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| Issued December 2023 | ||||
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| In this newsletter... | ||||
| Benchtest 11.2023 – rotation of underwriters, trustee expenses and more... | ||||
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| IMPORTANT NOTES AND REMINDERS | ||||
NAMFISA levies
After its October meeting, BON announced that the repo rate remains unchanged at 7.75%. The interest rate on funds’ direct loans remains at 11.75%. Registered service providers Certain pension fund service providers must register with NAMFISA and report to NAMFISA. Download a list of service providers registered as of June 2023, here... |
Retirement calculator Use our web-based retirement and risk shortfall calculator for your personal retirement planning. Find it here... If you need help with your financial planning, get in touch with
RFS provides comprehensive support for trustees. Find a list of downloadable documents to assist with governance and management of private funds, registered as of June 2023, here... |
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| IN THIS NEWSLETTER... | ||||
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In this newsletter, we address the following topics:
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Read the end-of-year message to RFS stakeholders in a note from the Managing Director.
In 'Tilman Friedrich's industry forum' we present...
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In 'Legal snippets', read about...
As always, your comment is welcome, so open a new mail and drop us a note! Regards Tilman Friedrich |
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| A NOTE FROM THE MANAGING DIRECTOR | ||||
| End-of-year message to RFS stakeholders | ||||
| Hal Borland, author and former editor of The New York Times, said, “year’s end is neither an end nor a beginning but a going on, with all the wisdom that experience can instil in us”. As we approach the end of this year, we indeed had a lot of experiences to learn from this year. Everyone experiences challenges and lows in their lives, varying in degrees. Sometimes, we beat ourselves up because we have disappointed expectations of those depending on us or for not living up to our high standards. When faced with a low period, one often must dig deep to get out of such lows, and it can feel like it cannot happen soon enough. But when you are drawing and feeding from the knowledge that the low is temporary and that you will reach highs again, that is called resilience.  Looking back at the year about to end, I would like to pay tribute to the resilience of the RFS team, both collectively and as individuals. As is to be expected, we faced expected and new, unexpected challenges, but thanks to the combined strength of our team, we were able to succeed through the challenges. Early in the year, we faced an unexpected and unwarranted social media abuse following a communication to a section of our Benchmark Retirement Fund members. The term ‘cancelling’ or ‘cancellation’ has become increasingly known and associated with online abuse of an individual or corporate entity, driven primarily by social media influencer(s). Thanks to the combined efforts of our team, this new and increasing threat to any corporate entity of any size was managed without any major losses to our business. This is, however, a recent phenomenon which we expect to recur and will be dealt with as part of our focused stakeholder engagements. The resilience of our team was also a saving grace when the huge wave termed “the great resignation” battered the financial services industry and took its toll on our various teams, with resignations driven primarily by the difficult economic conditions that prevailed post-Covid. Various teams were stretched beyond acceptable limits as they ensured that our clients’ expectations were met despite the teams operating at only half the strength in some situations. We will rely on the strength and resilience of our team as we navigate the difficult path of changing the administration system. I have previously compared some of the projects carried out by our team to the impossible task of changing an aeroplane’s engine during flight. Why not? Our clients are unforgiving about dropping any of our high service delivery standards. Most of us will equally not be interested in being told why a service we expect and paid for cannot be delivered because of a system change. We have embarked on changing our main business system, fully aware of this. We have had some wins, and our team is working hard to ensure we complete this project successfully. So far, we have successfully converted 5 of our clients with 30 June and 30 September year-ends and will convert clients with 31 December year-ends to the new administration system during January 2024. To provide context, these are only five employers out of over 150 different employer groups whose pension fund arrangements we manage in stand-alone and umbrella arrangements. Further context: We have successfully converted around 6,200 members of approximately 40,000 members and pensioners under our administration. We are under no illusion that we still have a long way to go. We will update our valued clients on progress along the way. Based on our project schedules, we expect to bed down the admin system change project by 31 October 2024, all things being equal. On the business front, we have celebrated some new appointments during the year. Noteworthy was Standard Bank Namibia, which appointed us on 01 April 2023. Its appointment of RFS is a ‘welcome back’ to this client who previously used our services, and we are proud to be associated with them. Several large employer groups joined the Benchmark Retirement Fund. Most notable were Letshego Bank and Coca-Cola, to mention a few. More recently, the First Rand Group decided to join Benchmark Retirement Fund. We appreciate the trust and confidence these Namibian blue-chip companies have shown in us. As a home-grown company, we remain humble and proud of the support we continue to enjoy from the Namibian business community. The sustained and increasing support will not be taken for granted. We are fully aware that the support is behind our sustained service reputation. The ongoing support has allowed us to continue ploughing back directly over N$ 300,000 per annum into our communities, with the amount of time spent by senior management in industry support initiatives exceeding this figure many folds. I want to thank all our staff for their involvement in the different charitable projects funded by the company thanks to their participation. Many of our staff are regular flag bearers who keep fit and healthy by participating in various competitive and social sports and cultural events. Long service bears testimony to our values and business philosophy, as we believe in forging long-term relationships. We have breached a staff complement of 80 employees this year. Five staff members celebrated five years of service, four completed ten years, another five completed 15 years, and two completed 20 years of service with RFS during the year. Our crown jewel of long-term service is none other than Charlotte Drayer, the first employee of RFS. Charlotte will end her illustrious career in the pension funds industry of over 30 years, of which 24 years were in service of RFS. Charlotte will retire on 31 December 2023, and the staff will have the opportunity to bid her farewell at an exclusive staff event. We are hugely indebted to Charlotte, and she will leave an indelible mark in the history books of RFS. Unfortunately, we also had seven staff members that left us during the year. As we look forward to the coming year, we remain alert to the expected and unexpected challenges in 2024. Our operational environment remains challenging. I repeat Hal Borland’s quote, “Year’s end is neither an end nor a beginning but a going on”. We have a long way to go with our business system migration, and we still await the implementation of FIMA. We expect discussions regarding a National Pension Fund (NPF) to take centre stage, and we still hope to deal with regulatory uncertainties in our dealings with NAMFISA. These are among the challenges to be expected. However, we also expect some positive things to come in 2024, with a recovering economy on the back of a recovery in the tourism sector and the hype around the development of the green energy sector and the orange basin oil discovery by global players. We will need each one of our staff to build on their best as we go into another year. Before that, we need each one to rest well with the coming office close and holiday season. I pray that our staff and clients will keep safe and out of harm’s way during this eventful period. |
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| TILMAN FRIEDRICH'S INDUSTRY FORUM | ||||
| Monthly Review of Portfolio Performance to 30 November 2023 |
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| In November 2023, the average prudential balanced portfolio returned 5.9% (October 2023: -1.5%). The top performer is Namibia Coronation Balanced Plus Fund, with 8.0%, while Hangala Capital Absolute Balanced Fund, with 4.0%, takes the bottom spot. For the three months, Allan Gray Namibia Fund takes the top spot, outperforming the 'average' by roughly 0.4%. Namibia Coronation Balanced Plus Fund underperformed the 'average' by 0.8% on the other end of the scale. Note that these returns are before (gross of) asset management fees. (Refer to graphs 3.1.3 to 3.1.5 for a more insightful picture of the relative long-term performances of the portfolios and the asset classes.) The Monthly Review of Portfolio Performance to 30 November 2023 reviews portfolio performances and provides insightful analyses. Download it here... |
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| Navigating the shifting economic landscape | ||||
| The undervaluation of the Rand introduces challenges and opportunities for Namibian and South African investors. The potential for capital repatriation, attractive yields in government bonds, and the tax efficiency of returns contribute to a complex investment landscape. Careful consideration of exchange rate dynamics, risk-reward profiles, and tax implications is paramount in making informed and strategic investment decisions. As the global economic landscape evolves, savvy investors in Southern Africa can leverage these insights to navigate uncertainties and position themselves for financial success. In the Monthly Review of Portfolio Performance to 30 November 2023, we elaborate on the strategies an investor should follow under the above circumstances. It also reflects the editor’s views on current developments and their impact on investment markets. Download the Monthly Review of Portfolio Performance to 30 November 2023, here... |
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| Should you rotate your underwriter regularly? | ||||
| Most pension funds have their consultant regularly test the insurance premium rates the fund bears in the market. Will it be to the fund’s advantage to move its insurance policies to another insurer every time the other insurer offers a lower premium? While a long-term insurance policy remains in force until terminated, all policies have an annual review procedure. At this time, insurers look at the rating based on statistics and experience to ensure they remain competitive. For larger schemes, insurers typically consider the ratio of claims paid versus the net premium received when assessing their premiums. A ratio between 60% and 90% over the last five years is typically considered normal, whereas ratios outside that range will likely lead to premium adjustments. For smaller schemes, usually up to around 200 members, their claims experience has little statistical validity and is not considered. For such schemes, the underwriter would use its overall rates adjusted for the group’s demographical composition. The bigger the scheme, the more relevance its own experience has, and more reliance will be placed on that by the underwriter. When a new underwriter enters the market, it often consciously undercuts the market rates to attract new business to increase the rates to a market-related level a year or two down the line. Remember that every time a new policy is issued and replaced with another one, it attracts a hefty stamp duty, a wasted cost. Although the insurance company bears stamp duty, it will be built into its pricing to be paid by the fund members. |
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| Trustee expenses – the trustees’ fiduciary duty of care | ||||
| The governance landscape for pension funds is evolving, with increasing emphasis on transparency, accountability, and ethical conduct. South Africa prides itself on being at the forefront of good corporate governance based on the 16 plus-one principles formulated in the King IV report. A trustee on a pension fund’s board of trustees is in a more onerous position vis-à-vis his fund members than a company director vis-à-vis his shareholders, as he is responsible for the life savings of the fund’s members. Trustees in SA have been held liable in their personal capacity for wrongdoings on their fund, and Namibian courts will undoubtedly look for SA precedents when adjudicating any wrongdoing by a board of trustees in Namibia. The essential duties of directorship and trusteeship are
But what about fund expenses, managed by the trustees at their discretion? There are no readily available benchmarks. So, one board of trustees may decide that the fund should carry the cost of each of their trustees doing an MBA or similar qualification to qualify them better to manage the fund's affairs. Another board may decide it should be good enough to have each trustee attend a relevant training course once every second year. One board may decide trustees need international exposure to be better equipped to act in the best interests of the fund’s members considering global developments, while another fund is only prepared to support local seminars and courses. The size of the fund and the benefit to the members in relation to the costs incurred must be considered carefully. Trustees must ask themselves: Would I be comfortable if our decision appeared on the front page of the local newspapers? We are seeing a trend of trustees incurring extravagant costs on trustee meetings. A few funds are now meeting at venues outside the company’s offices. It entails renting the facility and refreshments; sometimes, lunch or dinner becomes par for the course. The venue may be at a remote venue, and the meeting may be scheduled for the day before a long weekend. That arrangement then offers the opportunity to enjoy a long weekend. It becomes challenging to draw the line between acceptable and unacceptable behaviour. The decisive question is: would I be comfortable if the Namibian reported on the matter on its front page? So, how does your board of trustees decide if its policies address their duty of care, skill and good faith? These duties of trusteeship are particularly critical regarding expenses incurred for the direct or indirect personal benefit of trustees – an area where trustees are likely to face severe censure if they have not managed to separate personal interests from fund interests. As far as the example of training goes, one crucial consideration is whether trustees are serving the fund full-time or only part-time. If one looks at this question from a company’s point of view, any company would go to a much further extent in training staff to run the business of the company because the benefits of such training would accrue to the company on a ‘24/7 basis’, i.e. the dedicated employee is expected to plough back into the company everything he learnt. Directors or trustees typically only serve the company or fund on a part-time basis and are expected to have a sufficiently solid foundation to understand and to apply their obligation of duty of faith, duty of good care and duty of skill to overseeing the management of the business of the entrusted entity. One needs to distinguish clearly between these two situations. Companies often have benchmarks for staff training, and maybe the VET levy is a good starting point as this is what the government effectively has resolved employers should spend on training their staff. In the pension fund environment, no pointers exist to guide the trustees, but this does not absolve the trustee from applying utmost good faith, care and skill in managing the business of his fund. The King IV principles advocate for ethical leadership, effective control, and accountability. It is essential to scrutinise the decision against these principles. Trustees must act in the best interests of the fund and its members. Incurring expenses at the cost of fund members where it becomes difficult to differentiate between the personal and members’ benefits raises ethical concerns. It might be perceived as a misuse of funds for personal benefit. Guidance for Trustees, Members, and Service Providers:
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| Signing off for 2023 | ||||
| Dear reader, as editor of the Benchtest newsletter, I hope that you found some interesting reading in this newsletter in 2023, that you were alerted to important developments in the Namibian pensions industry and in achieving this objective, I was able to make your lives easier and save you time. I wish you all a peaceful festive season and an exciting 2024 blessed with health, happiness and success! May Namibia be blessed with a good rainy season and a prosperous economy, and may we all be spared from global shocks such as the COVID pandemic! Until next year, I sign off with my best wishes to all! Tilman Friedrich |
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| COMPLIMENT | ||||
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Compliment from a former fund member
21 November 2023 |
“Dear M I wanted to take a moment to express my sincerest appreciation for your incredibly prompt response in providing the tax certificates. Your swift action has been immensely helpful and has allowed me to proceed smoothly with the necessary documentation. I truly value your efficiency and dedication to assisting with this matter. Your promptness not only reflects your professionalism but also your commitment to exceptional service. Once again, thank you for your timely support. I look forward to future interactions and commend your team's outstanding efforts.” |
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Read more comments from our clients, here...
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| BENCHMARK: A NOTE FROM GÜNTER PFEIFER | ||||
| Annual member meeting at Am Weinberg | ||||
| The Benchmark Retirement Fund conducted its annual member meeting at Am Weinberg on Thursday, 23 November. The meeting was held in a hybrid format so members and stakeholders could attend physically or virtually. Here is a visual impression of this informative and enjoyable occasion. |
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Guests arriving
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An illustrious audience | |||
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The board of trustees FLTR T Friedrich, S Jacobs, H Müseler, A Schimming-Chase, M Fabianus, M Theron, H Hentschel
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Outgoing Chair H Müseler and incoming chair A Schimming-Chase | |||
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The videos recorded at the meeting are available on the Benefit Counsellor platform. Please log in and indulge in the content available under the Fund Videos tab. You should find the investment consultant’s presentation very interesting. It provides a short overview of what steps the trustees plan to take in restructuring the default portfolio to improve performance and reduce costs by introducing specialist mandates.
The other videos available on the platform cover:
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| Important circulars issued by the Fund | ||||
The Benchmark Retirement Fund issued the following new circular:
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| NEWS FROM RFS | ||||
| RFS says farewell to its first employee | ||||
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RFS bids farewell to Charlotte Drayer, a distinguished colleague and true stalwart of RFS Fund Administrators, whose remarkable 24-year journey shaped our organisation and left an indelible mark on our team.
As Charlotte embarks on a new chapter, we express deep gratitude for her dedication, hard work, and lasting impact. We wish Charlotte a retirement filled with joy and fulfilment in the knowledge that her contributions have forever shaped the legacy of RFS Fund Administrators. Our managing director aptly put her character into the context of the company’s values – “Charlotte leaves a legacy which SHOULD continue to define RFS as a business. For this purpose, I have extracted the following characteristics which immediately came to mind, but I am sure there are a lot more:
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| Important circulars issued by RFS | ||||
RFS issued the following circulars in July:
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| LEGAL SNIPPETS | ||||
| Admissibility of employer’s claim against a member’s benefit transferred to another fund | ||||
| This matter is an SA Supreme Court of Appeal Judgement in the case of ABSA Bank (Appellant) vs HJ Burmeister (1st Defendant) and two others dealing with an employer’s claim for compensation against a former employee’s pension benefit, which was transferred to another fund. Background: The case involves the interpretation of section 37D(1)(b) of the Pension Funds Act 24 of 1956. ABSA sought damages from the first respondent (Burmeister) for alleged dishonest and fraudulent conduct. The legal process commenced when ABSA filed a lawsuit against Burmeister in the High Court, Johannesburg. It claimed damages amounting to R1,765,269.05, alleging fraudulent and dishonest conduct by Burmeister during his employment. Burmeister initially defended the action but did not appear on the trial date. As a result, a default judgment was granted against Burmeister in the sum of R721,420.56. However, the default judgment remained unsatisfied, prompting the bank to take enforcement action. The sheriff (second respondent) purportedly attached the life annuity to the extent of R300,000. In response, Burmeister sought an urgent order in the High Court, Cape Town, to set aside the attachment of the life annuity. The application primarily focused on the protection provided by Section 37A(1) of the Pension Funds Act, preventing the attachment of pension fund benefits. As the appellant, ABSA brought a counter-application which sought a declaration that the bank's judgment against Burmeister entitled it to attach the annuity. Judge Potgieter granted an order setting aside the attachment and dismissed the bank's counter-application with costs. Dissatisfied with the High Court's decision, ABSA appealed the case to the Supreme Court of Appeal. Appellant's Argument (ABSA):
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| Complaint about undue delay in death benefit payment | ||||
This case deals with a complaint by Mrs L Naidoo, spouse of a deceased fund member, against the Massmart Provident Fund, Sanlam Employee Benefits as the fund administrator, and the employer, Cambridge Food, for the undue delay in paying the deceased member’s benefit.
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| The Consumer Credit Bill | ||||
| The Economic Policy Research Association (EPRA) recently published its report on the Consumer Credit Bill. The Bill is still open for comments to NAMFISA until 31 December 2023. The Bill establishes the Bank of Namibia and NAMFISA as consumer credit regulators for all entities they regulate. The EPRA generally believes this law is necessary and well-drafted. It has a few issues, as stated in its report. Its primary issue is with the regulators’ powers to impose excessive penalties on sometimes very subjective matters, in which penalties automatically have the status of “civil judgments”, without the regulators following due process (see pages 31 and 32 of its report). This places credit providers in a predicament, clouded with uncertainty, and exposes them to unfair and unreasonable legal and financial risk. Download the report here… |
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| Amendment to the Financial Intelligence Act | ||||
| Every person who carries on any business or is a director, secretary to the board, employed or contracted by any such business or institution must report to the Centre any suspicious activity contemplated by this Act (money laundering or financing of terrorism activities). The obligation arises from the following sections of the Financial Intelligence Act:
In July 2023, the Financial Intelligence Amendment Act 2023 was published in Government Gazette No. 8139. The reporting timeline was now reduced from 15 working days to “promptly”, which means without delay but not later than three (3) days after the suspicion was formed. Furthermore, the following was added: “…irrespective of the size of the transaction.” Therefore, all suspicious transaction independent of size must from now on be reported.. |
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| SNIPPETS FOR THE PENSION FUND INDUSTRY | ||||
| The biggest retirement mistakes South Africans make | ||||
The author emphasises the importance of making informed decisions about retirement savings and highlights ten common mistakes that South Africans often make, especially during the festive season. The key points include:
Read the article by Luke Frazer in Businesstech of 26 November 2023 here... |
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| The great unretirement | ||||
| The author discusses the evolving concept of retirement, shifting from a traditional permanent exit from the workforce to the dynamic idea of "unretirement." Unretirement involves individuals re-entering the workforce or pursuing new professional endeavours after retiring. Such endeavours can take various forms, such as part-time employment, freelance work, starting a business, or exploring personal interests in a structured manner. The motivation behind unretirement is influenced by increased life expectancy and the need to support longer lives with limited retirement savings. The article highlights the benefits of unretirement for both employers and individuals. For employers, unretirement offers:
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| SNIPPETS OF GENERAL INTEREST | ||||
| Which comes first: mortgage freedom or retirement security? | ||||
| In this interview with Gareth Collier, a certified financial planner at Crue Invest, the discussion centres around prioritising between paying down a mortgage or saving for retirement. Collier provides insights into the advantages of paying down a bond early, particularly in the early years when a significant portion of repayments goes toward interest. He emphasises the impact of compound interest and the potential consequences of not finding a balance between bond payments and retirement savings. Collier discusses the argument for early retirement savings, highlighting the benefits of compounding growth over time. He addresses concerns about stock market volatility, explaining how volatility can contribute to returns, especially for those with a longer investment horizon. The interview includes a practical example comparing the outcomes of paying down a bond early versus investing in retirement funds over different periods. Collier suggests a mathematical approach for those seeking a compromise between paying down a mortgage and saving for retirement. Depending on factors like interest rates and tax brackets, a 30-year approach might be more favourable, considering potential tax savings on retirement contributions. He also emphasises the importance of flexibility in managing cash flow during economic fluctuations and recommends finding a balance that suits individual circumstances. Overall, the interview provides valuable insights into the considerations individuals should weigh when deciding between paying down a mortgage and saving for retirement, offering practical advice for finding a compromise that aligns with financial goals and realities. Read the transcript of the interview of Gareth Collier by Boitumelo Ntsoko in Monweyweb on 24 November 2023 here… |
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| Tips and talking points for investing right now | ||||
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The author offers investing tips and talking points for financial advisers when discussing investment decisions with clients amidst economic uncertainty. The key points include:
Read the full article by Nico Janse van Rensburg of Amplify in Moneymarketing of 24 November 2023 here…
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| AND FINALLY... | ||||
| Wisdom from great philosophers | ||||
| "Twenty years from now, you will be more disappointed by the things you didn’t do than by the ones you did, so throw off the bowlines, sail away from safe harbour, and catch the trade winds in your sails. Explore, Dream, Discover." ~ Mark Twain | ||||
| Unsubscribe If you do not want to receive these newsletters {unsubscribe}click here...{/unsubscribe} Disclaimer Whilst we have taken all reasonable measures to ensure that the results reflected herein are correct, Benchmark Retirement Fund and RFS Fund Administrators (Pty) Ltd do not accept any liability for the accuracy of the information and no decision should be taken on the basis of the information contained herein before confirming the detail with the relevant portfolio manager. |
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