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| Issued May 2024 | |||||
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| In this newsletter... | |||||
| Benchtest 04.2024, the emerging global conflict and Africa, housing loans, the value of the Rand and more... | |||||
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| IMPORTANT NOTES AND REMINDERS | |||||
NAMFISA levies
After its April 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 Financial Advisers (Pty) Ltd.
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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In 'Tilman Friedrich's industry forum' we present...
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In ‘News from RFIN”, 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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| TILMAN FRIEDRICH'S INDUSTRY FORUM | |||||
| Monthly Review of Portfolio Performance to 30 April 2024 |
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| In March 2024, the average prudential balanced portfolio returned 1.3% (February 2024: 0.7%). The top performer is Allan Gray Balanced Fund, with 2.0%, while Lebela Balanced Fund, with 0.5%, takes the bottom spot. Namibia Coronation Capital Plus Fund takes the top spot for the three months, outperforming the ‘average’ by roughly 1.7%. Lebela Balanced Fund underperformed the ‘average’ by 1.6% on the other end of the scale. Note that these returns are before (gross of) asset management fees. The Monthly Review of Portfolio Performance to 30 April 2024 reviews portfolio performances and provides insightful analyses. Download it here... |
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| Africa’s role in the emerging global conflict: implications and strategies for Namibia and Africa | |||||
| The world is teetering on the brink of a potentially devastating conflict as the geopolitical landscape shifts from a unipolar world dominated by the United States to a multipolar world championed by Russia, China, and the other BRICS countries. The Ukraine conflict and tensions in the South China Sea are manifestations of this struggle, with the US seeking to contain and wear down Russia and China’s economic and military capabilities to preserve its hegemony. As these global powers jockey for position, Africa, specifically Namibia, will inevitably be drawn into the fray. This article explores how the impending global conflict might affect Africa, specifically Namibia… Read on in paragraph 6 of the Monthly Review of Portfolio Performance to 30 April 2024. It also reviews portfolio performances and provides insightful analyses. Download the Monthly Review, here... |
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| Employer guaranteed housing loans – a real-life scenario | |||||
| 1. The employer’s housing loan scheme The scenario in this article is that the employer offers housing loans to its employees under an employment policy. A local commercial bank provides the housing loans, and the employer provides a surety to the bank for a specified portion of the loan. The employee must complete an application form. The employee certifies that he has acquainted himself with the scheme’s rules and subjects himself to the scheme conditions. The surety agreement between the bank and the employer requires the employer to pay the bank the value of the outstanding loan up to the value of the surety it gave when the employee’s service terminates. The rules contain a schedule of benefits that quantifies the withdrawal, retirement, death and disability benefits. The fund’s rules explicitly allow benefit deductions for compensating the employer regarding damage caused to the employer, medical aid and insurance premiums and any other purpose approved by the Registrar. The rules further authorise the fund to grant housing loan guarantees for the purpose referred to in PFA section 19(5)(a). 2. The Pension Funds Act on housing loans The PFA section 37D(b)(i)(bb) states that the fund (of which the employee was a member) “… may deduct any amount due by a member to his employer on the date of his retirement or on which he ceases to be a member of the fund, in respect of any amount for which the employer is liable under a guarantee furnished in respect of a loan by some other person (the bank in this scenario) to the member for any purpose referred to in section 19(5)(a) … from any benefit payable in respect of the member or a beneficiary in terms of the rules of the fund, and pay such amount to the employer concerned.” PFA section 37A prohibits the reduction, transfer, cession, pledge or hypothecation of the member’s benefit and protects the benefit from attachment or execution except as provided in this section. One of the exceptions is the deduction per section 37D(b)(i)(bb) cited above. The PFA, therefore, requires that the benefit must be paid to the member and nobody but the member. 3. The employer, the member and NAMFISA’s position on the member’s complaint Under the agreement with the bank, the employer was obliged to pay up the surety value. It approached the fund to deduct its surety payment from the member’s benefit. The member objected and complained to NAMFISA that he never expressly consented to the deduction from his benefit. NAMFISA advised the fund that it may not deduct the benefit because the rules have no explicit provision mandating the trustees to deduct the employer’s surety payment. 4. Must the rules authorise trustees to withhold the employer’s housing loan surety? While sections 37A and 37B offer exceptional protection to members’ benefits, section 37A makes a few exceptions. It allows the following:
Schedule 2 of the Income Tax Act requires the deduction of income tax on any benefit defined as gross income and for the tax debt of the member as instructed by NamRA under section 91. The only permitted deductions under the PFA are provided in section 37D. Amongst the permissible deductions are housing loans. Sections 37D(a)(i) and (ii) deal with direct (fund granted) and indirect (fund guaranteed) loans. These sections do not apply to the scenario sketched in this article. Section 37D(b)(i)(aa) deals with housing loans granted by the employer. Section 37D(b)(i)(bb) deals with “any amount for which the employer is liable under a guarantee furnished in respect of a loan by some other person (the bank) to the member for any purpose referred to in section 19(5)(a) to an amount not exceeding the amount which in terms of the Income Tax Act, 1962, may be taken by a member or beneficiary as a lump sum benefit as defined in the Second Schedule to that Act;” In our scenario the employer was liable for its guarantee to the bank. Provided the bank made the loan for the purpose referred to in section 19(5)(a), section 37(D)(b)(i)(bb) allows the fund to deduct the employer’s surety payment. The section has no other precondition. Unlike section 19(5)(a), which says that loans may only be granted if the rules allow it, it does not require that the rules permit the deduction. This section also does not require the member to consent to the deduction, unlike in the case of a deduction for theft, fraud, dishonesty or misconduct without a court judgment. In our scenario, the rules permit housing loans but do not explicitly speak about benefit deductions for housing loans. 5. May the fund pay directly into the member’s loan account? After NAMFISA advised the fund that it may not deduct the benefit, the question arose of whether the fund could pay the employer’s surety amount directly into the member’s housing loan account as it is the member’s account. The fact that a commercial bank maintains such an account of the member’s housing loan debt does not make the account the member’s property on which he can transact as he wishes. The account is merely the bank’s record of the member’s debt. Therefore, the fund paying the member’s benefit into his housing loan account does not constitute a payment to the member and would contravene section 37A. 6. Does section 19(5) impact the fund’s ability to withhold the employer’s surety payment? Section 19(5) sets out the purposes for which a fund may grant a housing loan or guarantee and other obligatory terms and conditions where the fund would grant the loan or give a guarantee to the bank. It does not refer to Section 37D and is irrelevant to the fund’s ability to deduct under Section 37D. It also does not speak about an employer-granted housing loan or guarantee as iis the case in the scenario sketched in this article. |
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| What is the actual value of the Rand? | |||||
| Our monthly Benchmark performance review contains graph 5.1, copied below, that tracks the actual value of the Rand. There are many ways of determining its actual value. We measure the true value by adjusting the exchange rate from the starting point with the difference in the US vs Namibian inflation rate. Businesstech had an article on 30 January, ‘The ‘real’ value of the Rand in 2024 – according to the Big Mac Index’. It is interesting to compare the results. The Economist’s updated Big Mac Index for 2024 indicates that the South African Rand is significantly undervalued against the US dollar. Overview of the Big Mac Index
Raw PPP Measure:
Despite accounting for GDP differences, the Rand remains substantially undervalued, with broader economic and policy factors contributing to its weakened state. The Big Mac Index offers a simplified yet insightful perspective on currency valuation, highlighting the disparity between the market exchange rate and the implied fair value of the Rand. Graph 5.1 shows that if one starts measuring the US vs Namibia inflation rate differential from the beginning of 1987, the Rand’s real value should be 11.77, as opposed to the official exchange rate of 18.69. The Big Mac index, adjusted by the GDP per capita consideration, arrives at an actual value of 11.32. Graph 5.1
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| COMPLIMENT | |||||
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Compliment from an Employee Benefit Consultant
August 2023 |
“Goodness gracious, but that was quick!!! Thanks, G and RFS team!” |
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Read more comments and compliments from our clients, here...
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| BENCHMARK: A NOTE FROM GÜNTER PFEIFER | |||||
| Benchmark trustees hold a strategy session | |||||
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The Benchmark Retirement Fund trustees convened for a fruitful strategy session at Am Weinberg on Friday, 17 May. Mr Eben de Klerk, a highly qualified expert holding various degrees and post-graduate qualifications, including a Master's degree in future studies, acted as the facilitator.
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| Important circulars issued by the Fund | |||||
| The Benchmark Retirement Fund issued no new circular since the newsletter 202309 – changes to survivor annuity investments. Clients are welcome to contact us if they require a copy of any circular. |
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| NEWS FROM RFS | |||||
| Long service awards complement our business philosophy | |||||
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RFS places a high value on its employees and recognises the importance of their contributions to the company’s success. Long service awards are a great way to acknowledge and celebrate the commitment and loyalty of employees who have been with the company for a significant time.
In addition to recognising employees’ contributions, long service awards can be a powerful retention tool, demonstrating that the company values and appreciates its employees’ dedication and hard work. These awards create a positive and motivating work environment where employees feel supported and encouraged to continue to grow and develop within the company. In May, RFS celebrated the following anniversaries:
We sincerely thank our two fund accountants, Vernon and Elray, for their dedication, loyalty, and support over the years since joining RFS. We look forward to their contribution to the good of RFS, our clients, and our colleagues in the future!
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| The RETIREMENT COMPASS | |||||
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Read the latest version of the Retirement Compass here...
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| RFS staff support Môreson Special School fun walk | |||||
| The Môreson fun walk for inclusivity took place on Saturday, 27 April. Through their participation in the Môreson Special School fun walk, RFS staff made a meaningful difference in the lives of the special needs school children. The event was a huge success, and judging from the angelic smiles on the faces of those who took part in the walk, the impact was noticeable. RFS staff collected N$2,400, which was used to purchase much-needed toiletries for the children and stocked the water points with water, cooldrinks and oranges. These, along with the seizable amount of toiletry items collected from staff on the ground, were handed to the Môreson staff, who extended their heartfelt appreciation for the generous donation. The photos below give an impression of the spirit prevailing at the fun walk. |
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| On the road again… | |||||
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Rudigar van Wyk with his daughter.
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Martha Nakaambo (l) and Hilde Towe (r) with their children. | ||||
| Important circulars issued by RFS | |||||
RFS issued the following circulars:
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| NEWS FROM NAMFISA | |||||
| Circular on block submissions of rule amendments | |||||
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NAMFISA issued Circular PI/PF/DIR/01/2024 on 3 May 2024. The directive aims to streamline amending pension fund rules to ensure operational efficiency and clarity. Here’s a breakdown of its key points:
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| Changes to ERS and chart of accounts | |||||
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When compiling the quarterly reports on the Electronic Regulatory System (ERS) and the chart of accounts (COA) for March, which were due by 25 April, RFS realised that changes were made to the ERS and COA. Upon enquiry, NAMFISA confirmed changing the system.
It then issued a circular dated 23 April 2024, informing the pension funds industry about significant changes it made to the ERS and chart of accounts for pension funds. If you missed the Circular, download it here… |
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| NEWS FROM RFIN | |||||
| RFIN’s trustee training calendar | |||||
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| LEGAL SNIPPETS | |||||
| Withholding of benefit for dishonesty and fraud | |||||
| This article deals with the case NI Jonck (“complainant”) v Retail and Allied Employees Provident Fund (“fund”) and HR Focus (Pty) Ltd (“employer”). Background The case involves the withholding of NI Jonck’s withdrawal benefit by the fund at the request of her employer under section 37D(1)(b)(ii) of the Pension Funds Act [theft, fraud, dishonesty or misconduct]. The Complaint The complainant resigned on 2 June 2021, citing gross mistreatment and abuse from the employer, and referred the dispute to the CCMA. She contacted the fund regarding the payment of her withdrawal benefit but was informed that no payment would be made due to ongoing legal proceedings initiated by the employer. The employer had summoned her for allegations of gross dishonesty and fraud. The complainant’s attorneys contested that no judgment had been granted against her, nor had she admitted liability. Thus, the fund should not withhold her benefit. Undisputed Facts
Complainant’s Arguments
The Adjudicator ordered the fund to pay the complainant’s withdrawal benefit, highlighting that the legal action taken by the employer did not meet the necessary criteria under section 37D(1)(b)(ii) to justify the withholding of her benefit. The Adjudicator emphasised the need for a balanced and fair process, which the fund’s board had failed to provide. Read the determination here… |
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| SNIPPETS FOR THE PENSION FUND INDUSTRY | |||||
| Nine habits for becoming truly happy in retirement | |||||
Retirement is often perceived as a time of freedom and relaxation, yet it comes with challenges and uncertainties for many. However, some seem to have mastered the art of retirement, radiating genuine happiness in their golden years. What’s their secret? It turns out they’ve embraced specific daily habits that keep them thriving. Here is a summary of these nine habits adopted by men who find true happiness in retirement.
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| Middle East conflict and market responses: what does it mean for investors? | |||||
| This article discusses recent events in the Middle East and their implications for global markets. The discussions in the article reveal a nuanced understanding of the shifting alliances in the Middle East. General Sir Nick Carter points out Iran’s alliances with Russia and North Korea, suggesting a potential anti-Western coalition. Additionally, he highlights China’s cautious approach and Russia’s engagement with Hamas, indicating a complex web of relationships in the region. Schroders investment experts, represented by Duncan Lamont and Matthew Michael, anticipate spikes in market volatility primarily due to the risk of oil supply disruptions from the Middle East. They also identify investor behaviour, such as seeking safe havens like gold, contributing to potential market fluctuations. However, they argue that historical precedent suggests markets recover swiftly after geopolitical crises, implying a degree of resilience. By emphasising the need for cautious market assessment, the experts suggest that investors carefully evaluate the geopolitical landscape’s impact on market fundamentals and avoid knee-jerk reactions. This approach involves analysing the broader context of geopolitical events, considering historical patterns, and assessing the long-term implications for investment strategies. It advocates for a measured and strategic approach to navigating market uncertainties arising from geopolitical developments in the Middle East. Read the article in Cover of 7 May 2024 here… |
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| SNIPPETS OF GENERAL INTEREST | |||||
| How to build lasting customer relationships | |||||
| In the face of rising living costs and limited disposable incomes, financial services and insurance products are often the first to be cut from household budgets. For financial service providers (FSPs), building strong client-advisor relationships and fostering customer loyalty is crucial, especially in challenging economic environments. Strategies for Improving Customer Loyalty FSPs must evaluate their current practices to identify shortcomings and implement strategies to enhance client retention. Key recommendations include:
Read the article by Danielle Wassermann in the April edition of the Cover web magazine here… |
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| How much money is enough, and at what point does it stop making you happier? | |||||
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This article emphasises that while money can increase happiness up to a certain point, its impact diminishes beyond specific income levels, with significant policy implications for addressing social inequities.
Key Points:
This article by Paula Luckhoff appeared in Eyewitness News on 23 April 2024 here...
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| AND FINALLY... | |||||
| Wise words from wise men | |||||
| The insights of ancient philosophers still resonate today and offer timeless wisdom on the relationship between money, virtue, and well-being. “Excessive wealth can lead to corruption, inequality, and a focus on material possessions rather than the pursuit of virtue and wisdom.” ~ Plato (428 BC – 348 BC) |
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| 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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