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| Issued October 2024 | ||||
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| In this newsletter... | ||||
| Benchtest 09.2024 – it is not easy doing business in Namibia, is the old age grant taxable, and more... | ||||
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| IMPORTANT NOTES AND REMINDERS | ||||
NAMFISA levies
BIPA released an urgent notice calling on all persons owning immovable property through a legal entity to comply with the beneficial ownership requirements. Failure to comply could entail deregistration of the legal entity and the property falling to the state. If you missed this notice, download it here... Repo rate declines in October The repo rate was reduced by 0.25% on 16 October to 7.25%. The interest rate on funds’ direct loans will reduce to 11.25% from 1 November 2024. |
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 download documents to assist with governance and management of private funds, registered as of June 2024, 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 'Snippets for the pension funds industry,' 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 September 2024 |
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| In September 2024, the average prudential balanced portfolio returned 1.8% (August 2024: 1.3%). The top performer is NAM Coronation Balanced Plus Fund, with 2.7%, while Stanlib Managed Fund, with 1.0%, takes the bottom spot. M&G Managed Fund took the top spot for the three months, outperforming the ‘average’ by roughly 0.8%. Stanlib Managed Fund underperformed the ‘average’ by 1.3% on the other end of the scale. Note that these returns are before (gross of) asset management fees The Monthly Review of Portfolio Performance to 30 September 2024 reviews portfolio performances and provides insightful analyses. Download it here... |
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| Avoid any permanent loss, but be prepared to give up value. | ||||
| If you own something you do not use, chances are you will lose – “use it or lose it” is a rugby rule. It applies to all spheres of life. No one can take what you use from you if we equate ‘using’ to ‘consuming. This wisdom also applies to your investments. Since you do not use your investments, chances are you will lose. This is not to say that you will permanently lose, but there will be times when you will lose. The best thing you can do is to be prepared for losing at times. One also needs to distinguish between different types of losses, namely, temporary and permanent losses. You cannot recover a permanent loss as opposed to a temporary loss. To the analogy of a house: if you bought the house for N$ 1 million and the valuator now values the house at N$ 850,000, you made a temporary (or unrealised) loss. The market may pick up again in a year when the home may be worth more than N$ 1 million. However, if you sold the house for N$ 850,000, you made a permanent (or realised) loss. If you own shares in a company listed on the stock exchange and its price declines, it is only a temporary loss. However, it is a permanent loss if the company goes into liquidation (like Steinhoff). Since we are dealing with pension funds and personal investments, in terms of market conditions, we find ourselves in a situation where we feel we have been on a losing streak for quite some time. But how do you define loss in these circumstances? Is it a loss relative to inflation, or is it a loss relative to the returns one has seen in investment markets until the advent of the financial crisis (GFC) at the end of 2008? I suspect many investors are still clamouring for past returns of 20% and more. Importantly, it should only be your above-inflation return; inflation should be your bottom line! Where would you have invested had you anticipated developments in financial markets since the financial crisis? It was not too difficult to predict the impact of quantitative easing, the low interest rate environment, and the COVID-19 stimulus. Still, no one would have expected such a strong recovery for the four years since the GFC, followed by a flattening of financial markets afterwards. What alternative investments could you possibly have made in anticipation of what was expected - property, life stock, vintage cars or other exotic objects? Well, test them one by one. Property in Namibia would not have been a good idea until the COVID-19 shock. Life stock in Namibia would have been a dull investment. Gold or any other exotic object? Read paragraph 6 of the Monthly Review of Portfolio Performance to 30 September 2024 for our views on investment markets and global political developments. It also reviews portfolio performances and provides insightful analyses. Download it, here... |
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| Will the government do more than pay lip service to improving the ease of doing business? | ||||
| The Fraser Institute measures economic freedom using five key areas, namely: (1) size of government, (2) legal system and security of property rights, (3) sound money, (4) freedom to trade internationally, and (5) regulation. In an article by Robert McGregor of Cirrus Capital on LinkedIn, it was revealed that the Frazer Institute ranks Namibia in the 113th position (of 165 countries measured) for economic freedom. According to the author, “This puts Namibia in the third quartile. While Namibia has improved her score to decent levels for Size of Government and Sound Money, Namibia scores poorly (and her score has deteriorated) for Legal System and Property Rights (owing to crime and court backlogs, amongst others), Freedom to Trade Internationally (given tariffs and other protectionist measures), and Regulation (particularly on business regulation and freedom to compete). The evidence is clear that the approach to growth, wealth creation and prosperity requires economic freedom. Providing institutions and protections for core principles is necessary, but there must also be allowance for individuals – natural and juristic – the freedom to make their own economic decisions. Unfortunately, Namibia still falls short in allowing such economic freedom.” It is alarming that the government entrusted business regulation and freedom to compete to SOEs, hoping they could outperform the government in achieving its economic objectives. Yet, it is the area where the government’s endeavours are marked down by global research institutions such as the Frazer Institute. We talk a lot about the ‘ease of doing business’ in Namibia and its importance in attracting foreign investment and developing our economy. Yet when you speak to anyone who has to deal with SOEs entrusted with the Regulation of business and freedom to compete, it is a tale of frustration and dismay about the attitude of these regulators. In theory, the CEOs of all SOEs and other government bodies should have a performance agreement. However, if these performance agreements fail to support the government’s objectives, one may ask if they are worth the paper they are written on. Critically, do these performance objectives address the ‘ease of doing business’ in Namibia? To attract foreign capital and grow the economy and employment, Namibia should offer a superior environment for the ‘ease of doing business’ relative to our neighbours. I suggest that the government must ascertain that every new CEO performance agreement of every SOE or government body that is supposed to promote the business environment, economic development, job creation and other socio-economic government objectives must stipulate how their achievement of socio-economic objectives will be measured and must account to what extent there was progress towards the achievement of the envisaged socio-economic objective. In the pensions industry, the following are key metrics and should be measured relative to our neighbouring countries:
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| COMPLIMENT | ||||
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Compliment from a pensioner
Dated September 2024 |
“Dear B You are an absolute star!! Once again proof that RFS / Benchmark outperforms any other fund administrator in town for client service! Much appreciated. Thank you and regards Jens C Kuehhirt t/a JCK Consulting” |
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Read more comments from our clients, here...
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| BENCHMARK: A NOTE FROM GÜNTER PFEIFER | ||||
| Annual member meeting | ||||
| The annual Benchmark Retirement Fund member meeting will be held on Thursday, 21 November, starting at 15h00. Members are invited to save the date for joining the meeting. Further information will follow via the media. | ||||
| Important circulars issued by the Fund | ||||
The Benchmark Retirement Fund issued the following new circulars:
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| NEWS FROM RFS | ||||
| Staff improving their competencies. | ||||
| It is inspiring that RFS staff commit to their ongoing education and professional development. As Nelson Mandela once said, “Education is the greatest equaliser,” and by investing in the education and training of its employees, RFS is helping to create a more skilled and knowledgeable workforce. As staff members become more competent and knowledgeable, they are better equipped to provide high-quality service to clients and to help the company stay competitive in a rapidly changing market. RFS congratulates the following RFS staff members who have successfully advanced their qualifications! Pursuing further education can be a challenging and arduous road, and the achievement of this milestone is a testament to their hard work and dedication.
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| A gesture of support from the RFS team to the Bible Society | ||||
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The Bible Society launched an essay writing competition at the beginning of August. This is an initiative for Bible engagement among secondary school learners. It approached business associates to sponsor six winners for two tablets, two mobile phones, two smartwatches, and printing paper boxes. RFS decided to sponsor printing paper boxes for N$ 3,200
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In the picture below, Rudigar van Wyk and Crezelda Kooper, Benchmark client managers, handed over the photocopying paper to Mrs. Bernada Nghikevali from the Bible Society.
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| The RETIREMENT COMPASS | ||||
| RFS Fund Administrators sponsor this newsletter as part of its social responsibility and its initiatives to support the retirement fund industry. It aims to provide members of funds managed by RFS Fund Administrators and other parties in their network with retirement funding and planning-related news and insights presented understandably. Read the latest Retirement Compass here... |
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| Important circulars issued by RFS | ||||
RFS issued the following new circular:
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| NEWS FROM NAMFISA | ||||
| FIMA Standards republished | ||||
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NAMFISA has completed its public consultation on Gen.S.10.10 (Outsourcing – prohibition of outsourcing of ‘principal business functions’, as defined and permission of outsourcing of ‘material business functions’ within confines of standard) and Gen.S.10.21 (Treating Customers Fairly) and re-issued these statements following the public’s submission of comments.
Download the final (‘fairly final’) draft general standards, here… |
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| LEGAL SNIPPETS | ||||
| Adjudicator Determination in M Barnard v Momentum RA and Others | ||||
| The complainant was divorced from the deceased member. She claimed that during their marriage, the deceased was financially irresponsible and that she had taken out a retirement annuity policy in his name, paid the contributions and made it paid up before their divorce. She submitted that in their divorce settlement, they had agreed that if the deceased member predeceased her, the benefit would be paid to her. She intended to divide the benefit between their two sons, aged 21 and 23, when their father passed away. She claimed that since she paid for the policy, was the nominee on the policy, was named in his will, and was recorded in the divorce settlement as a beneficiary, she should have been awarded the death benefit. The deceased had a life partner whom he had been in a relationship with for 18 months before his death. They were engaged to be married.p The fund submitted that although the complainant was married to the deceased for 21 years, she was not financially dependent on him at the time of his death, nor was there a maintenance order in her favour following their divorce. The children of the deceased submitted affidavits to the fund stating that they were not financially dependent on the deceased. The fund submitted that the deceased’s life partner shared a joint household with him and shared expenses. She fell within the definition of a spouse as a permanent life partner of the deceased. Based on certain assumptions about the permanent life partner’s level of dependency on the deceased and her projected life expectancy, the life partner’s dependency was calculated by the fund to be R657,094.00. Considering that the amount available for distribution was only R91,761.00, the fund allocated 100% of the benefit to the deceased’s permanent life partner. The fund submitted that the nomination form was not binding and only serves as a guide to the board, which the board may not use to fetter its discretion. Since the value of the benefit was insufficient to cover the life partner’s loss of support, the fund decided not to allocate a portion to the complainant based on the nomination form. The Adjudicator held:
From the Pension Fund Adjudicator’s annual report 2022-2023 |
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| Every annuity is taxable, but what is an annuity? | ||||
| Because an annuity always constitutes ‘gross income’ and is always subject to income tax, it is important to understand what constitutes an annuity. Old age grant In Namibia any citizen is entitled to the state old age grant of currently N$ 1,600 as from age 60. The pensioner has not worked for this ‘windfall’, at least not directly. Is this an annuity and therefor taxable? Well, there is no provision in the Income Tax Act exempting this grant, and the grant is thus clearly taxable, as it is an annuity payable for more than two years, as argued further. The old age grant is, therefore, taxable. Maintenance upon divorce The same question should be posed regarding maintenance payments by one divorced spouse to the other. Section 16(1)(q), however, exempts from income tax “…any amount received by or accrued to any person from such person’s spouse or former spouse by way of alimony or allowance or maintenance…” Regular maintenance payments are, therefore, tax-exempt. Annuities from pension – and retirement annuity funds ‘Closer to home’, the Income Tax Act stipulates in the definition of ‘pension fund’ as follows: “(a) that the fund is a permanent fund bona fide established to provide annuities for employees on retirement or for widows, children, dependants or nominees of deceased employees (i.e. upon death in service)…” The definition of ‘retirement annuity fund’, in turn, provides as follows: “(a) that the fund is a permanent fund bona fide established solely to provide life annuities for the members of the fund or annuities for the spouses' children, dependants or nominees of deceased members …” and goes on “(b) (vii) that where a member dies after he or she has become entitled to an annuity no further benefit shall be payable other than an annuity or annuities…” Take note of the difference in the definition of ‘pension fund’ that merely refers to an annuity for members or their dependants as opposed to ‘retirement annuity fund’ that relates to life annuities for members and annuities for dependants. So, the Income Tax Act distinguishes between annuities and life annuities without defining these terms. In South Africa, two prominent cases in the Appellate Division dealt with this subject. In SIR v Watermeyer, Holmes JA said the following in respect of annuities: “Used in connection with payments, the word, from its very nature, postulates the element of recurrence, in the sense of annual payments (even if made, say, quarterly during the year). This element of necessary annual recurrence cannot be present unless the beneficiary has a right to receive more than one annual payment… Hence, if voluntary and payable at will, de facto recurrent payments do not qualify as annuities.” The decision in KBI v Hogan affirmed the principles laid down in SIR v Watermeyer regarding the characteristics of an annuity. When Inland Revenue responded to a new product in the market referred to as ‘living annuity’ or ‘flexible annuity’ by way of practice note 1/96, it required that “…where the annuitant dies, the annuity available to the deceased’s spouse, children, dependants or nominees, shall constitute an annuity for a minimum of 5 years.” This practice note refers to annuities paid by retirement annuity funds (although it vaguely discusses retirement annuity agreements). Inland Revenue later issued practice note 1/98 that refers to flexible annuities paid by any pension fund and directs that “…where the pensioner dies, the annuity available to the deceased’s spouse, children dependants or nominees, shall constitute a life annuity.” Since the definition of ‘pension fund’ does not require a life annuity in respect of either the member or their dependants, practice note 1/98 is ultra vires Inland Revenue’s powers to the extent that it requires a life annuity for dependants of a deceased fund member. Considering the judgements above, Inland Revenue is probably also wrong in directing that the annuity should be paid for a minimum of 5 years. According to those judgements, living or flexible annuities can thus be accelerated to pay over a minimum of two years to members of pension funds and their dependants and dependants of members of retirement annuity funds. The annuity payable to the member of the retirement annuity fund, however, must be an annuity for life |
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| Can capital be transferred from a retirement annuity fund to an untied insurance product at retirement? | ||||
| It is common practice in the market that members of retirement annuity funds, upon retirement, purchase an untied annuity from an insurance company. Is this practice consistent with the Pension Funds Act and the Income Tax Act? Firstly, NAMFISA has confirmed in writing that it is comfortable for retirement capital to be moved into an untied insurance policy that provides the annuity. Effectively, capital from a pension fund leaves the safety of the Pension Funds Act to move into an insurance policy under the Long-term Insurance Act without any formal requirements. Where the money is paid as a benefit, the beneficiary can remain in the safety of the PFA but is not obliged to do so. The PFA does not prescribe how a benefit must be paid, but the rules would. If the money is not a benefit (i.e. a compulsory transfer), section 14 of the Pension Funds Act prescribes stringent formalities for it to move from a pension fund to any other person. A benefit is an amount accrued to the member legally entitled to it. The Income Tax Act (ITA) determines how any benefit is taxed. Thus, if it is a benefit, it is taxable; if it is not a benefit and is moved to any other person, it must comply with the PFA section 14 requirements. Because NAMFISA has not qualified its opinion to only relate to a benefit due to a member (i.e. a voluntary transfer), it has opened the door to move pension funds without the section 14 formalities to any other person even though it is not a benefit. Insurance companies argue that where the rules oblige the member to arrange an annuity at retirement, money due from a pension fund at retirement is not a benefit and not taxable. Inland Revenue bought the argument of insurance companies in support of being allowed to issue untied annuity policies with money derived from a pension fund and to transfer the capital tax-free upon retirement from the fund. (Note: The obligation to buy an annuity can only apply to a pension fund as it would always be optional in a provident fund.) In essence, the status quo means that NamRA considers the capital of untied annuities as retirement fund capital and affords it the same tax preferential treatment as pension funds, even though the link between the retirement capital and the PFA was severed. In contrast, NAMFISA allows the capital to leave the PFA’s safety net without any formality. But what about retirement annuity funds? In the definition of ‘retirement annuity fund’, the Income Tax Act sets out the benefits a retirement annuity fund may provide under various circumstances. In subparagraph (x) it states “that save as is contemplated in subparagraph (ii), no member’s rights to benefits shall be capable of surrender, commutation or assignment or of being pledged as security for any loan.” Subparagraph (ii) states “that no more than one-third of the total value of any annuities to which any person becomes entitled may be commuted for a single payment...” The crux of the matter is the word ‘assignment’. The Oxford English dictionary defines ‘assign’ as “to give something to somebody as a share of work to be done or of things to be used…”. Another dictionary defines ‘assign’ as “allot, apportion, ascribe, transfer”. Unless the annuity is purchased from an insurer in the name of the retirement annuity fund, it would imply that the member’s retirement capital is transferred or given to somebody else. My conclusion thus is that a retirement annuity fund cannot allow the purchase of an annuity from an untied insurance product once a member becomes entitled to a retirement benefit. |
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| SNIPPETS FOR THE PENSION FUND INDUSTRY | ||||
| Invest Offshore with your eyes wide open. | ||||
This article discusses the complexities South Africans face when investing offshore, particularly for currency diversification or hedging against currency volatility. Key issues include:
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| Should I invest in an annuity or property for a better return? | ||||
In this conversation, a reader asks an investment expert two questions.
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| SNIPPETS OF GENERAL INTEREST | ||||
| Navigating the authentic leadership tightrope | ||||
| As leaders, we often find ourselves walking a tightrope between our genuine emotions and the expected display of positive, supportive energy for our teams. This emotional labour can be challenging but is essential to effective leadership. So, how can we authentically manage this delicate balance? Let's explore some techniques to help us navigate the world of leadership with authenticity and empathy. Do an Emotional Audit: Start by taking a moment to reflect on your emotions. Ask yourself: What am I feeling right now? Where in my body do I feel it? What is causing these emotions, and how do they differ from what's expected of me? This reflective exercise can enhance your emotional intelligence and self-awareness — two crucial qualities of successful leaders. Reappraise the Situation: To genuinely tap into the positive emotions you're expected to project, focus on finding genuine reasons to feel those emotions. You won't need to fake your feelings when you can identify these reasons. Authenticity shines through when your emotions align with your thoughts and actions. Focus on the Big Picture: Sometimes, it helps to step back and remind yourself why your work matters. Reflect on your leadership's impact on your team, customers, or community. Recognising the positive outcomes your efforts bring can be a source of motivation for both you and your team. Take Time to Reconnect and Replenish: Emotional labour can be draining, so seeking support and practising self-care is crucial. Connect with people you trust, whether your partner, a therapist, or trusted colleagues, with whom you can share your unfiltered thoughts and feelings. Engaging in activities that help you relax and recharge, such as meditation, journaling, art, or nature walks, can also alleviate the toll of emotional labour. Authentic leadership isn't about concealing your true feelings or pretending to be someone you're not. Instead, it's about acknowledging your emotions, understanding their source, and finding constructive ways to align them with your leadership responsibilities. By practising these techniques, you can become a more authentic and effective leader who empowers your team while staying true to yourself. Source: Business Buzz (the Namibia digital newsletter) of 30 September 2024. |
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| Rethinking Employee Benefits – tailoring rewards for true impact | ||||
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This article emphasises the need to modernise traditional employee benefits (EB) to better address the diverse needs of today's workforce. While existing EB packages often suffice for mid- to high-income earners, lower-income employees, mainly blue-collar workers, are underserved. They typically receive limited benefits like funeral cover and small savings, leaving their broader needs unmet.
Botes argues for a more inclusive approach, urging HR professionals to customise benefits based on income levels. Low-income employees' access to affordable healthcare, such as subsidised primary healthcare plans, could significantly improve their well-being. Additionally, wellness initiatives should offer mental health counselling, family planning, and financial advice to provide better value. The article also highlights the importance of non-financial rewards. Recognising and rewarding employees for their achievements, whether through bonuses, social recognition, or development opportunities, boosts morale, reinforces positive behaviour, and enhances overall performance. Tailoring benefits and rewards across all income levels fosters a more engaged and motivated workforce. Read the full article by Reo Botes, Managing Executive at Essential Employment Benefits, in Cover September 2024 edition, here... |
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| AND FINALLY... | ||||
| Wise words from wise men | ||||
| "It’s not the employer who pays the wages. Employers only handle the money. It’s the customer who pays the wages." ~ Henry Ford | ||||
| 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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