2024-07



Issued July 2024

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In this newsletter...
	Benchtest 06.2024 – S37A does not deal with the benefit build-up, funds fail to pay benefits, Namibia should vie for millionaires and more...

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	Important notes & reminders In this newsletter... Tilman Friedrich's industry forum Compliments Benchmark: a note from Günter Pfeifer News from RFS	News from RFIN Legal snippets Snippets for the pension fund industry Snippets of general interest And finally...


IMPORTANT NOTES AND REMINDERS

	NAMFISA levies Funds with July 2024 year-ends must submit their 2nd levy returns and payments by 23 August 2024; Funds with January 2024 year-ends must submit their 1st levy returns and payments by 23 August 2024; and funds with August 2023 year-ends must submit their final levy returns and payments by 30 August 2024. Repo rate unchanged in July After its June 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 Annemarie Nel (tel 061-446 073) Christina Linge (061-446 075) Dennis Fabianus (061-446 098) Toolbox for trustees RFS provides comprehensive support for trustees. Find a list of download documents to assist with governance and management of private funds, registered as of June 2023, here...


IN THIS NEWSLETTER...

	In this newsletter, we address the following topics:

	In 'Tilman Friedrich's industry forum' we present... Monthly review of portfolio performance – 30 June 2024 S 37A: Member’s right to contributions and the protection of benefits Do NAMFISA’S achievements point to pension funds’ failure? Namibia should compete for migrating millionaires In Compliments, read... A compliment from a former member In ‘Benchmark: a note from Günter Pfeifer’, read about… Retirement fund benefits, the Income Tax Act and other considerations In 'News from RFS', read about... RFS welcomes new staff member The Retirement Compass In 'News from RFIN', read about... RFIN announces its new strategy The RFIN training calendar	In 'Legal snippets', read about... SA Adjudicator determination: prescription and outstanding withdrawal notice SA Adjudicator determination: section 14 delays and loss of investment returns In 'Snippets for the pension funds industry,' read about... What you need to save to retire comfortably Three common mistakes investors make In ‘Snippets of general interest', read about... Dodgy sick notes – what employers need to know Five powerful ways to master self discipline And make a point of reading what our clients say about us in the ‘Compliments’ section. It should give you a good appreciation of who and what we are! As always, your comment is welcome, so open a new mail and drop us a note! Regards Tilman Friedrich


TILMAN FRIEDRICH'S INDUSTRY FORUM

Monthly Review of Portfolio Performance to 30 June 2024

	In June 2024, the average prudential balanced portfolio returned 1.7% (May 2024: 1.2%). The top performer is Momentum Namibia Growth Fund, with 2.8%, while Allan Gray Balanced Fund, with 0.01%, takes the bottom spot. Momentum Namibia Growth Fund took the top spot for the three months, outperforming the ‘average’ by roughly 1.3%. Allan Gray Balanced Fund underperformed the ‘average’ by 2.0% on the other end of the scale. The Monthly Review of Portfolio Performance to 30 June 2024 reviews portfolio performances and provides insightful analyses. Download it here...

S 37A: Member’s Right to Contributions and the Protection of Benefits

	Clement Marumoagae, Associate Professor, School of Law, University of the Witwatersrand, South Africa, published an interesting article in Law Democacy and Development volume 25 of 2021. In its abstract the author points out the fragmentation of the industry with regard to the protection of benefits, as the result of the different pension laws. This fragmentation leads to the development of confusing jurisprudence regarding the protection of benefits and suggests that it should be addressed. The abstract concludes that legislative protection of retirement benefits is available before these benefits accrue to members, there is, however, controversy whether this protection remains intact when these benefits have accrued to members, but not paid yet. NAMFISA is lately declining rules where any costs are accounted for in the build up of a member’s fund credit, i.e., before the benefit has accrued to the member. It argues its decision on section 37 A(1) of Namibia’s PFA (a copy of the South African equivalent quoted by the author below). It appears that NAMFISA might be relying on this article for its decision to decline rules that provide for the accounting of costs in the build up of a member’s fund credit. By implication NAMFISA should also argue that no costs may be accounted for in calculating the portion of monthly contributions to be allocated to a member’s fund credit, based on the member’s ‘right in respect of contributions…’ contained in the section. If NAMFISA indeed relies on the cited article, it overlooks or ignores the author’s unambiguous conclusion that the protection only relates to a member’s creditors and not to the fund’s creditors! In the build-up before a benefit accrues, the member only has an interest in the fund based on the fund’s rules but the assets belong to the fund! If one follows NAMFISA’s assumed rationale, there is actually no manner in which a retirement fund could fund its management costs, as even a reduction of the investment returns would meet the prohibitions NAMFISA seems to read into section 37A(1). In practice retirement funds have, over many years, funded its management costs from contributions, member’s fund credits and investment returns. Section 37A(1) states “No benefit provided for in the rules of a registered fund (including an annuity purchased or to be purchased by the said fund from an insurer for a member), or right to such benefit, or right in respect of contributions made by or on behalf of a member, shall, notwithstanding anything to the contrary contained in the rules of such a fund, be capable of being reduced, transferred or otherwise ceded, or of being pledged or hypothecated, or be liable to be attached or subjected to any form of execution under a judgment or order of a court of law, or to the extent of not more than three thousand rand per annum, be capable of being taken into account in a determination of a judgment debtor’s financial position in terms of section 65 of the Magistrates’ Courts Act, 1944 (Act No. 32 of 1944) …”. I have narrowed down the content of the article to only focus on the member’s rights to contributions and the protection of benefits under the PFA, without delving into comparisons with other laws. Introduction The South African Pension Funds Act 24 of 1956 (PFA) [and the Namibian PFA, in the same manner] includes provisions designed to protect the retirement benefits of members from the reach of their creditors. These legislative measures are crucial in ensuring that members can sustain themselves during retirement, establishing a general rule that protects pensioners from being deprived of their income source during retirement. Protection of Retirement Benefits Contribution to Retirement Funds: The most common method for saving towards retirement in South Africa involves contributions to retirement funds. These funds include pension funds, provident funds, and retirement annuity funds. Employers may provide retirement funding as part of employment packages, while some employees invest independently to secure financial stability in retirement. Challenges to Financial Security: Various challenges, such as unemployment, lack of access to retirement funds, and high charges by retirement funds, can impact the financial security of individuals during retirement. The South African government aims to increase the financial security of all citizens, encouraging adequate provision for retirement through policy initiatives. Legislative Framework: The PFA provides significant protection for retirement benefits, aiming to reduce the financial vulnerability of the elderly population. This protection ensures that retirement benefits are used for their intended purpose, primarily to prevent poverty during retirement. Legislative Provisions in the PFA Section 37A(1) of the PFA: Prohibits the reduction, transfer, cession, pledge, hypothecation, attachment, or execution of retirement benefits under a court order. This section explicitly includes benefits provided for in the rules of a registered fund, annuities purchased by the fund, and contributions made by or on behalf of a member. The protection is intended to ensure that retirement benefits remain intact for the financial security of the member during retirement. Interpretation of Legislative Protection Judicial Interpretation: Courts have generally interpreted section 37A(1) to mean that retirement benefits are protected from the member’s creditors while still in the custody of retirement funds, but have not accrued to the member yet. However, once benefits accrue to the member and are paid out, they can be subject to claims by creditors. This interpretation creates a potential risk for members who might become insolvent. Case Law: In Mostert NO v Old Mutual Life Assurance Co (SA) Ltd, the court ruled that annuities are protected under section 37A until they are paid out to the member, after which they can be claimed by creditors. Similar interpretations were made in Moller v Innova Insurance Ltd and Vawda v Administration of Transvaal, where the courts held that accrued benefits fall within the member’s insolvent estate once paid out. Conclusion The legislative protection of retirement benefits under the PFA is vital for the financial security of retirees. While section 37A provides robust protection, there is a need for legislative harmonisation to ensure consistency across different statutes and enhanced protection, such as preventing retirement benefits from being part of an insolvent estate once paid out. The unanswered question raised in the article is only if a creditor may attach a benefit once it has become due and payable (it has accrued) while the fund still holds it. In the Sentinel case referred to on page 429 and onwards, the High Court concluded that “…once the fund is legally obliged to … pay it to the member, the benefit automatically becomes an asset in the member’s estate … notwithstanding that it … has not yet been paid to the member. Relying on the definition of ‘benefit’ in section 1 in line with section 5(1)(b), the SCA contradicted the High Court by concluding “… that a benefit payable to a member is, therefore, deemed to belong to the fund and not the member” (meaning a member’s creditor cannot attach it while the fund holds it). In the Sentinel case, a member’s curator, Bonis, wanted to attach the member’s benefit and acknowledged that he did not demand that the fund pay the benefit to him. While the author relies on extensive references, the article nowhere insinuates that pension fund management costs may not be funded from monthly contributions, member’s fund credit, or investment returns. It only refers to a National Treasury comment concerning the impact of recurring charges on the ultimate retirement benefits that individual members of retirement funds will receive.Here’s a relevant excerpt from the article regarding this point: “Fifthly, recurring charges levied by retirement funds on assets under management, which are generally borne by individual members, play a significant role in the ultimate retirement benefits individual members of retirement funds will receive when they exit their funds. According to the National Treasury’ in South Africa’s retirement system, recurring charges, which serve to reduce the investment return of the fund, are borne entirely by members in the form of lower benefits when they retire.’” The article, therefore, acknowledges that management costs are indeed funded from the retirement fund’s investment returns and other assets, which ultimately reduces the benefits received by the members. It does not argue against this practice but instead points out its implications for members’ final retirement benefits. Judgments cited in the article repeatedly confirm that the fund rules are the source of benefits. Implicitly, the reduction of benefits would only become relevant to the benefit once it is determined in the manner the rules prescribe. Editor’s note Retirement fund consultants frequently find themselves in a difficult position due to sudden rulings by NAMFISA that long-standing industry practices violate the PFA. These decisions are made without prior notice or consultation with stakeholders. As discussed in this article, NAMFISA’s new interpretation of section 37A(1) is likely incorrect. Unfortunately, NAMFISA is not inclined to seek workable solutions when it diverges from well-established practices that have stood the test of time in Namibia and South Africa. While NAMFISA often suggests that disputes be reviewed, it is well aware that few Namibian funds can afford the costs associated with such reviews unless NAMFISA itself is committed to resolving the matter swiftly and economically. NAMFISA has the opportunity to play a crucial role in safeguarding the interests of retirement funds and their members. By engaging with industry stakeholders and thoroughly considering the long-term implications of its rulings, NAMFISA can ensure that regulatory changes do not disrupt the stability and reliability of retirement planning. A collaborative approach would not only uphold the integrity of the regulatory framework but also enhance the confidence of fund members in the system’s ability to protect their retirement benefits. NAMFISA’s willingness to find solutions that respect established practices while ensuring compliance with the PFA can foster a more cooperative and constructive relationship with the industry. This cooperation, in turn, would lead to better outcomes for all stakeholders involved. We urge NAMFISA to consider its interpretations’ significant impact and work proactively with the industry to develop transparent, fair, and beneficial guidelines for funds and their members.

Do NAMFISA’S achievements point to pension funds’ failure?

	The media regularly reports on the large amounts of money NAMFISA boasts to have extracted from pension funds and paid to members. The latest quarterly report mentioned a figure of around N$ 6 million. We understand that NAMFISA desires to justify its role in protecting benefits. However, without context, these reports can easily be misinterpreted and harm the image of pension funds and their administrators amongst members and the general public. NAMFISA does not pay benefits to fund members. NAMFISA sometimes intervenes in a member’s complaint about non- or late payment of his benefit. There are many reasons for non, or late payment of a benefit. Reasons could those envisaged in the Pension Funds Act or procedural. Mostly, the members’ tax affairs are not up-to-date because of their own doing. If they are not up-to-date, NamRA will not issue a tax directive, and the fund (the administrator on the fund’s behalf) cannot pay the benefit. Often, an outstanding form prevents a fund from paying a benefit. The fund (and its administrator) cannot be held accountable for outstanding forms. Forms are outstanding because the employer is missing certain information from the member or his signature, there is a dispute between the employer and the member, or the employer lays claim against the benefit under the PFA. There are a few legal reasons for late payment or non-payment of a benefit by a fund. These reasons are set out in Section 37D and relate to legal claims against the member’s benefit from a bank or the employer. A bank could claim an outstanding housing loan guaranteed by the fund. An employer could claim a housing loan guarantee or for loss suffered by the employee’s fraud, theft, dishonesty or misconduct. If an employer has incurred a loss for the described reasons, an investigation into the matter could take time, causing a delay in the payment. It could also result in the benefit being reduced or attached by the fund for the employer’s benefit. In the case of a death claim, the fund’s trustees are responsible for allocating the benefit to the deceased’s dependents and nominees and are legally liable for a defective allocation. The PFA generally affords trustees twelve months to absolve themselves of their onerous responsibility. Very often, the deceased’s family members object to a trustee decision. Such an objection could easily delay payment beyond the allowed twelve months. The fact that funds eventually paid out around N$ 6 million over the quarter following NAMFISA’s enquiry does not mean that they would not have paid otherwise. Lastly, the N$ 6 million paid after NAMFISA’s enquiry represents a minute 0.2% of total benefit payments of around N$ 3 billion made by the industry quarterly.

Namibia should compete for migrating millionaires

	Henley and Partners is a global advisor on migration. One of its recent reports read ‘The Great Wealth Migration”, “Britain’s Wealthy are Voting with the Feet”, “UK to see Highest Millionaire Loss on Record”. In its Private Wealth Migration Report 2024, it lists the top ten destinations. Since Nambia is well out of the line of fire in the ongoing and escalating global conflict between the West on the one side and Russia and China with their allies on the other, Namibia should offer an attractive alternative to the top ten countries in the list above. Only the UAE may not be in the line of fire. However, the simmering conflict in the Middle East will likely explode, too, when the East-West conflict does. Of course, Namibia has a lot of other virtues to offer! The saying goes – if you snooze, you loose. Will Nambia seize on this opportunity?


COMPLIMENT

	Compliment from a former member Dated November 2023	Good day Ms. D and Ms. L, I would like to take this opportunity to thank you for your exceptional service. I really appreciate the prompt service and for your ability to go above and beyond for your clients. We will definitely cross paths again in the future. Thank you once again. Regards, M

	Read more comments from our clients, here...


BENCHMARK: A NOTE FROM GÜNTER PFEIFER

Benchmark Retirement Fund and the ITA

	To assist brokers in correctly advising their clients regarding retirement fund benefits, we are posing a few scenarios below, what the Income Tax Act (ITA) prescribes and a few other important considerations. Scenarios before a member reaches retirement age: Question: Can a member transfer his benefit from an employer or umbrella pension fund to a provident preservation fund? Answer: The ITA places no restrictions on such transfer, but the rules of the two funds may prohibit it and must be consulted. Question: Can a member transfer his benefit from an employer or umbrella provident fund to a pension preservation fund? Answer: The ITA places no restrictions on such transfer, but the rules of the two funds may prohibit it and must be consulted. Question: Can a member transfer their pension preservation fund to a provident preservation fund and vice versa? Answer: The ITA does not allow transfers between preservation funds. However, when a member retires from a provident preservation fund, the capital not drawn can be used to provide a pension. Regarding retirement provision, the ITA does not distinguish between a preservation pension and a preservation provident fund, meaning that a preservation provident fund can also provide a pension from the capital left at retirement after the member has taken any portion as a lump sum. Question: Can a member transfer his pension preservation fund to an employer-sponsored or umbrella provident fund if he is a member of such a fund? Answer: The ITA places no restrictions on such transfer, but the rules of the two funds may prohibit it and must be consulted. Scenarios after a member reaches retirement age: Question: If the fund rules (employer-sponsored or umbrella fund) allow deferred retirement, can a pension fund member transfer his benefit to a provident preservation fund and retire based on provident fund rules? Answer: The ITA places no restrictions on such transfer, but the rules of the two funds may prohibit it and must be consulted. Benchmark Specific scenarios Question: If a member has passed his chosen retirement date on the Benchmark Pension Preservation Fund, may he transfer the benefit to a provident preservation fund and retire based on the provident fund rules? Answer: The member must retire after age 55 and before age 70, whatever his chosen retirement date was. The ITA does not allow transfers between preservation funds. The member is now obliged to arrange a pension (from the Benchmark Pension Preservation Fund or any approved retirement annuity fund) from no less than two-thirds of his capital. Question: Can the living annuity draw-down be changed multiple times during the year? Answer: The ITA does not know living annuities. The tax authorities complemented the ITA with Practice Notes 1 of 1996 and 1 of 1998. These practice notes do not prescribe the frequency except that the draw-down may not be less than 5% or more than 20% of the capital on each anniversary date. Question: Are the Benchmark Retirement Fund valuations of member investments only done once a month? Answer: The fund invests in unit trusts and segregated portfolios on behalf of its members. While unit trusts are valued daily, segregated portfolios are only valued at every month’s end. Members’ investments can, therefore, also only be valued once a month. Question: Can a member transfer his units within the Benchmark products instead of taking the money out of the market? Answer: When a member transfers between portfolios or products within Benchmark, the money is not taken out of the market, but the administrator effectively transfers the units.
Important circulars issued by the Fund

	The Benchmark Retirement Fund issued no new circular since the previous newsletter 202309 – changes to survivor annuity investments. Clients are welcome to contact us if they require a copy of any circular.


NEWS FROM RFS

RFS welcomes new staff member

	We are delighted to announce that Dennis Fabianus, son of Marthinuz Fabianus, our managing director, will be joining our permanent staff as a financial adviser on 1 August 2024. Dennis has done vacation work as a student for a few holiday seasons. Dennis completed Grade 12 in 2017 and is currently busy with his final exams for a bachelor’s degree in business management at NUST. We warmly welcome Dennis to the RFS Financial Advisors (RFSFA) team and look forward to his contribution to helping our private clients rest easy, knowing that RFSFA is attending to their retirement business. We are confident that Dennis’ friendly and outgoing personality will be a valuable addition to our team and its private clients, and we wish him all the best in his new role.

The RETIREMENT COMPASS

	Read the quarter 1, 2024 Retirement Compass here...

Important circulars issued by RFS

	RFS issued no new circular after circular RFS 2024.05-03 – Administration System Progress Update. Clients are welcome to contact us if they require a copy of any circular.


News from RFIN

RFIN announces its new strategy

	RFIN has announced significant structural changes implemented from May 2024, aiming to enhance value, improve member services, and optimise efficiency, with completion by July 2024. Established in 1997, RFIN serves the retirement funds industry in Namibia. The Board of Directors has adopted an outsourced management model for the RFIN Secretariat, with a management consultant taking over its functions. The consultant will: Align with strategic goals. Develop and implement policies and programs. Engage and mobilise members. Ensure compliance and collaboration with regulators and stakeholders. Execute Board decisions effectively. This change aims to provide better support and navigate industry complexities. The AGM and training programs will continue in the last quarter of the year, and the flagship industry program is planned for 2025. RFIN seeks patience and understanding during this transition and expresses gratitude for ongoing support. Download the RFIN circular here…

RFIN’s latest newsletter

	The RFIN website is a valuable resource for pension fund trustees and other industry stakeholders. It would be worth your while rummaging around on it here… If you missed the RFIN’s latest quarterly newsletter, find it here…


LEGAL SNIPPETS

SA Adjudicator determination: prescription and outstanding withdrawal notice

	Complainant: GJ Schindehutte Respondents: Alexander Forbes Retirement Fund (Provident Section) and Scoin Trading (Pty) Ltd Basis of the Complaint The complainant, GJ Schindehutte, alleged an undue delay in paying his withdrawal benefit from the Alexander Forbes Retirement Fund due to his employer, Scoin Trading (Pty) Ltd, failing to sign the necessary claim form. Schindehutte was an Administration Manager from 3 February 2007 to 23 August 2013 and contributed to the provident fund from January 2012 to August 2013. Despite completing the claim form in 2017 and again in January 2021, his benefit of R31,676.70 remained unpaid. Arguments from the Fund Membership and Contributions: The fund confirmed Schindehutte’s membership in January 2012 and last received contributions in August 2013. Lack of Withdrawal Claim Form: The fund did not have a completed withdrawal claim form and had repeatedly requested the employer to submit it. Willingness to Pay: The fund expressed readiness to pay the benefit if the Tribunal ordered payment without the employer’s signature, as the employer had not provided a specific reason for the refusal to sign the form. Arguments from the Employer Acknowledgement of Complaint: The employer agreed with the content of the complaint but stated that the authorised person to sign the form was unavailable. Fraud Allegation: The employer alleged fraud in the complainant’s department and wished to recover the incurred loss from Schindehutte’s withdrawal benefit. However, no formal action or criminal case had been pursued against Schindehutte. Adjudicator’s Reasoned Conclusion Prescription: The complaint against the employer was deemed time-barred as it was lodged more than three years after the complainant left the employment. However, the complaint against the fund was not time-barred as the fund acknowledged holding the benefit. Employer’s Submission: The employer’s fraud claim was not supported by any formal action or evidence. Hence, their argument for withholding the benefit was dismissed as an abuse of process. Fund’s Responsibility: The fund’s failure to act without the employer’s signature was criticised. The Tribunal noted that the fund had no legitimate reason to withhold the benefit and should have treated the customer more fairly. Determination Submission of Documents: The complainant is directed to submit the completed withdrawal claim form, identity document, tax number, and a recent bank statement directly to the fund. Waiving Employer’s Signature: The fund is ordered to accept the claim form without the employer’s stamp or signature. Payment: The fund must pay the complainant the held benefit plus interest at 7% per annum within two weeks of receiving the claim documents.Benefit Breakdown: The fund must provide a detailed breakdown of the withdrawal benefit to the complainant within twelve weeks of the determination. Read the determination here...

SA Adjudicator determination: section 14 delays and loss of investment returns

	Complainant: PT Smolak Respondents: Alexander Forbes Retirement Fund (Provident Section), first respondent; Alexander Forbes Life Limited as administrator, second respondent; and EOH Holdings Limited as employer, third respondent Nature of the Complaint This complaint addresses the delay in transferring PT Smolak’s fund credit from the Alexander Forbes Retirement Fund (Provident Section) to the 10X Umbrella Provident Fund (“10X Fund”). The delay has allegedly caused financial prejudice to Smolak. Factual Background Employment History: PT Smolak was employed by JDG Trading (Pty) Ltd from 16 September 2002. On 1 November 2013, JDG Trading was acquired by EOH Holdings Limited (third respondent) under section 197 of the Labour Relations Act (LRA), making Smolak an employee of EOH Holdings. Fund Membership: Smolak was an Alexander Forbes Retirement Fund member, administered by Alexander Forbes Life Limited (second respondent). Complaint Details Smolak is aggrieved by the delay in transferring his fund credit from the first respondent to 10X Fund, which has allegedly caused him financial loss due to the better performance of his chosen investment portfolio at 10X Fund than the first respondent’s. Additional Submissions Transfer Expectations: Smolak expected his fund credit to be transferred to 10X Fund within 60 days of his employment with the third respondent, starting from 1 November 2013. Dispute Over Withdrawal Claim Form: The fund administrator (second respondent) claimed it had received the withdrawal form and paid out the benefit. Smolak denied submitting a withdrawal claim form, arguing the form presented by the second respondent was incorrect, not signed by him and invalid. First and Second Respondents Employment and Transfer Background: The second respondent confirmed that the complainant was initially an employee of JDG Trading, which participated in the first respondent’s fund. In November 2013, the third respondent acquired a division of JDG Trading through a Section 197 transfer under the Labour Relations Act, leading to the complainant becoming an employee of the third respondent. The first respondent applied for a Section 14 transfer to move the affected members’ fund credits to 10X Fund. However, the complainant was excluded due to provident fund contributions received for him in November 2013 in error. Administrative Error and Correction: Upon discovering the error, JDG Trading clarified that the contributions were made by mistake, as the complainant should have been part of the transfer. The first respondent refunded the overpaid contributions to JDG Trading and began applying for the Section 14 transfer of the complainant’s fund credit to 10X Fund. The first respondent stated that it is liaising with 10X Fund to complete the necessary paperwork for the approval of the Registrar of Pension Funds. Fund Value and Deductions: The fund value was R529,173.25 as of 31 October 2013, with deductions relating only to monthly investment fees. Disinvestment and re-investment occurred: R564,399.60 was disinvested on 24 January 2014, and R577,082.34 was re-invested on 18 September 2014. This was due to the incorrect withdrawal claim. Third Respondent Lack of Response: The new employer (third respondent) did not respond to the complaint. Determination and Reasons Delay in Transfer Rule 9.2.3 of the Fund Rules: Specifies that in the event of a section 197 transfer, members’ fund credits should be transferred to the new employer’s approved fund. The failure to do so constitutes a breach of the fund’s rules. Section 14 of the Act outlines the procedural requirements for transfers, which were not met promptly in this case. Order: The first respondent is ordered to expedite the transfer and provide bi-monthly updates to Smolak until finalisation. Financial Prejudice Delictual Liability: To establish financial prejudice, the complainant must prove wrongful acts, blameworthiness in the form of intention or negligence, and causation of monetary loss. Administrator’s duty to act with due care and diligence: A fund administrator must always act in the best interest of members. The failure to perform this duty constitutes maladministration. Actuarial Assessment: An independent actuary concluded that the Alexander Forbes portfolio outperformed the 10X Fund from the complainant’s exit from the transferor fund until the transfer of the fund value to the transferee fund, indicating no financial loss from the delay. Disinvestment Loss: The disinvestment and subsequent re-investment of Smolak’s fund credit in the transferor fund resulted in an investment return loss of R36,530.95 as of 31 October 2016. Order Credit for Investment Loss: The first respondent is to credit Smolak’s fund value with R36,530.95 plus interest for October 2016. Expedite Transfer: The first respondent must expedite the section 14 transfer and provide updates every two months. Provide Benefit Statement: An updated benefit statement must be provided within three weeks and annually until the transfer is finalised. Conclusion The delay in transferring PT Smolak’s fund credit from the first respondent to 10X Fund constitutes a breach of the fund rules, requiring corrective actions as outlined in the Tribunal’s order. However, no financial prejudice was found due to the portfolio performance. The wrongful disinvestment must be compensated. Editor’s comment: From the case report, I conclude that the adjudicator’s order that the transferor fund pay an additional R36,530.95 was due to a misunderstanding of the facts. The actuary calculated the transfer value in the underlying portfolio of the transferor fund from the exit date to the date of payment to the transferee fund. The additional payment covers the period for which the actuary calculated the loss and amounted to duplicating investment returns for the period the capital was incorrectly disinvested and re-invested. Does the transferor fund now have to appeal against the adjudicator’s order for the additional payment? Read the determination here…


SNIPPETS FOR THE PENSION FUND INDUSTRY

What you need to save to retire comfortably

	The article “What you need to save in your 20s, 30s, and 40s to retire comfortably in South Africa” emphasises the importance of early retirement planning due to South Africa’s low savings rate. It recommends aiming for a retirement income of 75% of one’s current salary. Key points include: Statistics on Savings Behavior: A survey revealed that 46% of South Africans focus on present needs over future savings, 44% are not actively saving, and 33% have no retirement plan. The 10X Investments Retirement Reality Report indicates a minimal change in saving behaviours, with many lacking confidence in their retirement plans. Savings Recommendations: Financial adviser Marnus Mostert suggests saving 12% of your gross monthly salary starting at age 25, which rises to 21% by age 35 and 40% by age 45, to achieve a 75% salary replacement ratio by retirement at 65. Assumptions include a R40,000 monthly gross salary, a 10% investment growth rate, a yearly savings increase by 5.5%, and a life expectancy until age 90. Savings Breakdown: Age 25: Save 11.85% of the gross salary (R4,741 per month) Age 35: Save 20.45% of the gross salary (R8,182 per month) Age 45: Save 39.18% of the gross salary (R15,672 per month) Age 55: Save 98.68% of the gross salary (R39,470 per month) Additional Advice: Increase savings contributions by 10% annually and re-invest tax refunds to enhance retirement savings. General Rule of Thumb by Ninety One: Start saving at 20: Set aside 15% of pre-tax salary for 40 years. Start saving at 30: Save 30% of pre-tax salary annually. Start saving at 40: Save 60% of pre-tax salary annually. Milestones: By age 25, save one annual salary; by 40, five times the salary; and by 50, ten times the salary to be on track for a comfortable retirement. Read the full article by Malcolm Libera in Wealth of 13 June 2024 here…

Three common mistakes investors make

	The article discusses three common mistakes that investors often make and provides strategies to avoid them, thereby improving investment performance. Drawing a parallel with Michael Johnson’s quote about self-defeat, the article suggests that investors are often their own worst enemies. Trying to time the market: Investors often attempt to buy low and sell high based on market conditions, but this strategy is mainly ineffective. Emotional decisions driven by greed and fear can lead to poor timing, causing investors to miss out on market recoveries. For example, missing just a few of the best trading days in the S&P 500 over 20 years can drastically reduce returns. Instead, investors should align their strategies with risk profiles and use dollar-cost averaging to mitigate timing errors. Panic selling: Due to loss aversion bias, investors are prone to selling during market downturns to avoid perceived losses, which only become real when the investments are sold. The key is to accept market volatility and maintain a long-term perspective, avoiding the impulse to sell during short-term market fluctuations. Investing in fads: Chasing investment trends without solid rationale can lead to inflated valuations and potential losses. Instead, investors should make decisions based on robust analysis and informed advice, focusing on long-term performance rather than short-term gains. By avoiding these mistakes and adopting a disciplined, well-informed investment approach, investors can better protect their portfolios from emotion-driven decisions and market misinformation, ultimately enhancing their investment performance. Read the article by Sean Kelly in Moneyweb Magazine, 10 June 2024 edition here…


SNIPPETS OF GENERAL INTEREST

Dodgy sick notes – what employers need to know

	This article deals with a South African Labour Appeal Court (LAC) ruling that employers cannot dismiss employees for misconduct based on suspicions about the validity of a medical certificate issued by a doctor. This decision stems from a 2018 case involving a Woolworths employee dismissed for submitting a medical certificate from a doctor suspected of selling fake certificates. Woolworths argued that the certificate was irregular, but the Commission for Conciliation, Mediation and Arbitration (CCMA) found the dismissal unfair due to lack of evidence proving the employee was not sick. The Labour Court and, subsequently, the LAC dismissed Woolworths’ appeals, emphasising that suspicion alone is insufficient for disciplinary action. Employers need concrete proof of misconduct or tampering with medical certificates. Employment law expert Chloë Loubser advises employers to be cautious when doubting the integrity of an employee’s sick note and suggests that they should inform employees about suspicious practitioners only after thorough investigations. Read the article by Seth Thorne in Moneyweb of 29 June here…

Five powerful ways to master self-discipline

	Self-discipline is critical to effective leadership and personal fulfilment, enabling achieving meaningful goals amid distractions and temptations. Here are five powerful ways to master self-discipline: Know about your strengths and weaknesses Understanding our strengths and weaknesses is crucial. It guides our actions and decisions, helping us prioritise effectively. Set clear goals To attain higher levels of self-discipline, clarity in your goals and a personal definition of success are essential prerequisites. Practice daily diligence We aren’t born with self-discipline. It’s a learnt behaviour. And just like any other skill you want to master, it requires daily practice and repetition. It must become habitual. Create new habits When acquiring self-discipline and building new habits, focus on simplicity rather than the entire task to avoid feeling overwhelmed. Forgive yourself and move forward Despite our best intentions and carefully laid plans, setbacks are inevitable. Embrace your journey with its ups and downs, celebrate successes, learn from failures, and keep moving forward. By Rishabh Chauhan, in India Today of 13-06-2024.


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. "The life of money-making is one undertaken by compulsion, and wealth is evidently not the good we are seeking; for it is merely useful and for the sake of something else." ~ Aristotle (384 BC – 322 BC)

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