms of a pension fund rule to an employee upon the termination of their employment, notwithstanding that the requirements of section 37D of the Pension Funds Act have not been met...”
 
Read the article by Staff Writer in Businesstech of 9 July 2022 here...
 
How much is enough for retirement in South Africa?

“The results of the latest independent tracking study commissioned by retirement income specialist Just S.A. revealed that a vast majority of South African pensioners are drawing (or planning to draw) an unsustainable rate of monthly retirement income.
 
This means they run the risk of using up their retirement savings too soon, which could lead them to become a burden in their final years...
 
How much is enough?
 
Looking at the stated retirement income requirements from the tracking study, Ladewig says there are three possible scenarios or zones for pensioners invested in living annuities. You are either:
  • Drawing an income at a sustainable rate (safe zone)
  • Drawing an income that may be sustainable only if investment markets continuously outperform or the annuitant happens to die early (risky zone) or
  • Drawing an income at an unsustainable rate (danger zone)...”
Read the article by Staff Writer in Businesstech of 3 July 2022 here...

 

Snippets of general interest

 
 What are the implications of dying intestate
 
“...the administration of an intestate estate can be slow and frustrating for the heirs. In this article, we summarise the consequences of dying intestate and subsequently the importance of having a valid will.
 
In the absence of a valid will, the aim of the Intestate Succession Act is to provide a streamlined set of rules for the distribution of the deceased’s assets – a process which is dependent on the nature of each heir’s relationship to the deceased at the time of death. Intestate heirs can include the spouse or life partner of the deceased, natural and adopted children, the parents and siblings of the deceased, and any other blood relatives. Once it has been determined that the deceased has no will, or that his will is invalid, the provisions of the Intestate Succession Act automatically apply – with the deceased’s spouse and children taking preference...
 
The strict guidelines laid down by the Intestate Succession Act ensure that the assets of the deceased are apportioned amongst his intestate heirs as follows:
 
Surviving spouse and children: If the deceased leaves behind a spouse and children (including adopted children), then both spouse and children will inherit according to a set formula known as a child’s share...
 
Only surviving children: If the deceased leaves behind children and no surviving spouse, the children will share equally in the estate.
 
No surviving spouse or children: Where the deceased has no surviving spouse or children, the parents of the deceased, if both still alive, will each inherit one half of the estate.


No surviving spouse, children or parents: In such circumstances, the deceased’s estate will be distributed equally amongst his siblings
 
No surviving spouse, children, parents or siblings: In the absence of all four categories of heirs, the closest blood relative to the deceased will inherit.
 
No descendants: Where the deceased dies intestate and has no descendants as defined by the Act, the estate’s assets will be held in the Guardian’s Fund for a period of 30 years..”
 
Read the article by Eric Jordaan, Crue Investments, in Moneyweb of 22 June, here...
 
Before nominating your executor, know what the job entails

 “...When contemplating your executor, keep in mind that the Act disqualifies certain people from being appointed as executor, including minor children, a mentally unsound person, anyone who is insolvent, companies, partnerships, and anyone who signed as a witness to your Will. The Act also sets out the remuneration that an executor is entitled to charge so, ideally, when having your Will drafted be sure to understand how your executor will be remunerated, keeping in mind that you can negotiate a fee lower than the legislated tariff. As it currently stands, an executor is entitled to charge up to 3.5% of the gross value of assets in the estate as well as 6% on any income accrued and collected after your death although, as mentioned above, you can negotiate a reduced fee when drafting your Will. In this regard, it is advisable to have a comprehensive estate plan drafted to ensure that you understand which assets fall in your deceased estate and therefore subject to executor’s fees, and which assets (such as retirement funds) will be excluded for these purposes...
 
Some of the first tasks facing your executor are to open a bank account in the name of your deceased estate, draw up an inventory of your assets and liabilities, advise your respective banks and institutions of your passing, and do a valuation of your various assets and liabilities. Once finalised, your executor will need to prepare a Liquidation and Distribution Account (L&D account) for submission to the Master which, while it may sound relatively easy, can be a fairly complex exercise depending on the nature and type of the asset, the ownership structure, whether the asset is co-owned with other parties, the nature of your matrimonial property regime, and the location of the asset...”
 
Read the article by Gareth Collier in Moneyweb of 29 June 2022 here...


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


"Live as if you were to die tomorrow. Learn as if you were to live forever." ~ Mahatma Gandhi



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

 
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