Click to download the following documents...

• July 2022: List of fund service providers duly registered by NAMFISA
• Privacy policy
• Draft rule dealing with the appointment of the board of trustees
• Code of ethics policy
• Generic communication policy
• Generic risk management policy
• Generic conflict-of-interest policy
• Generic trustee performance appraisal form
• Generic investment policy
• Generic trustee code of conduct
• Unclaimed benefits policy
• Principal Officer performance appraisal form
• Revised service provider self-assessment

Rock solid fund administration that lets you sleep in peace...

In an industry characterised by decisions made and objectives set across the border, RFS distinguishes itself by acting in the interests of Namibians. Since its establishment in 1999, the company has grown from strength to strength, attracting a client base of leading Namibian companies and organisations who recognise the benefit of expert pension fund administration by expert Namibians. The company has grown from strength to strength based on a rock solid set of values, and has earned the recognition of being a leader in its field.

What makes us different?

• ROCK SOLID FUND ADMINISTRATION

  In order for you to be confident of your fund's performance, stability and status, we keep our meticulous records updated at all times and provide you with documentation, promptly when needed. We do what is needed without delay and keep you informed. We always stay abreast of legislative developments.

• CAPABLE PEOPLE

  Our people are selected for their capabilities and we train them to take responsibility. We only recruit the best that Namibia has to offer. To date, our staff turnover is minimal. Our staff take pride in their company.

• THE RIGHT INFORMATION AT THE RIGHT TIME

  We make sure that the people who can give you the answers are available when you need them. We provide ongoing information and analysis as the information becomes relevant.

• NAMIBIAN SPECIALISTS

  Where others state their international affiliations, we take pride in being a truly Namibian company with a high level of expertise in the Namibian pension fund and investment environment.

• ENDURING RELATIONSHIPS

  The true mark of our effectiveness and expertise lies in the enduring relationships that we foster with our clients. To date we have not lost a dissatisfied client to a competitor. It's a claim and a reputation that we take care to preserve.

• G

  G. Good governance

  In order for you to be confident of your fund's performance, stability and status, we keep our meticulous records updated at all times and provide you with documentation, promptly when needed. We do what is needed without delay and keep you informed. We always stay abreast of legislative developments.

• R

  R. Rigid quality standards and controls

  Rigid adherence to quality standards and sound financial controls depend on an exceptional team who are both skilled, qualified and committed to professional excellence. Each member of our team is selected for years of appropriate experience, not just to fill vacancies. The financial skills that we bring to the table include seven Certified Financial Planners® and three full-time Chartered Accountants.

• E

  E. Excellence through local ownership

  Because we are owner-managed, we don’t answer to the bottom line requirements of foreign shareholders. We give full measure of value, and never cut corners to grow our profits. Our managerial dedication and commitment is driven by the fact that we take responsibility for the interests of Namibian entities and individuals.

• A

  A. Added value

  To ensure that every fund receives the best possible service, we provide the skills and support of an administrator, as well as a technically skilled, qualified and experienced individual to each fund that we manage. We support fund trustees with reporting on the financial regulatory and investment environment to ensure that decisions can be made with understanding, and with confidence that they are correct.

• T

  T. Track record and reputation

  We don’t grow for the sake of growth and profit. We take a measured approach by matching new fund administration requests to internal acquisition of the right expertise. By choosing the slow path of sustainable growth, over more than 15 years, we have become a leading pension fund administrator, with a fund base that includes many of Namibia’s leading companies. Our reputation bears testimony to the value clients find in dealing with us.

Seven ways we support private fund trustees
 

1. Needs-driven advice and support for trustee fiduciary responsibilities
   Administering a retirement fund, and managing its assets, requires certain actions and involves specific responsibilities. RFS gives advice on these responsibilities, and provides support with preparation of reports and returns required by law.
    
2. Legal advice on rules of funds and adaptation to the changing regulatory environment
   The Namibian legal environment is dynamic, and the regulatory environment requires a high degree of expertise and rapid adaptation to fulfill the needs of regulatory compliance. RFS provides advice and rapidly adapts to regulatory changes.
    
3. Regulatory compliance support
   RFS immediately adapts systems to changes in the regulatory environment, so that reporting is compliant with the current regulatory requirements. Ongoing, company-wide training ensures that knowledge of the correct practices is applied to every fund.
    
4. Concern for trustee legal liabilities
   By ensuring that all fiduciary responsibilities are fulfilled, and by following, adapting and adhering to the changing regulatory environment, RFS ensures that legal liability arising out of a trustee’s tenure is mitigated.
    
5. Pairing of technical, financial and administrative skills
   To ensure that all funds are in compliance, and providing the best possible attention to members and the benefits due to them in terms of fund rules and policy, RFS pairs a highly competent administrator with a financial expert as joint leads on each fund. At the same time the hands-on approach of top management ensures that its unrivalled expertise has a bearing on the well-being of every client.
    
6. Investment decision support
   RFS provides ongoing short and medium-term investment views of the regional and global investment environments to ensure that trustees are empowered to understand the impact of these on their investment decisions. Certified Financial Planners® oversee the day-to-day business of, and provide expert management skills to each fund.
    
7. Timely reporting and documentation
   In addition to prompt regulatory reporting and compliance, RFS reports extensively and with exceptional transparency to management and trustees on a monthly and quarterly basis, in a timely manner.

2015-05 Draft Standards

General

Appealing decisions by Namfisa

Government notice no 160 provides an appeal procedure and form for persons wishing to appeal any ruling or decision of the chief executive officer of Namfisa made under the Namfisa Act. A person intending to appeal a decision of the chief executive officer in terms of the Namfisa Act must commence the appeal within 14 days of receipt of the notice.

Diligent pension fund trustees should have been concerned whether they would be required to register with the Financial Intelligence Centre (FIC) in their capacity of trustee of a fund. In this regard consider section 1 (d) of Schedule 1 of FIA, which reads as follows:

“A person in his or her capacity as either a legal practitioner as defined in the Legal Practitioners Act, 1995 (Act No.15 of 1995) and who is in private practice, or an estate agent as defined in the Estate  Agents Act, 1976 (Act No. 112 of 1976), or an Accountant or Auditor, or in any other capacity, who accepts instructions from a client to prepare for or carry out a transaction for the client in respect of … (d) Creation, operation or management of legal persons or legal and commercial arrangements;”

Ostensibly this could mean that any person serving as trustee must register. However, rephrasing this quote to remove the ‘noise’ and to underscore our interpretation it reads like this:

“A person … who is in private practice… in any … capacity, who accepts instructions from a client to prepare for or carry out a transaction for the client in respect of … (d) … management of legal persons…”

The key phrases here are “…who is in private practice…, who accepts instructions from a client… to carry out a transaction…”

The appointment of a trustee to a board of trustees is not because the person is offering a service being in private practice, does not constitute an instruction by a client to serve on the board of trustees, the relevant fund does not constitute a client and serving on a pension fund board of trustees does not constitute a transaction.

We consequently conclude that pension fund trustees need not register unless their appointment to the relevant board of trustees was made in their capacity as legal practitioner, accountant, auditor, estate agent or any other person rendering trustee services in return for professional services to the fund.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. RFS Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of RFS.

Vision

• To be the partner of choice for Namibian retirement fund trustees to manage the day-to-day business of their fund.

Mission

• Recognising that people are at the core of our business
• Adding value to our relationships
• Devoting our personal commitment and dedication to the well being of our community
• Building and maintaining professional relationships with all stakeholders
• Being at the forefront of changes and developments in the employee benefits environment
• Actively contributing towards the development and advancement of capacity in the employee benefits industry
• Applying our professional expertise to finding appropriate solutions

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Our policy is to empower all members of our team to make a difference to the world around them, so our social engagement is driven by our people, not the company. This makes our social engagement more meaningful to our team, stakeholders and those around us.

Ongoing activities include:

• Support to Projekt Lilie, an ongoing initiative to improve the quality of German-language education in Namibia.
• Support the annual awards ceremonies of the Polytechnic of Namibia and Namcol, through sponsorship of awards to meritorious students
• Support to the Okanti Foundation
• Support to school sports tournaments
• Support to schools wrestling
• Support to Windhoek Männerchor
• Participation in sponsored walks in aid of various initiatives
• Visits to retirement homes to distribute gifts

Wenn Sie kurz vor der Pensionierung bei Ihrem Arbeitgeber stehen, stehen einige Entscheidungen an, die den Verlauf Ihres Ruhestandes entscheidend beeinflussen werden. Im schlimmsten Fall könnten Ihre Entscheidungen, sobald sie einmal dafür ihre Unterschrift geleistet haben, nicht mehr rückgängig gemacht werden - und Sie könnten diese Entscheidungen für den Rest Ihres Lebens bereuen. Bevor Sie also diesen Schritt wagen, sollten Sie sich umfassend informieren, um die Zusammenhänge und Regularien zu verstehen. Es ist in dieser entscheidenden Fase Ihres Lebens oft besser, etwas Geld für den Rat eines Experten auszugeben.

Einleitende Überlegungen und Grundlagen

Als Mitglied eines Pensionsfonds ist es für die Mitglieder wichtig, dass sie sich der Möglichkeiten bewusst sind, die ihnen im Rahmen dieses Fonds zustehen. Deshalb sollten Sie von Ihrem Arbeitgeber oder Ihrem Pensionsfonds direkt eine Kopie der relevanten Verträge anfordern, um genau zu wissen, welche Leistungen Ihnen zustehen. Allerdings sind diese Richtlinien und Verträge zumeist sehr technisch, theoretisch formuliert und dadurch nur schwer verständlich. Daher ist es sicherlich ratsam, einen Experten aufzusuchen, bevor Sie sich von solch komplizierten Verträgen überwältigen lassen.

Der Ruhestand bringt eine Menge einschneidender Konsequenzen mit sich. Die einschneidenste ist dabei sicherlich, dass das monatlichen Gehalt in Zukunft wegfällt. Natürlich verringern sich zugleich auch in den meisten Fällen die arbeitsbezogenen Ausgaben, dennoch sollte man den Gesichtspunkt des fehlenden Gehalts bei allen Überlegungennicht aus den Augen verlieren. Wenn Sie keine Vorstellung haben, wie Sie Ihr Leben ohne dieses Einkommen meistern sollen, empfiehlt es sich auch hier, einen Fachmann zu Rate zu ziehen. Zusätzlich müssen Sie des Weiteren auch auf Leistungen im Todes- oder Unglücksfall und im Fall der Arbeitsunfähigkeit verzichten. Oftmals bestimmt die Art, wie Sie in den Ruhestand treten, ob der Arbeitgeber auch weiterhin Ihre Krankenversicherung trägt. Fortlaufende Zuschüsse zur Krankenkasse hängen zumeist von Ihrer fortgesetzten Mitgliedschaft des Pensionsfonds des Arbeitgebers ab. Informieren Sie sich also in jedem Fall über die für Sie zutreffenden Bestimmungen. Natürlich spielen bei der Pensionierung auch psychologische Aspekte eine Rolle. Suchen Sie sich auch nach dem Ausscheiden aus dem Berufsleben Ziele und Beschäftigungen, die Sie herausfordern.

Vor Erreichen des Rentenalters hat ein Fondsmitglied normalerweise die Möglichkeit, Pensionskapital bei einer beliebigen namibischen Versicherungsgesellschaft oder einem anderen anerkannten Fonds anzulegen. Oftmals ist dies nach dem Erreichen des Rentenalters nicht mehr möglich. Deshalb sollte dies normalerweise mindestens einen Monat vor Erreichen des Rentenalters geregelt und verbindlich festgelegt werden, wie die Pensionszahlungen ab dem Eintritt ins Rentenalter gestaltet werden. Bitte überdenken Sie bei Zeiten ob dies in Ihre Finanzplanung passt und welche Auswirkungen es hätte, wenn Sie Ihren Pensionsfonds einen Monat vor Erreichen des Rentenalters verlassen würden. Bleiben alle anderen Leistungen des Arbeitgebers trotzdem bestehen? Zahlt der Arbeitgeber auch weiterhin in die Krankenkasse ein?

Wenn Sie dann in Ihren verdienten Ruhestand treten, kann Ihnen, im Falle es sich um einen Pensionsfonds handelt, ein Drittel Ihres Rentenkapitals bar und steuerfrei ausgezahlt werden, (beziehungsweise der Gesamtbetrag im Falle es sich um einen „Providentfund“ handelt, wovon zwei Drittel dann allerdings versteuert werden). Zwei Drittel des Kapitals muss erneut angelegt werden und die Pension (im Effekt die Amortisierung Ihres Kapitals) wird wie ein normales Gehalt versteuert. Es ist meist aus Steuergründen nicht ratsam, dass das gesamte Kapital für eine Rente angelegt wird, da Sie dann auch auf die Amortisierung der ansonsten steuerfreien Pauschale Steuerabgaben leisten müssten.

Sollten Sie zunächst nicht auf ein Einkommen aus dem Rentenkapital angewiesen sein, können Sie - sofern Ihr Fonds dies zulässt - das Geld in eine eigens für diesen Zweck geschaffenen „Preservationfund“ zwischenlagern, bis Sie es brauchen.

Wie sicher ist Ihr Pensionskapital?

Als besonnener Investor sollten Sie Sich natürlich damit beschäftigen, wie sicher Ihre Geldanlage in einem Pensionsfonds wirklich ist. Nach gründlicher Überlegung und Prüfung werden Sie wohl zu dem Ergebnis kommen, dass es schwierig werden könnte, eine noch sicherere Kapitalanlage zu finden - und das gilt für jeden Pensionsfonds, unabhängig von dessen Größe. Dafür sorgt das Pensionsfondsgesetz, welches besonders strenge Schutzmassnahmen für Rentenkapital beinhaltet. Eine spezielle Regierungsbehörde, der „Registrar of Pensionfunds“ (unter dem Dach der NAMFISA), hat dabei die Aufgabe, die Renten-„Industrie“ zu überwachen und zu regulieren sowie zu gewährleisten, dass die Interessen der Öffentlichkeit gewahrt werden.

Ein Pensionsfonds ist eine vom Arbeitsgeber und Förderern unabhängige gesetzlich eingetragene Vereinigung. Seine Finanzen und Verwaltung werden jährlich geprüft und detaillierte Jahresabschlüsse werden dann jeweils innerhalb von sechs Monaten nach Ende des Geschäftsjahres dem „Registrar“ vorgelegt. Zusätzliche Sicherheit bietet eine oft jährliche, oder alle drei Jahre stattfindende versicherungsstatische Prüfung durch einen qualifizierten Aktuar.

Ziel des Gesetzes ist es auch, das Kapital der Mitglieder vor deren eigener Unvorsichtigkeit zu schützen und zu verhindern, dass Gläubiger ihre Ansprüche auf Ihr Rentenkapital geltend machen können. Wie immer es auch um Ihre Finanzen, oder die Ihres Arbeitsgebers bestellt sein mag, geniesst Ihr Rentenkapital gesetzlichen Schutz. Mitglieder sind oftmals besorgt darüber, dass ihr Rentenkapital, besonders im Todesfall oder im Invalidenfalle nicht die versprochenen Leistungen abdeckt. Dergleichen Leistungen, die oftmals das angesparte Kapital bei weitem übertreffen, sind jedoch normaler weise durch eine Versicherungspolice abgedeckt und beeinträchtigen meist nicht das Rentenkapital des Fonds.

Allerdings ist es absolut normal, dass Ihre Kapitalanlage durch Schwankungen auf den Finanzmärkten ständigen Wertschwankungen unterworfen ist, die aber auch Mittels verschiedener Investitionsstrategien teilweise oder selbst vollkommen ausgeschaltet werden können, immer nach dem Motto geringes Risiko (Wertschwankungen), geringer Gewinn. Da das Pensionsfondsgesetz ein sehr konservatives Vorgehen mit Ihrem Kapital vorschreibt, wird das Risiko für ihre Kapitalanlage allerdings relativ gering gehalten. Dies zeigt sich auch darin, dass die meisten Kapitalverwalter (Investmentmanager) in dieser Sparte, in meist zwischen 50 und 70 der bekanntesten, auf der Börse notierten Gesellschaften investieren. Dabei darf maximal 15% des Fondskapitals in einer spezifischen Aktie angelegt werden. Die Gesamtsumme, die in Aktien investiert werden darf, ist zudem gesetzlich auf 75% des Vermögenswertes eines Pensionsfonds beschränkt.

Es wird dabei stets eine möglichst balancierte Verteilung des Kapitals über verschiedene andere Werte wie Immobilien, Schuldscheine, Schatzwechsel und auch Barguthaben angestrebt. Ähnlich wie im Falle der Einschränkung einer Investition in einer speziellen Aktie, ist auch die Investition des Geldes pro Immobilie oder Bank auf ein Maximum beschränkt. Die Einhaltung der diesbezüglichen gesetzlichen Vorschriften, wird vom Investmentmanager verantwortet, vom Revisor überprüft und vom „Registrar of Pensionfunds“ überwacht.

Wie wird Ihr Geld angelegt und versteuert?

Das Steuergesetz bietet eine einzigartig vorteilhafte Steuerregelung bezüglich Ihres Rentenkapitals. Ihre monatlichen Beiträge, sowie die Ihres Arbeitgebers, werden nämlich als Abzug vom steuerpflichtigen Einkommen gestattet. Innerhalb des Pensionsfonds geniesst dann Ihr dort angespartes Kapital Dank der vorteilhaften gesetzlichen Bestimmungen ebenfalls steuerfreien Zuwachs. Werden schlussendlich irgendwelche Leistungen fällig, bietet das Gesetz auch ins solchen Fällen wieder eine sehr vorteilhafte Besteuerung, deren Detaillierung den Rahmens dieses Artikels leider sprengen würden.

Pensionsfondsgelder die bei einer in Namibia eingetragenen Versicherungsgesellschaft oder einem in Namibia eingetragenen Pensionsfonds anglegt wurden tragen namibische Identität und können somit nicht ohne Weiteres zwischen verschiedenen Länder transferiert werden.

Nach der aktuellen Gesetzgebung dürfen maximal 65 Prozent des Gesamtkapitals eines Pensionsfonds im Ausland angelegt werden. Die meisten Investmentmanager nutzen auch dieses Zugeständnis. Da Pensionsfonds, im Gegensatz zu Südafrika zum Beispiel, in Namibia derzeit nicht besteuert werden, kann der Anleger – verglichen mit Südafrika – einen deutlich günstigeren Kapitalzuwachs erwarten. Im Nachbarland unterliegen Pensionsfonds nämlich einem Sondergesetz, demzufolge Pensionsfonds mit zwischen 1% und 2% des Kapitals jährlich besteuert werden. Auch die in Südafrika kürzlich eingeführte Kapitalzuwachssteuer wirkt sich nachteilig auf das Sparkapital aus. Diesen Nachteilen einer in Südafrika angelegten Rente, wird allerdings durch die allgemein höhere Inflation und die niedrigeren Zinssätze in Namibia entgegengewirkt.

Wie wird Ihre Rentenhöhe bestimmt?

Als Laie mögen Sie vielleicht der Meinung sein, dass Versicherungsfirmen mit einer komplizierten und streng geheimen Formel (die den Kunden stets benachteiligt) die Höhe Ihrer Rente bestimmen, aber wir können Sie beruhigen: dies ist nicht der Fall. Das Ganze ist sogar nur eine einfache Tilgungsrechnung mit logischem Prinzip. Sie leihen Ihr Geld einer Versicherungsgesellschaft und diese wird Ihnen das Kapital für den Rest Ihres Lebens mitsam Verzinsung wieder zurückzahlen. Natürlich weiß niemand, wie alt Sie werden oder welche Rendite Ihr Kapital in Zukunft erwirtschaften wird. Die Versicherungsgesellschaft muss sich deshalb an allgemeinen Lebenserwartungsstatistiken und langfristigen wirtschaftlichen Rahmenbedingungen orientieren, die in aller Warscheinlichkeit in Ihrem Falle letztendlich gar nicht zutreffen werden. Anhand dieser Annahmen ist es dann jedoch ganz einfach, Ihre monatliche Rente zu errechnen. Allerdings verwendet jede Versicherungsgesellschaft eigene Lebenserwartungs- und Wirtschaftsstatistiken, so dass Sie bei verschiedenen Versicherungsfirmen auch deutliche Unterschiede in der angebotenen Rente feststellen werden.

Die Gemeinschaftsrente

Die allgemeinere und gängigere Alternative, die Gemeinschaftsrente (Pooled Pension), versorgt wahlweise nur Sie selbst lebenslänglich mit einem vertraglich festgelegtem Einkommen, was auch immer geschehen mag, oder aber Sie und eine zweite vorweg angewiesene Person, die in Ihrem Todesfalle ebenfalls lebenslänglich eine Rente bezieht. Diese Rentenform wird nur von Versicherungsgesellschaften angeboten. Das Rentenkapital aller Anleger wird in ein Gemeinschaftskonto eingezahlt und verliert sogleich seine Identität als Kapital eines bestimmten Rentners.

Vertraglich kann ein jährliche Erhöhung der Rente um 5%, 10% oder 15% festgelegt werden, welche dann auch für den angewiesenen Zweitbezieher zutrifft. Wenn Sie einen Zweitbezieher anweisen möchten, der auch nach ihrem Tod weiter eine Rente lebenslänglich beziehen soll, muss die Höhe dieser 'Restrente’ als Prozentsatz Ihrer Rente vertraglich festgelegt werden (normalerweise 50%, 66%, 75% oder 100%). Die Gemeinschaftsrente bietet außerdem eine minimum Laufzeit (‚Zahlungsgarantie’) von wahlweise 5,10 oder 15 Jahren, ab dem Zeitpunkt der Pensionierung, demzufolge, im Todesfalle des oder der Rentenempfänger innerhalb dieser Zeitspanne, die Zahlungsverpflichtung der Versicherungsgesellschaft erst nach Ablauf der gewählten Zeitspanne erlischt. Ansonsten erlischt die Verpflichtung immer erst nach dem Tode des letzten Empfängers.

Das Prinzip dieser Rentenform ist die vertragliche Verpflichtung der Versicherungsgesellschaft zur Auszahlung der vereinbarten Rente, was immer passieren mag. Damit übernimmt die Versicherungsgesellschaft gewisse Risiken: Zum Einen könnte die Rendite Ihres Rentenkapitals geringer ausfallen als erwartet, zum Anderen könnten Sie und/oder Ihr Zweitbezieher länger leben als angenommen. Wenn Sie oder der Zweitbezieher allerdings früher sterben als erwartet oder die Rendite höher ausfällt als angenommen, fällt der daraus resultierende Gewinn der Versicherungsgesellschaft zu. Das heisst: Wenn Sie profitieren, verliert die Versicherungsgesellschaft, aber eben auch umgekehrt.

Diese Alternative ist geeignet für einen Rentner, der hauptsächlich oder völlig von diesem Einkommen abhängig ist, mit nur geringen oder gar keinen weiteren Einnahmequellen. Die Gemeinschaftsrente empfiehlt sich außerdem für Personen, die finanziell wenig risikofreudig sind, denn sie legt die Zahlungsverpflichtung für die gesamte Lebensdauer des Rentners und seines angewiesenen „Rentennachfolgers“ vertraglich fest und man ist somit nicht den Schwankungen der Finanzmärkte ausgesetzt und wird nicht von einem sehr langen Lebensabend beeinträchtigt. Angehende Rentner sollten sich allerdings vorsehen, unter aussergewöhnlichen Wirtschaftsbedingungen (z.B. historisch niedriges Zins – und Infationsniveau), wie sie derzeit vorliegen, solche Rente zu wählen. Unter vorherrschenden Bedingungen ist es ratsam, entweder den Eintritt in die Rente zu verschieben oder aber zunächst die Privatrente zu wählen die in Folge besprochen wird. Nach einer Normalisierung der wirtschaftlichen Rahmenbedingungen sollte es dann immer noch möglich sein, zur Gemeinschaftsrente zu wechseln. Vor einer diesbezüglichen Entscheidung sollte der angehende Renter ein klares Bild seiner Finanzlage haben und sollte sich vollkommen im Klaren sein, was seine Prioritäten für die Zukunft sind. Geht es ihm hauptsächlich um das eigene finanzielle Überleben nach dem Ende der Beruftätigkeit, dann empfiehlt sich die Gemeinschaftsrente als bessere Lösung. Ist er aber ausreichend versorgt und möchte gern den Restbestand seines Rentenkapitals im Todesfalle den Erben erhalten, dann könnte er zusätzlich eine Kapitalsicherungsoption wählen, die in Folge beleuchtet werden soll, oder aber er entscheidet sich für die Privatrente die auch in Folge besprochen wird und bei der der betreffende Rentenfonds des Rentners Kapital individuell anlegt.

Die Gemeinschaftsrente mit Kapitalsicherungsoption beinhaltet den Abschluss eine Lebensversicherung durch den Rentner, die im Todesfall das ursprüngliche Rentenkapital mittels einer Versicherungspolice zurückerstattet. Für die Versicherungsgesellschaft steigt dabei das Risiko nach Beginn der Rentenzahlungen zunächst langsam, dann aber immer schneller, da sich das Rentenkapital durch die monatlichen Auszahlungen progressiv „abnutzt“ (amortisiert wird). Je länger der Rentner lebt, umso weniger ist von dem ursprünglichen Kapital übrig und umso höher ist die Summe, die die Versicherungsgesellschaft aufbringen muss, und umgekehrt. In Zeiten hoher Inflation verringert sich der reale Wert der Auszahlung des Kapitals im Todesfall allerdings sehr schnell. Wie gesagt ist der Grundgedanke dieser Option, dass der Rentner etwas für die Erben hinterlassen möchte. Er muss also einen Teil seiner Rente „opfern“, um dieses Ziel zu erreichen. Nach seinem Tod kommt die Versicherung für den Fehlbetrag zwischen dem ursprünglich eingezahlten Rentenkapital und dem bis dahin amortisierten Betrag auf.

Ein grundlegender Nachteil der Gemeinschaftsrente ist die Tatsache, dass es sich um keine transparente Vereinbarung handelt. Der Rentner wird nicht darüber informiert, welche Rendite erwirtschaftet oder welche Leistungen von seinem Kapital auf dem Gemeinschaftskonto finanziert wurden.

Die Schlüsselfragen die Sie Sich stellen sollten, bevor Sie die Kapitalsicherungsoption vor der Privatrente wählen, ist erstens wie risikofreudig Sie sind und zweitens ob Sie sich aller zukünftigen Entscheidungen bezüglich der Anlage Ihres Rentenkapital entledigen möchten. Trifft Letzteres zu, dann wäre die Gemeinschaftsrente mit Kapitalsicherungsoption für Sie geeigneter, da eine Privatrente finanzielle Risikobereitschaft und fortwährendes Engagement erfordert.

Eine der hiesigen Versicherungsgesellschaften bietet eine, für derzeitig ungünstige Bedingungen (mit ungewöhnlich niedrigem Zins – und Inflationsniveau) vorteilhaftere Regelung, derzufolge der Rentner Anfangs bestimmt welch eine Rendite die Versicherungsgesellschaft der Berechnung seiner vertraglich festgelegten Rente zu Grunde legen soll. Diese Rendite kann derzeit wahlweise auf 3.5%, 4.5% oder 5% festgelegt werden, welche in allen Fällen etwas unter der heute zu erwartenden Zukunftsendite liegt. Je höher die von Ihnen gewählte Renditenannahme ist, desto höher wird Ihre Anfangsrente, aber desto niedriger dementsprechend Ihre zu erwartenden Erhöhungen in Zukunft ausfallen, und umgekehrt.

Ein Beispiel: Wenn Sie den Ertrag auf 5% festlegen, berechnet die Versicherungsgesellschaft Ihre persönliche Rente anhand dieser Vorgabe sowie der statistischen Lebenserwartung ihres Kundenstamms. Nehmen wir einmal an, diese Lebenserwartung liegt bei 10 Jahren, Sie investieren Rentenkapital in Höhe von N$ 1 Mio. und es fallen keine weiteren Unkosten an. Mittels eines Finanztaschenrechners kann Ihnen nun eine monatliche Pension von ca. N$ 10 600 und ein theoretisches Kapitalsaldo von N$ 920 000 nach Ablauf des ersten Jahres errechnet werden. Wenn der tatsächliche Ertrag im ersten Jahr allerdings 10% und nicht 5% beträgt, beläuft sich Ihr Kapitalsaldo in den Büchern der Versicherungsgesellschaft auf etwa N$ 971 400, welches in der dann verbleibenden Laufzeit von rund neun Jahren amortisiert werden kann (mit jedem Jahr dass Sie überleben, verringert sich Ihre restliche Lebenserwartung mit etwas weniger als 1 Jahr). Im zweiten Jahr werden Sie deshalb eine monatliche Rente von etwa N$ 11 200 erhalten – immerhin etwa 6% mehr als die ursprüngliche Rente. Wenn der Ertrag des zweiten Jahres dann nur bei 5% liegt, bleibt die Rente im dritten Jahr konstant. Ihre Sicherheit dabei ist, dass Ihre Rente nie reduziert werden kann, selbst wenn die Rendite unter der Erwartung der Versicherungsgesellschaft liegen sollte.

Wenn Sie von einer Versicherungsgesellschaft ein Angebot auf Grund einer Gemeinschaftsrente einholen wollen, sollten Sie beachten, dass dies nur für maximal sieben Tage gültig ist. Geht Ihr Rentenkapital nicht innerhalb dieser Frist bei der Versicherungsgesellschaft ein, verfällt das Angebot aufgrund der ständigen Wertschwankungen und es könnte passieren, dass Ihre Rente niedriger oder höher ausfällt, als zuvor angegeben. Aus diesem Grunde lohnt es sich nicht, solche Angebote vorzeitig einzuholen es ei denn, lediglich zum Zweck einer groben Andeutung der zu erwartenden Pension.

Die Privatrente

Die etwas ungewöhnlichere Regelung einer Rente ist die „Privatrente“, bei der das Kapital des Pensionärs in einem persönlichen Rentenkonto geführt wird und nicht in ein Gemeinschaftskonto mit einfliesst, in dem es seine „Identität“ verliert.

Diese Alternative wird nicht nur von Versicherungsfirmen aber auch von anderen Institutionen im Lande angebote. In diesem Fall hat die Firma, die Sie beauftragen, zwei Hauptaufgaben: zum Einen führt sie Ihr Privatrentenkonto und zahlt Ihre monatlichen Renten, zum Anderen wird Ihr Rentenkapital nach Ihren Wünschen und Aufträgen an einen, oder verschiedene, von Ihnen angewiesenen Investmentmanager zur Verwaltung weitergeleitet.

Das Risiko hinsichtlich der Rendite sowie der Lebensdauer des oder der Rentenempfäger, im Falle eines Zweitnutzers, wird von Ihnen und Ihrem Zweitnutzer getragen. Ungünstige Entwicklungen diesbezüglich beeinträchtigen die Bezüge des oder der Rentner, und umgekehrt. Sie bestimmen in diesem Falle die Höhe Ihrer Rente, die allerdings nicht niedriger als 5%, und nicht höher als 20% des Kapitalsaldos auf Ihrem Rentenkonto zu Jahresanfang sein darf. Dies können Sie jährlich entsprechend Ihrer Bedürfnisse revidieren.

In konkreten Zahlen hieße das: Wenn Ihr Kontostand im ersten Jahr bei N$ 600 000 liegt, beträgt Ihre jährliche Mindestrente für diese 12 Monate N$ 30 000 (5% von N$ 600 000) oder N$ 2 500 im Monat, während als maximale Jahresrente in Jahr Eins N$ 120 000 (20% von N$ 600 000) oder N$ 10 000 pro Monat möglich wären. Dieser Prozess würde sich jährlich wiederholen. Das Rentenkapital bleibt dabei Ihr Eigentum, egal, was passiert. Sollte die Rendite geringer ausfallen als die gewählte Pensionshöhe oder wenn Sie älter werden, als die Lebenserwartungsstatistiken angenommen haben, müssen sie damit rechnen, dass Ihre Rente rapide sinkt – was natürlich umgekehrt ebenso zutrifft.

Diese Rentenoption empfiehlt sich eher für Rentner, die selbst oder deren Zweitnutzer nicht existenziell von der Pension abhängig sind, weil sie beispielsweise noch andere Einkommensquellen im Ruhestand haben. RFS empfiehlt die Privatrente darüber hinaus auch nur Personen die bereit sind, ein gewisses Risiko einzugehen (betreffs der zukünftigen Rendite und der Lebensdauer). Unter dieser Alternative hat der Rentner normalerweise die Wahl bezüglich des oder der Investmentportfolios. Die zu erwartende Rendite hängt grundsätzlich von mehreren Faktoren ab. Zum einen vom Risiko, das Sie bei der Auswahl Ihres oder Ihrer Investmentportfolios eingehen, sowie von den Fähigkeiten der oder des von Ihnen angewiesenen Investmentmanager/s, aber auch von den wirtschaftlichen Rahmenbedingungen. Aufgrund dieser Faktoren sind Garantien für Zukünftige Erträge mehr oder weniger ausgeschlossen. Das Risiko im Kontext der Verwaltung Ihres Investmentportfolios wird generell im Ausmass der Wertschwankungen ausgewiesen.

So weist eine Anlage am Geldmarkt zum Beispiel keine Wertschwankungen, dafür aber niedrigste Erträge auf lange Sicht aus. Bei dem „Smoothed Bonus Portfolio“ (gelegentlich auch unpassenderweise als Portfolio mit Kapitalgarantie bezeichnet) kann auf lange Sicht mit etwas größeren Schwankungen, dafür aber auch potenziell höheren Erträgen gerechnet werden. Letztere werfen jährliche oder halbjährliche Ausschüttungen in Form von einer Bonusverteilung ab, die auf den erwirtschafteten Zinsen, Dividenden sowie auch dem Wertzuwachs der Kapitalwerte begründet sind. Diese Portfolios unterscheiden sich zumeist nicht gravierend von „normalen“ marktbezogenen Investmentfonds, allerdings behält die Versicherungsgesellschaft unter vorteilhaften Marktbedingungen einen Teil des erwirtschafteten Ertrags ein, um die negative Marktschwankungen bei Bedarf auffangen zu können. Da die Versicherungsgesellschaft hier ein gewisses Risiko trägt, veranschlagt sie für diese Art Portfolio auch höhere Verwaltungsgebühren die Teilweise nicht dem Anleger offenbart werden.

Ein an die Inflation gekoppeltes Portfolio bietet sich eher für weniger risikofreudige Rentner an, da dieses ebenso wie das „Smoothed Bonus“ Portfolio geringere Wertschwankungen aufweist, aber mitunter auch negative Wertentwicklungen nicht vollkommen ausschliesst, wenn es sie auch auf ein meist akzeptables Minimum beschränkt. Somit gibt es hierbei auch keine Kapitalgarantie. Auch diese Portfolios werden in typischen Rentenfonds-Vermögenswerten angelegt, wie Aktien, Schatzbriefe, Hypotheken, Immobilien oder Wechsel. Normalerweise soll bei solch einem Portfolio die Rendite die Inflation mittel- bis langfristig um einen Zielprozentsatz, zumeist zwischen zwei und sechs Prozent, übertreffen. Die Renditen dieses Portfolios sind somit direkter an die vorherrschende Inflation gekoppelt und sollten daher attraktiver für Rentner sein, deren Bedürfnisse meist ebenfalls eher an der vorherrschenden Inflation als am generellen Zustand der Wirtschaft oder des Investitionsmarktes ausgerichtet sind. Hinsichtlich Risiko, beziehungsweise Wertschwankungen, beinhaltet auch dieses Portfolio wiederum eine etwas höhere Instabilität und dafür aber auch wiederum eine potenziell höhere Rendite auf lange Sicht, wobei ein höheres Renditenziel höhere Wertschwankungen beinhaltet und umgekehrt.

Der Multimanager versucht, die beste Kombination verschiedener Anlagenverwalter (meist die nachfolgend besprochenen marktbezogenen Investmentfonds) in einem Portfolio zu verbinden um dadurch zum Einen die Wertschwankungen zu reduzieren, zum Anderen ein Ergebnis zu erzielen, das über dem des durchschnittlichen Anlagenverwalters liegt.

Die vergleichsweise höchsten Wertschwankungen, aber auch die potentiell höchste Rendite auf lange Sicht, bieten die typischen markbezogenen Investmentportfolios („Market Linked Prudential Portfolios“). Wie zuvor erwähnt, müssen Vermögenswerte dieser Portfolios laut Gesetz stets eher „konservativ“ angelegt werden. Das Risiko ist daher selbst in den riskantesten marktbezogenen Portfolios immer noch relativ gering.

Ein entscheidender Vorteil der Privatrente ist die Tatsache, dass sie völlig transparent ist. Der Rentner sollte dabei jederzeit auf dem aktuellen Stand seiner erzielten Rendite und der aus seinem Kapital beglichenen Kosten sein. Privatrenten könnten derzeit in Namibia bei nahezu allen Versicherungsgesellschaften, sowie bei privaten Rentenkassenverwaltern – wie unter anderem RFS – abgeschlossen werden.

Fazit

Als Faustregel gilt: Der Pensionär sollte dafür Sorge tragen, dass er in jedem Falle ein gesichertes Einkommen hat welches seine Lebenshaltungskosten deckt und sollte das dazu benötigte Kapital auf „Nummer Sicher“ investieren. Das heisst, dass Wertschwankungen für diesen Teil des Kapitals weitgehenst ausgeschlossen sein sollten und dass dieses Einkommen unabhängig von seiner Lebensdauer, oder der des Zweitnutzers, gesichert ist. Wie zuvor erwähnt, ist es immer wichtig, die vorherrschenden wirtschaftlichen Gegebenheiten im Auge zu behalten, da der Berechnung der gesicherten Gemeinschaftsrente die aktuelle Wirtschaftslage zu Grunde liegt und diese Vorgaben für den Rest Ihres Lebens, und das Ihres Zweitnutzers Bestand haben, was sich möglicherweise in Zukunft für Sie höchst nachteilhaft erweisen könnte. Sollte die Inflationsrate zum Beispiel in Zukunft nennenswert steigen, wird sich die Kaufkraft Ihrer Rente rapide verringern und warscheinlich schon bald nicht mehr Ihre Lebenshaltungskosten decken.

Den Teil Ihres Kapitals der diese Grundbedürfnisse überschreitet, sollten Sie allerdings eher in einer Privatrente unterbringen, da diese deutlich flexibler ist und unverbrauchtes Kapital nach Ihrem Tod, über eine minimum Zeitspanne von 5 Jahren, in steuerpflichtige Raten an Ihre Erben ausgezahlt werden kann.

Die Renditenannahme, die derzeit der Berechnung Ihrer Einstiegsrente im Gemeinschaftsrentenmodell durch Versicherungsgesellschaften, zu Grunde gelegt wird, beläuft sich momentan auf nur etwa 7% pro Jahr oder sogar weniger - ein geradezu historisches Tief, das auch historisch niedrige Einstiegsrenten für Pensionäre ergibt, die jetzt in den Ruhestand treten. Darin zeigt sich auch die Gefahr der Gemeinschaftsrente. Wenn die Inflationsrate, die derzeit bei ausgesprochen niedrigen 3% pro Jahr liegt, in Zukunft steigt, wird sich die Kaufkraft der Rente progressiv verringern und den Pensionär, der keine zusätzlichen Einkünfte bezieht, wahrscheinlich relativ schnell mittellos machen.

Aus diesem Grunde raten wir derzeit vom Abschluss einer Gemeinschaftsrente ab. Entweder sollten Sie den Zeitpunkt Ihrers Renteneintritts verschieben, oder aber Ihr Kapital zeitweilig in einer Privatrente anlegen, bis sich Inflation und Zinsen wieder auf ein dauerhaftes Niveau eingependelt haben. Dann können Sie immer noch entscheiden, Ihr Rentenkapital in eine Gemeinschaftsrente zu übertragen, da die meisten Privatrentenvereinbarungen diese Möglichkeit bieten. Dies sollten Sie allerdings vor Abschluss einer Privatrentenvereinbarung sicherstellen. In dieser Situation sollten Sie Ihr Kapital allerdings nicht allzu grossen Wertschwankungen blossstellen.

Kurz vor Eintritt in die Rente sollten Sie ein paar grundlegende Entscheidungen treffen, die die Zeit im Ruhestand nachhaltig beeinflussen werden. Einige dieser Entscheidungen werden unabänderlich, sobald Sie Ihre Unterschrift geleistet haben - es könnte also passieren, dass Sie diese Entscheidung für den Rest Ihres Lebens bereuen werden. Es ist deshalb wichtig, dass Sie Sich umfassend informieren und Sich über die Prinzipien und die Auswirkungen Ihrer Entscheidung vollkommen im Klaren sind. Hier lohnt es sich in jedem Fall, Geld für Expertenrat auszugeben.

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If you are due to retire from your employer’s retirement fund, you will be required to make some decisions that will determine the course of your life in retirement. Worse, some of your decisions may be irreversible once you have affixed your signature to paper and you may live to regret your decision for the rest of your life. So be certain that you are fully and properly informed and that you do understand the implications and the underlying principles of the choices you are required to make! Rather spend some money on expert advice!

Preliminary Considerations and Principles

As a member of a retirement fund it is important that you are fully appraised of the options available to you upon retirement in terms of the rules of your fund. It is therefore essential that you obtain a copy of the relevant sections of the rules that deal with retirement from your employer or your fund or that you at least obtain a summary of the benefits offered by your fund. Rules are mostly very technical documents that are difficult to understand and it would be wise to approach an expert to assist you if you feel overwhelmed by what you read.

Retirement entails a number of important consequences, most obvious being the fact that your regular monthly income will fall away. Most likely some work related regular expenditure will also fall away but it is important that you have a clear understanding of your position. Again rather call on expert assistance if you are not certain how to approach this! In addition, the death and disability benefits offered by your pension fund will fall away. Sometimes the manner in which you retire determines whether or not the employer will continue to subsidise medical aid contributions. Often ongoing employer subsidization of post retirement medical aid contributions is dependent on your continued membership of the employer’s pension fund. You need to ensure that you are aware of the arrangements in this regard. Of course the psychological effect of retirement should also not be ignored and you are well advised to ensure that you have a goal and a meaningful occupation after retirement that continue to present a challenge to you.

At the time of retirement, a fund member usually has the option to purchase a pension of his or her choice from any Namibian insurance company or other approved fund. Some funds would however require that this happens one month prior to reaching normal retirement age and stipulate that once a person has reached normal retirement age the only option left, is to arrange a pension with that fund. Please enquire in good time whether or not this applies to your fund and what the implications would be in case of leaving your fund one month prior to reaching normal retirement age in terms of continuation of any benefits and continued subsidization of medical aid contributions, as referred to in the previous paragraph.

When you reach retirement age a pension fund will allow you to have one-third of your retirement capital paid out to you in cash, tax free (provident funds allow you to take your full retirement capital in cash, but two-thirds of this amount will be subject to income tax). You will be required to purchase a pension with the remaining two-thirds of your retirement capital which will be taxed as if it were a salary. Normally it is not appropriate to use your full retirement capital to purchase a pension since you will convert the tax free lump sum (one-third) into a taxed pension.

If you do not have any need for an income from your retirement capital at the time of retirement, and provided the rules of your fund allow you to do this, the capital can be ‘warehoused’ in a preservation fund or a retirement annuity fund until the need for a regular income arises.

How Secure is Your Pension Capital?

As a prudent investor you should ask how secure your investment in a pension fund is. Well to put your mind at ease right at the outset, you will find it very difficult to invest in a more secure environment than a pension fund. And this applies to every pension fund independent of its size. Firstly, the Pension Funds Act and various regulations made in terms of the Act are all designed to protect the interests of the public in many different ways. A special government agency, the Registrar of Pension Funds, is tasked with the job to supervise and regulate the pensions industry and to ensure that the interests of the public are properly safe guarded.

A pension fund is a legal entity with its own identity, separate from the employer and sponsor. A pension fund has to be audited and has to submit audited annual financial statements and other detailed information to the Registrar of Pension Funds every year within 6 months of the end of its financial year. Additional peace of mind is often provided by means of annual or triennial actuarial investigations into the financial position of the fund by an actuary who is a highly specialized professional in the pensions field.

The Pension Funds Act also protects members’ retirement capital against members’ own financial imprudence and protects retirement capital from attempts by creditors to secure their debt with your retirement capital whether with or against your own wishes. So whatever your or your employer’s financial position may be, your retirement capital enjoys special statutory protection. Members are often concerned about their fund’s ability to pay for large benefits often offered by funds, particularly in the event of death. Well, any benefit offered by your fund that is not based on your own accumulated retirement capital has to be secured by means of an insurance policy taken out with a local insurance company and the payment of such benefits will not impact on the fund’s financial position or its ability to meet your retirement promise. Of course, if your own accumulated retirement capital is exposed to the wild fluctuations of financial markets you will find that your capital will increase and decline in accordance with movements in these markets.

Pension fund assets are by law required to be invested fairly conservatively as a result of which the risk to which your capital is exposed, is relatively moderate, even in the most risky market linked portfolios. This is evidenced by the fact that most investment managers in this category invest in anything between 25 and 70 different, generally only the more prominent and well known shares, with a maximum exposure to any single share of 15% of the fund’s capital. The total invested in equities by any fund is limited to 75% of its assets in terms of the Pension Funds Act, the balance being required to be invested in property, bonds, treasury bills, cash and other assets. Similarly to the limitation of an investment in one specific share, investment in a single property or bank is limited to a certain maximum. So your retirement capital is spread widely between different asset classes and between different investments. Compliance with these prescribed limits is typically managed by the fund’s investment manager, verified by the fund’s auditor and supervised by the Registrar of Pension Funds.

How is Your Pension Capital Invested And Taxed?

The Income Tax Act provides for a uniquely favourable tax regime for pension funds. You will be aware that your contributions to your pension fund are deducted from your income before determining the taxable portion of your income. Similarly, your employer’s contributions are offset against its income before determining the taxable portion thereof. Once invested in the pension fund all investment returns earned by your fund accumulate tax free, since pension funds are tax exempt entities. Lastly when benefits become due, the Income Tax Act provides for very favourable tax treatment of the benefits.

Pensions purchased from a registered long-term insurer or another approved fund in Namibia will remain a Namibia domiciled and Namibia Dollar denominated pension. Current legislation allows a maximum investment outside Namibia of 65% of the fund’s total capital, including a maximum of 20% of total capital that may be invested offshore. Most insurers do make use of this concession. Pension funds are currently not taxed in Namibia and should thus achieve superior returns compared to South African funds. This is not the case in the RSA where retirement funds are subject to Retirement Funds Tax. The effect of Retirement Funds Tax in the RSA is typically between 1% and 2% of capital invested. South Africa recently introduced capital gains tax which should also have a negative impact on investment returns. These disadvantages of a South Africa sourced pension must be tempered by the generally higher inflation and lower interest rates prevailing in Namibia though.

How is the Level of Your Pension Determined

As a layman you might believe that insurance companies use some fancy but secret formula to determine the level of pension that will be paid to you. This is actually not the case and it is in fact a pretty simple amortization calculation. The simple principle is that you lend your capital to the insurance company, which will repay the capital to you over the remainder of your life. Of course no one knows how long you will live nor what investment returns your capital will earn. The insurance company will therefore have to place reliance on statistics as regards life expectancy and will have to make assumptions as regards future investment returns. With these inputs and a financial calculator it is then fairly simple to calculate the rate at which your loan to the insurance company will be amortised (or repaid). Since every insurer maintains its own life expectancy statistics and makes its own assumptions concerning future investment returns you will find that every insurer will quote a different pension.

The Pooled Pension (part 1)

Firstly the more common arrangement, often referred to as ‘pooled pension’, provides either for a guaranteed income for your life whatever happens, or alternatively for a guaranteed income for your life and the life of another nominated person who would continue to receive an income for his or her life, whatever happens, once the pensioner has passed away. The ‘pooled pension’ is only offered by insurance companies. The pensioner’s retirement capital is paid into a pensioners’ pool and loses its identity. The income can usually provide for an annual increase of 5%, 10% or 15% as desired and this increase will also be applicable to the dependant or spouse that is nominated to continue receiving a pension after the death of the pensioner. Where provision is made for another nominated person to receive a pension for life following the death of the pensioner, the spouse’s or dependant’s pension needs to be determined as a fixed percentage (normally 50%, 66%, 75% or 100%) of the pensioner’s pension upon death of the pensioner, before retirement. The pooled pension furthermore offers a choice of a so-called ‘guarantee period’ of 5, 10 and up to 15 years, following date of retirement. This means that in the event of death of everyone that was provided for to receive a pension for life prior to the expiry of the ‘guarantee period’, the pension will continue to be paid up to expiry of the ‘guarantee period’. Once the last pension has been paid in terms of the original arrangement, the insurer’s obligations are extinguished and no further capital will be paid out by the relevant insurance company.

The principle of this arrangement is that the insurance company commits itself contractually to the pension agreed between it and the pensioner at date of retirement, whatever may happen. The risk the insurer is taking upon itself (with regard to the ‘whatever may happen’) is, firstly, that the income earned on the pensioner’s capital is lower than expected and, secondly, that the pensioner and/or his spouse/dependant live longer than expected. Conversely, if the pensioner and/or his wife/dependant died sooner than expected and the investment income was higher than expected, the benefit would accrue to the insurance company at the expense of the pensioner. Obviously, the pensioner loses where the insurance company gains and vice versa. This alternative is the more appropriate alternative for a pensioner who is wholly or mainly dependent on his/her pension income, and whose spouse/dependant is likely to be so, with few or no other sources of post retirement income. It is also recommended for persons with a low risk threshold. This arrangement fixes the contractual conditions of the retiree, for as long as the pensioner and his or her nominated ‘pension successor’ live. We expressly caution the prospective retiree not to enter into this arrangement under abnormally unfavourable market conditions (historically low interest rates), as is currently the case. When such conditions prevail it is advisable to postpone retirement or to initially enter into a ‘living annuity’ arrangement until conditions have normalized, where after one may consider moving into the ‘pooled pension’ arrangement.

The key question whether to opt for the ‘pooled pension’ or for the ‘living annuity pension’, as will be referred to in our next article is whether the pensioner is more concerned about his or her own financial survival, a situation that would favour the ‘pooled pension’ or about the preservation of surplus capital for the heirs, a situation that would require adding a ‘capital preservation’ option as referred to in the next paragraph, or choosing the ‘living annuity’ pension as will be referred to in our next article.

The ‘Pooled Pension’ (part 2)

The ‘pooled pension’ also offers a ‘capital preservation’ option, in terms of which the pensioner takes out a life insurance policy that secures repayment of the original pension capital, in the event of death of the pensioner at any time after retirement, at the cost of an insurance premium. Clearly, the risk to the insurance company only increases gradually from date of retirement in accordance with the erosion of the pensioner’s capital as a result of the payment of pensions. Therefore the longer the pensioner survives the less of the original capital will be left and the larger the amount to be borne by the insurance company, and vise versa. In times of high inflation, the real value of a pay-out of the original capital in the event of the death of the pensioner will obviously decline rapidly. The rationale for this option is usually to leave something behind for the pensioner’s heirs and can only be realized through the pensioner sacrificing a portion of his or her pension for the benefit of the heirs, as insurance cover is provided for the gap between the original pension capital received by the insurer and the amortised capital left at date of death of the pensioner.

A distinct disadvantage of the ‘pooled’ pension is the fact that it is not a transparent arrangement and the pensioner will not be appraised of the actual investment returns earned by, or costs recovered from his or her investment in the pool.

The key question whether to opt for the ‘capital preservation’ option in preference to the ‘living annuity pension’ is essentially how risk averse the pensioner is and whether he or she wants to be rid of all future management decisions concerning the retirement capital, where the ‘living annuity pension’ requires a higher level of risk acceptance, and requires ongoing involvement in managing the retirement capital.

Some pooled pension arrangements offer a variation concerning future pension increases. This arrangement may also be considered at times of unusually low interest and inflation rates, as we currently experience. Instead of a contractually fixed annual rate of increase as referred to above, the arrangement offers participation in investment returns in excess of the assumed future investment return that was applied to calculate your initial pension. You will also be able to select amongst a predetermined range of future investment returns that the insurer is to apply when calculating your initial pension. By way of example: If you set 5% as the future investment return to be used, the insurer will apply its statistical assumptions concerning the survival period of every person due to receive a pension in respect of your retirement. Let’s assume this survival period is 10 years, you have retirement capital of N$ 1 million and there are no costs to be taken into account (admittedly a very unrealistic assumption!). With a financial calculator you will be able to confirm a pension of around N$ 10 600 per month and a theoretical capital of N$ 920 000 at the end of the first year. If the actual return for the first year was in fact 10% and not 5%, the capital to be amortised over the remaining survival period of 9 years will now be around N$ 971 400. Your calculator will now give you a pension of around N$ 11 200 as from the start of year 2, some 5.5% higher than your initial pension. If the actual return for the second year is then only 5%, your pension for year 3 will remain unchanged, and so on.

If you want to be given quotes from insurance companies on the basis of a pooled pension, you need to be aware that these quotes are only valid for a maximum of seven days. Should your retirement capital not be received by the insurance company within these seven days, the quote will no longer be valid and your may find that your pension is either less or more than the amount quoted. For this reason there is no purpose in obtaining quotes at an early stage other than to give you a rough indication of the pension you can expect to receive. We therefore suggest that official quotes be obtained, based on your particular needs, around actual retirement or a week thereafter.

The ‘Living Annuity’

The less common alternative for arranging a pension in retirement is where a pensioner's capital is invested in the pensioner's personal pensions account, often referred to as 'living annuity'. The capital is thus not paid into a pool where it loses its identity as your retirement capital. In this case, the companies you appoint purely administer the pension payments on the one part and the investment of the retirement capital on the other part, on your behalf. These companies do not carry any risk regarding investment income or your and/or your spouse's/dependant's survival. This risk is borne by you. Negative experience in this regard is consequently at your expense while positive experience is to your benefit. You usually have a choice of the level of income to be drawn, between a minimum of 5% and a maximum of 20% of your capital in the pensions account, which can be changed from time to time. In other words, if your retirement capital is N$ 600 000, your minimum pension you may draw in year one will be N$ 30 000 (5% of N$ 600 000), or N$ 2 500 per month, while the maximum pension you may draw in year one will be N$ 120 000 (20% of N$ 600 000) or N$ 10 000 per month. The pension capital remains your property, whatever happens. Should investment returns be lower than the rate of pension drawn by the pensioner or should the pensioner survive beyond his/her statistical life expectancy, the pensioner's pension may decline rapidly over time, while the converse also holds true. This alternative is the more appropriate alternative for a pensioner who himself, and his spouse/dependant, is not dependent and is unlikely to be dependent, on his/her pension income because of access to other sources of post retirement income. It is also recommended only for persons with a medium to high risk threshold.

Pensioners under this system usually have a choice with regard to the investment portfolio or portfolios within which the capital is to be invested. Future investment returns will essentially be a function of the level or risk you take in terms of the investment portfolios you choose, the skills of the appointed manager/s from time to time and prevailing economic conditions. These products usually offer no guarantees for future investment returns. Risk in the context of the management of pension fund investment portfolios, is usually viewed as the level of volatility of the investment. In this regard a money market portfolio presents no volatility and lowest prospective returns in the long-term. The smoothed bonus portfolio (sometimes also inappropriately referred to as ‘guaranteed portfolio’) offers slightly higher volatility but also potentially higher returns in the long-term. These portfolios declare bonuses annually or biannually in arrears based on the returns generated by the underlying assets. The underlying assets are usually not much different from standard market linked pension fund portfolios but the insurer maintains a reserve from past investment returns to buffer the volatility in financial markets.

An inflation linked portfolio is quite suitable for risk averse pensioners as it also achieves a lower volatility similar to the smoothed bonus portfolio but offers no capital guarantee. Again these portfolios are invested in typical retirement fund assets such as cash, bills, bonds, property and equities. They usually have an investment objective of outpacing inflation by a target percentage, typically between 2% and 6%. Out performance of inflation is usually achieved by adding an increasing proportion of equities to the portfolio in accordance with the targeted higher rate of out performance. Its returns in the long-term, are more directly linked to inflation and should thus be more attractive for the pensioner whose income needs are also usually linked to prevailing inflation, rather than the status of the general economy and investment markets.

In terms of risk/volatility, this portfolio is followed by the multi-manager with yet again higher volatility and potentially higher returns. The multi manager attempts to find the best combination of different managers in one portfolio at all times thereby reducing volatility and leveraging performance above that of the average manager into consistent upper quartile performance, which individual managers will find difficult to achieve consistently.

Comparatively highest volatility and potential returns in the long-term are offered by market linked prudential portfolios. As pointed out in our first article, pension fund assets are by law required to be invested fairly conservatively and the risk referred to, is therefore still relatively moderate, even in the most risky market linked portfolios.

A distinct advantage of the ‘living annuity’ pension, is the fact that it is a totally transparent arrangement and the pensioner should at all times be fully aware of the actual investment returns earned by and costs recovered from his or her investment in the fund.

Living annuities can currently be purchased from most pension fund administrators in Namibia.

Conclusion

As a rule of thumb, the pensioner should not risk that portion of your retirement capital on which you depend for your survival and should not invest that portion in the ‘Living Annuity’ but rather in a ‘Pooled Pension’ arrangement. However, it is important to be aware of the prevailing economic conditions at time of retirement since the ‘Pooled Pension’ arrangement will lock you in under prevailing conditions for the rest of your and your survivor’s life. Surplus capital however is probably better invested in the ‘Living Annuity’ arrangement as it is more flexible and any unspent balance is left behind for the benefit of your heirs to be paid out in taxable installments over not less than 5 years, upon your death.

Current long-term interest rates typically applied by insurance companies to determine your initial pension in the ‘Pooled Pension’ arrangement, are around 7% per annum and even lower. This is exceptionally low in historic context and results in exceptionally low pensions for people who are now retiring. It also illustrates the risk inherent in the ‘pooled pension’ arrangement. Should the inflation rate that is currently on a historical low of 6% per annum, increase in future the real value of the pensioner’s pension would decrease very rapidly and is likely to leave the pensioner, whose main source of income is the pension arranged at retirement, destitute within a very short time. Under current conditions we would generally not recommend entering into the ‘pooled pension’ arrangement that locks you in at current interest rate levels and you should either postpone retirement or transfer the capital into a ‘living annuity’ arrangement, at least until the market conditions have normalized, to then consider transferring the remaining capital to the ‘pooled pension’ arrangement at that stage only. Fortunately the ‘living annuity’ arrangement normally offers this flexibility but be sure that your preferred alternative does indeed offer this flexibility.

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The company's first employee, now a director, Charlotte Drayer receives a token of appreciation.	Director Marthinuz Fabianus looks pleased as punch as he addresses the gathering.
Founders Tilman Friedrich and Mark Gustafsson congratulate one another on 10 years of sterling successes.	The Principal of Mweshipandeka High School, Mr Erick Kemanya receives an N$13,000 donation from RFS.

On 1 October 1999, Tilman Friedrich and Mark Gustafsson, opened an office in Windhoek. Their new company, Retirement Fund Solutions, had no clients, however they were certain that their venture would succeed as the only true Namibian business in this sector. On the same day, they were joined by their first staff member, Charlotte Drayer. It is a matter of legend that she joined them based on her confidence in their and her own ability, and received her first salary cheque some seven months later, after the company won its first few clients.

Ten years on, the company has become an unrivalled Namibian financial sector success story. It now administers Namibian pension funds holding investments in excess of N$ 6 billion and has gained a market share of 40 per cent of pension funds administered by private sector entities. More remarkably, the company, which is the only wholly Namibian private sector pension fund administrator, now administers the pension funds of many leading Namibian companies and organisations, including all major commercial banks, and it has not yet lost a private fund client to a competitor but rather gained all its clients from competitors and had its mandate extended repetitively in a number of instances.

The company has grown from a staff complement of two to forty six currently. Charlotte Drayer's confidence and her substantial contribution to the success of the company has been given recognition by way of a seat on the board of the company, and shareholding. She has been joined on the board of the company by Marthinuz Fabianus, who has a wealth of expertise in the field of pension fund administration, and Günther Pfeifer and Louis Theron who have a strong track records in the field of finance.

A track-record of trust

Asked about the secret of the company's success, Tilman Friedrich says, “There is no secret, actually. Everything we do is visible to the trustees and members of our funds, as well as our stakeholders in the field of pension funds, and we as owners are present all day and every day to attend to and resolve issues when they arise. We compete against interests that are partially driven by South African strategies and philosophies that very often are not appropriate for Namibian circumstances, so as a Namibian company, we are able to reassure our member funds that our focus is not in any way determined by anything other than their interests and the local environment.”

Partner Mark Gustafsson adds, “Because of the perception that South Africa is better, cleverer and more sophisticated, we intentionally set the bar higher for ourselves and we know we do not have to stand back to any wisdom coming from down south. The core aspects of our philosophy are that we provide excellent administration, prompt answers when they are needed and we share our home grown knowledge with trustees and fund members. When clients do encounter difficulties, they know that they can fall back on us.”

“The company has an excellent reputation as an employer as well,” Friedrich adds. “Many of the best people with whom we worked before opening Retirement Fund Solutions have returned to a warm 'welcome back', and as a result we have the best people who are able to meet and exceed client expectations without compromising on excellence. We owe our growth to their conscientious approach and the corporate culture which they have established. The fact that we lost only 3 staff over the past 10 years speaks for itself and is an important management measure for us.”

10 years of growth

Asked about the growth of the company, Gustafsson and Friedrich both pointed to the success of measured growth. According to the two, the company has had to delay new business in the past in order to maintain the company's standards.

“By not seeking new business at times, we have sacrificed potential profits, but we have focused on maintaining our standards, and the fact that we have not lost a client in ten years speaks for itself,” says Gustafsson. “Sometimes growth can come at a price.”

“We are expecting to grow further in future. When we started, we had one tiny office. We rapidly expanded and had to move to another office which had far more room than we needed, but we filled that space to overflowing rapidly. We had to halt our growth at that point and prepare for additional capacity with training and implementation of systems that were better able to respond to the increased number of funds. Now, as you can see, we once again had to find new premises with more room to grow. We expect to fill the demand which we know exists, but we are doing so in a measured way, with staff that we and the funds that rely on us can trust,” says Friedrich.

“Companies with South African parents, are often driven to grow by targets handed down from across the border, and they struggle to keep up with these demands. We on the other hand have the luxury of matching growth and capacity, in order to maintain our internal standards,” Gustafsson adds.

Benchmarking excellence

Asked about the Benchmark Retirement Fund, Friedrich said, “We established the fund for smaller employers, but also particularly in response to requests from financial managers and wealthy individuals, as a local home for their pension fund investments. The fund is a very flexible fund, but distinguishes itself in the same manner as Retirement Fund Solutions: with excellent administration, prompt responses and sharing of knowledge. It provides a range of investments, but these are cherry picked for performance and match to investment strategies.”

“The fund has grown by leaps and bounds, and recently broke the N$ 400 million mark. We have recently begun developing capacity in that direction as well, and last year made the decision to appoint Günther Pfeiffer, formerly Financial Manager of De Beers Marine, to steer the fund into the future” he says.

The years ahead

Asked about the future, Mark Gustafsson notes, “The Namibian regulatory environment is becoming more complex, sophisticated and demanding on service providers. Some of the challenges facing the pension fund industry are the proposed National Pension Fund, the Financial Intelligence Act and the prudential investment regulation requiring that a certain proportion of pension fund assets are to be held in unlisted equities in Namibia. Our core business is administration of funds, not the actual management of investments, so we are focusing on administration of that class of investment, and we are closely liaising with trustees and local asset management companies to map out a future path for investment in such assets.”

“We know that Namibia is in a growth phase, and we are providing for that by developing Retirement Fund Solutions and its capacity,” Tilman Friedrich adds.

“However, although there may be changes in economy and the regulatory environment, we will retain out focus on our strengths and the quality of our human resources. We administer a group of funds who have been with us for years. We fully expect that to be the case ten years from now,” he concludes.

Pension funds typically employ a whole array of different services from 3rd party providers. Certain service providers offer composite services while others are focusing on a limited range of closely related services.

Good corporate governance requires the regular review of service providers, does it not? In essence good corporate governance aims to manage risks and compliance. Rotating service providers for the sake of rotation certainly cannot be at the core of good corporate governance.

Assuming one is satisfied with the services provided by a service provider one would have to determine whether rotation reduces risk and/or strengthens compliance management, before this question can be answered conclusively.

What are the typical risks a fund faces vis-à-vis its service providers? Here are some that spring to mind immediately:

• The service provider overcharges, i.e. its costs are excessive relative to the value of the service provided. Costs can be benchmarked to the market, but to value the service provided is typically left to judgement.
• The service provider does not meet required standards of diligence such as inferior controls that lead to errors and omissions, loss or corruption of data and compliance failures; unqualified or inexperienced staff; high staff turnover and loss of corporate memory; insufficient indemnity and fidelity cover; inadequate succession planning; late, poor or defective reporting and potential of business failure due to defective or unsustainable business philosophy and policies.
• The service provider is not adequately supervised by another independent expert, particularly relevant to composite service providers.

Considering these key risks a service provider presents to a fund, it is quite evident that the risks referred to will not be addressed through rotation of service providers.

There are industries and situations where the rotation of service providers makes sense as it mitigates important risks. Rotation is typically employed in the security and asset protection industry or where highest standards of independence between client and service provider are required, such as in the audit profession.

In other industries rotation could in fact present additional risks. Personal services dependent on an acquired knowledge of the client or administration services relying on historic data going back over many years, such as typically relevant to the pensions industry are a points in case where rotation may present bigger risks than it might mitigate.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.

Trustees need to manage their fund’s risks

Namibian funds generally are too small to manage their own affairs and outsource all operational matters to service providers. The trustees however remain ultimately responsible for the proper management of its business and carry a fiduciary duty towards the fund’s members to exercise their responsibility with due care and skill. What do trustees do to monitor and manage their fund’s risk with regard to its various service providers?

As service provider to many prominent funds in Namibia, we have been grappling with the problem of assisting trustees in managing governance of their funds vis-à-vis their service providers.

Will Namibian subsidiaries be backed by their holding company?

Most Namibian service providers are subsidiaries of large South African or international companies. In all cases, however, the Namibian company is a separate legal entity and very often not a wholly-owned subsidiary of its parent company. How much comfort does this give the trustees. Will the foreign holding company always assume full responsibility for its Namibian off-shoot, whatever happens? We do not know and can surely not rely on such an assumption.

Namibian entities are too small for international rating

Some very large financial institutions may be rated by a recognized rating agency. Unfortunately no Namibian financial institution falls in that category to our knowledge and this avenue is therefore not available to trustees of Namibian funds.

What can you read from the financial statements of the holding company?

A next avenue would be to study the financial statements of the service provider in order to ascertain that the entity is in a sound financial position. This would be particularly instructive for institutions managing client assets in their own name such as insurance companies, banks and unit trust management companies. For Namibian subsidiaries of foreign companies, we have experienced it a challenge to obtain such financials. Group statements are usually made available but these hardly make any reference to the Namibian businesses and certainly not to any extent that would offer any comfort to trustees of Namibia funds.

Review financial statements of pooled investment vehicles

We do request copies of audited annual financial statements for all pooled investment vehicles our clients are employing and review these with the view to identify any possible cause for concern, which we would then bring to the attention of our clients. We will report back to our clients on our findings in due course.

Request proof of PI and FI cover

In addition, we request proof of professional indemnity and fidelity insurance cover from all service providers employed by our clients. We have recently informed our clients of the outcome of this exercise. Unfortunately, we have found that it is impossible to obtain any comfort on the level of cover held by the service providers as these are mostly not prepared to divulge the basis for setting their cover levels and there appears to be no generally accepted standard.

Request status of registration from Namfisa

As another avenue, we have made enquiry with Namfisa regarding the status of registration of relevant financial institutions and their compliance with the relevant statutory requirements.

Namfisa has provided us with a list of all relevant, registered financial institutions and persons. This list is available to our clients and we encourage clients to ascertain that all relevant institutions and persons serving their fund are indeed registered by Namfisa.

Namfisa ensures that registered institutions comply with the regulatory framework.

For this purpose, its Short-term Insurance Department and its Investment Institutions Department conduct off-site and on-site inspections.

The offsite inspection is conducted by analyzing quarterly returns and audited annual financial statements. The annual financial statements are analyzed by the analysts in these departments to assess compliance matters as prescribed in the relevant Acts and Regulations issued under these Acts.

The on-site inspections are conducted annually to verify information submitted to Namfisa in the form of audited annual financial statements, and to ascertain other operational matters which might not comply with the Act.

When an inspected institution does not comply with these Acts, Namfisa informs such particular institution to rectify the non-compliance and in the event of failure to rectify the matter, Namfisa has the right to cancel the registration and/or impose penalties as prescribed in these Acts.

What comfort can an administrator offer its clients?

Besides the risks that counter parties pose to a fund, the operations of each service provider, pose a number of unique risks that trustees need to be aware of and need to obtain comfort on that sufficient, acceptable mitigating processes are in place to manage these risks. Following are some of the key risks relating to fund administration:

• Payment of a benefit to a person other than the person entitled to the benefit.
• Incorrect calculation of a benefit as the result of:
• Incorrect benefit structure set-up;
• Failure to update benefit structure set-up on administration system;
  • incorrect interest rate set up;
  • incorrect costs set up;
  • incorrect contributions loaded;
  • incorrect loading of bonus allocations.
• Failure to record and implement changes to a member’s group life category choice.
• Failure to record and implement changes to a member’s investment portfolio choice.
• Failure to pay reassurance premiums to the underwriter.
• Failure to match assets to liabilities in respect of the member choice investment portfolios.
• Failure to invest monthly cash surplus.
• Failure to submit statutory annual report to Namfisa.
• Administrator earns undisclosed remuneration.
• Data manipulation by staff member.
• Misappropriation of fund cheques.
• Fraudulent payments via EFT.
• Misappropriation of fund assets.
• Loss of key staff.
• Loss or destruction of client data.
• Failure of the administrator’s business.

Being aware of such risks, trustees can institute governance conventions to manage risk at fund level. Some of such conventions relate to:

• Reporting by service provider;
• Banking mandates;
• Engagement of independent professional services;
• Service level agreements;
• Ownership of assets;
• PI insurance cover.

What should your administrator’s cover level be?

In Namibia there are no statutory requirements regarding levels of insurance cover to be maintained by an administrator or regarding the registration of an administrator.

An administrator is required to register with Namfisa only if it offers insurance intermediation services, and such registration requires the submission of a bank guarantee of N$ 25,000, fidelity and indemnity cover of N$ 500,000 and registration with a recognised Namibia insurance brokers association (NIBA or NIA).

The Financial Services Board of South Africa (FSB) issued a “NOTICE ON REQUIREMENTS FOR PROFESSIONAL INDEMNITY AND FIDELITY INSURANCE COVER FOR PROVIDERS, 2009”. This notice requires an intermediary, holding funds on behalf of their members, to maintain indemnity cover of N$ 5 million. For administrators the auditor is required to express an opinion on the adequacy of indemnity cover in consultation with the FSB. It requires the administrator to hold liquid assets equal to 8/52 times total annual expenditure.

We have extracted information from website of the FSA in the UK, which is the Namfisa/FSB equivalent. It appears that the topic of adequate professional indemnity cover is being discussed with stakeholders right now. The discussion document makes reference to the following proposed parameters:

• Minimum cover € 1 million per claim (i.e. +/- N$ 10 million);
• Aggregate annual cover € 1.5 million per claim i.e. +/- N$ 15 million);
• Basis to be used is 10% of annual income;
• Excess to be based on 1.5% of annual income.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.

How to handle fund disputes

Every fund has a board of trustees and a constitution, more commonly known as the rules of the fund.

The rules of the fund constitute the legal persona of a fund and the agreement between the fund and its members, even though the individual member may not ever have seen the rules or have signed acceptance of the agreement. Employees are usually required to become a member of the employer’s pension fund in terms of the contract of employment entered into between the employer and the member. In becoming a member of the fund and making monthly contributions to the fund, the member has, at least tacitly, accepted the conditions of membership as contained in the fund’s rules.

It is also to be noted that the obligation to join the employer’s fund has its roots in the Income Tax Act, that requires membership of the employer’s fund to be a condition of employment for the employee. Where membership is a condition of employment, the Income Tax Act concedes an annual tax deductible member contribution of N$ 40,000. This concession is not available to any voluntary contribution.

The trustees of the fund are required to manage the fund in accordance with its rules. Rules usually contain provisions regarding the resolution of any dispute. Having subscribed to this agreement with the fund, the member has a contractual obligation to comply with the agreement, i.e. the rules, when he/she has a dispute with the fund.

The typical dispute resolution procedures are that the member submits his/her complaint to the trustees in writing. It would be wise to request the trustees to respond within a reasonable period, say 14 days, as most rules do not lay down such period. Should the member not be satisfied with the response provided by the trustees, the complaint is typically required to be referred to the fund’s actuary by the trustees. The actuary is an independent professional person, with extensive knowledge of pension funds business and rules would typically state that the decision of the actuary regarding the complaint is binding on the fund and the member.

If the member remains dissatisfied, Namfisa would gladly involve itself in assisting to resolve the complaint at no cost to the complainant, and this should then be the member’s next avenue.

Members are sometimes so aggrieved with the employer and/or the fund or one of the fund’s service providers, that he/she has no faith in the sincerity of the trustees. Usually this is a wrong perception, considering that the board of trustees normally comprises of an equal number of employee elected, and employer appointed trustees. Trustees have a fiduciary duty to protect the interests of members and typically do take this duty very seriously.

Any confrontational approach a member may choose to take, is likely to end up in a protracted and costly matter and should be considered only if the trustees evidently do not take the member’s complaint seriously.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.

Before this question can be answered, the trustees need to take a step back and consider a few basic premises.

The first question to be answered is whether the fund focuses on the individual or on the group. The answer to this question has particular relevance to the following fund features:

• Market linked daily interest versus regular bonus allocation;
• Widest investment portfolio choice versus standard fund portfolios;
• Flexible benefit choice versus standard annual category choice;
• Frequent salary changes versus annual increases;

To find an answer, one needs to understand what is important to the members, and what is important to the trustees, who carry the ultimate responsibility for the choices offered and the folly of the members?

Members’ needs

Members’ needs will differ depending on the arrangement offered by the fund. If the fund focuses on individual choice and flexibility, members’ need will require -

• technology driven fund administration,
• online, in time access to the system,
• online transacting and switching capability.

If the fund focuses on group interests, members needs will require -

• process driven fund administration,
• timely communication,
• timely processing of benefit payments,
• reliability and accuracy of data,
• and the fund must be kept abreast of developments.

Trustees' needs

Trustees’ needs were identified in a survey carried out in Namibia a few years ago, where the following factors received highest ratings:

Characteristics of a prominent financial institution -

• Efficient, quick service;
• Personal service with visits to client offices;
• Stability of the institution.

Characteristics of successful service -

• Regular reviews and feedback;
• Constant communication.

Fund management now needs to define its objectives, with regard to -

• a preference for individual member choice;
• a preference for the group interests.

Where a fund prefers to focus on group interests, trustees need to ascertain that their fund administrator has the proven capabilities to excel on the following key deliverables:

• Turnaround times
• Data integrity
• Communication
• Active fund management
• Information needs
  - Timely information
  - Comprehensive information
  - Reliable and accurate information

The alternative of focusing on the individual requires the following capabilities of the fund administrator:

• high levels of technological sophistication,
• greatest flexibility and
• widest possible choice.

High levels of sophistication and flexibility clearly imply high costs. As pointed out above, the trustees, the fund and ultimately the employer will carry the risk attaching to choice, flexibility and sophistication.

Typically one can expect the management costs for the ultimate level of choice and sophistication to be a multiple of those applicable to a group focused arrangement. If one were to take it to these levels, the question begs to be asked whether members should not rather make their own private arrangements thereby removing the risk from the trustees, the fund and ultimately the employer and paying for what is demanded.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.