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Benchtest Newsletter
Issued June 2023
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In this newsletter
Benchtest 05.2023 – Is China back in vogue, changes to FIMA standards, the Minister’s FIMA committee, and more...
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Jump to...
Important notes & reminders
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NAMFISA levies
- Funds with June 2023 year-ends must submit their 2nd levy returns and payments by 25 July 2023;
- Funds with December 2023 year-ends must submit their 1st levy returns and payments by 25 July 2023;
- and funds with July 2022 year-ends must submit their final levy returns and payments by 31 July 2023.
Repo rate increases once again
The Bank of Namibia announced an increase in the repo rate from 7% to 7.5%. The interest rate on funds’ direct loans will increase to 11.5% effective 1 July 2023. Loan repayments must be adjusted accordingly.
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... |
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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 6075)
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 2022, here...
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Newsletter
In this newsletter, we address the following topics:
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In 'Tilman Friedrich's industry forum' we present...
- Monthly review of portfolio performance – 31 May 2023
- Is China back in vogue?
- FIMA bits and bites – the latest changes to subordinate legislation
- The FIMA TAC – will it be able to deliver?
- A regulator is obliged to serve its clientele
- Does the Minister not care about employers?
- Benchmark’s unique children’s pension product
In Compliments, read...
- A compliment from a pensions administration officer
In ‘Benchmark: a note from Günter Pfeifer’, read about…
- Important circulars issued by the fund
In 'News from RFS', read about...
- Long-service awards complement our business philosophy.
- Important circulars issued by the fund
In 'News from NAMFISA', read about...
- 30 March 2023 Industry Meeting minutes
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In 'Legal snippets,' read about...
- Payment to a beneficiary fund
- How rules can change the outcome for survivors
In 'Snippets for the pension funds industry,' read about...
- Highlights from Sanlam SA’s benchmark survey
- Beginning of the end of unit trusts in SA
In ‘Snippets of general interest', read about...
- Nominating an executor – key factors to consider
- Nine rules of thumb for the young investor
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
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 Tilman Friedrich's industry forum
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Monthly Review of Portfolio Performance
to 31 May 2023
In May 2023, the average prudential balanced portfolio returned 0.7% (April 2023, 2.3%). The top performer is NAM Coronation Balanced Fund, with 2.1%, while Momentum Namibia Growth Fund, with -0.3%, takes the bottom spot. Hangala Absolute Capital Balanced Fund took the top spot for the three months, outperforming the 'average' by roughly 2%. M&G Managed Fund underperformed the 'average' by 2.1% 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 31 May 2023 provides a full review of portfolio performances and other insightful analyses. Download it here...
Is China back in vogue?
In the latest diplomatic charm offensive, US foreign secretary adopted a totally different posture towards China during his visit. He did his utmost to flatter China as a global superpower and eye-level partner of the US. This is the same person who was vociferous in his anti-China polemic, the same government that sent high emissaries to Taiwan and made a point of challenging China by sending warships to the South China Sea, imposing sanctions on the export of microchips, edging Huawei out of 5G projects across Western countries, and much more, knowing full well that it would upset the China-US relationship. Even Germany has changed its tone towards China and recently approved China’s investment in the Hamburg Container Terminal business. Could it be that the Doves, spurred on by other US commercial business interests, took control of US foreign policy? Or is this just a ploy by the US government to appease China pretending not to present any threat to it, and to secure China’s cooperation and support in subjugating Russia (as a first step)?
The Monthly Review of Portfolio Performance to 31 May 2023 also reflects the editor’s views on current developments and their impact on investment markets. Download it here...
FIMA bits and bites – the latest changes to subordinate legislation (Part 3)
Contributed by Carmen Diehl
Senior Manager: Fund Accounting and Compliance
Background and status of FIMA subordinate legislation:
NAMFISA invited its regulated industry impacted by implementing the Financial Institutions and Markets Act No 2 of 2021 (‘FIMA’) (‘Industry’) to comment on FIMA subordinate legislation.
NAMFISA uploaded the revised standards and regulations incorporating NAMFISA responses on Industry representations on the NAMFISA website.
Since the changes to subordinate legislation are extensive, we brought these to you in this and the previous two newsletters. This exposition is the third and last contribution. The previous one appeared in Benchtest 05.2023.
Main changes identified that affect administrators and funds:
| Regulation / standard |
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- RF.S.5.19
Matters to be communicated to members and contributing employers and minimum standards for such communication
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- Clause 6(a) was adjusted to require the benefit statement of a defined contribution fund to include the member’s residential address (previous version: municipal address).
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- RF.S.5.19
Matters to be communicated to members and contributing employers and minimum standards for such communication
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- Clause 6(c)(h) required the benefit statement of a retired member of a defined contribution fund who has elected a programmed withdrawal scheme to reflect the projections of potential retirement benefits under different investment scenarios.
The revised version requires that the projections be based on three year or five year historic returns of the member’s current investment portfolios and then projecting end values using the same historic returns as well as scenarios with returns at 80% and 120% of the historical returns.
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- RF.S.5.23
The fee that may be charged to members for copies of certain documents
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- Clause 5(1) has been amended to limit fees for a paper copy of a document to which clause 3 applies that are charged by a fund on a cost recovery basis (previously: may not exceed the lowest cost of copying the document in question set in the commercial market for making copies at that time.)
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- Revised trustee tenure of office (clause 24):
- No trustee may serve more than three consecutive terms, and the tenure for one term may not exceed three years.
- After serving the maximum of three consecutive terms, a minimum period of at least three years must lapse before the same person may be appointed or elected as trustee again.
- (Previous version: No trustee may serve more than two consecutive terms.)
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- Revised auditor tenure of office (clause 25):
- The auditor may not serve for more than six consecutive years and comply with partner rotation requirements.
- After serving as the auditor for the maximum period of six consecutive years, a minimum period of at least three years must lapse before the same auditor may be appointed again.
- (Previous version: Auditor may not serve for more than two consecutive terms)
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- Clause 44: Risk management policy to be reviewed at least every two years (previous version: annual review)
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- Addition of clause 67:
The following transactions are prohibited:
(a) financial donations by the fund administrator or sponsor of a fund to the fund; and
(b) the subsidisation of the fund expenses by the fund administrator or sponsor of the fund, except for financial donations made, or the subsidisation of expenditure related to the fund’s incorporation or registration.
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Editor's Comment
With the changes and new standards issued, the number of compliance requirements we identified increased from just over 600 to 758! It goes beyond anyone’s imagination and substantiates the fact that FIMA does not constitute a move from compliance to risk-based supervision but rather the opposite!
Something has gone seriously wrong with this monstrous new law. We should stand back now and ask ourselves, “Is this what Namibia can afford and needs and what we want to achieve?” I fear that we have gone so far down the path and have invested so much energy and resources that we will rather close our eyes and carry on, whatever the consequences may be!
The FIMA TAC – will it be able to deliver?
According to NAMFISA, it did adequately consult the public on the FIMA and its subordinate legislation (standards and regulations). The industry generally expressed frustration with having been informed but not heard by NAMFISA. Compulsory preservation was one of many issues we raised in this newsletter. Unfortunately, our concern on this and so many other topics were disregarded.
When the proverbial pawpaw hit the fan on compulsory preservation, the Minister very quickly postponed the FIMA implementation and appointed a technical advisory committee (TAC) primarily to review the one matter that caused an uproar in social media.
Click here to find out about the TAC.
I noted that the Minister’s media release on the TAC first states that NAMFISA is represented on the Committee as the secretariat for the TAC. However, where it names the persons, two senior NAMFISA officials intimately involved in the FIMA drafting process are listed as committee members.
I identified only one industry expert (other than the NAMFISA representatives) among the 36 members of the Committee. The expert was appointed as chairperson. Since the role of a good chairperson is to lead orderly meetings, he will unlikely use his expertise to influence any decision. As a result, the two NAMFISA experts will most likely have their way of guiding decisions toward meeting their regulator’s brief.
I fear that the Committee may not deliver on its mandate and the expectation of providing unfettered, objective, and untainted advice on the whole Chapter 5 spectrum to the Minister and that the Minister will be confronted with compulsory-preservation-like surprises and other embarrassing, unexpected consequences as long as he may serve as line Minister.
A regulator is obliged to serve its clientele
As a business, my attitude towards my clientele will determine if I am worthy of its support and will flourish or if my competitor will be bestowed with its support, and I will vanish. In business, one often faces situations where the rules can be interpreted differently. One now has the choice between being dogmatic by applying your interpretation. Alternatively, one can be pragmatic by accepting the client’s interpretation if it’s ‘no skin off your nose’. Serving the client’s needs rather than ego will determine the business’s success. Even our government recognises its responsibility to serve its clientele and is undertaking many efforts to get its employees to live the government’s philosophy and to create a competitive environment for providing commercial services.
A regulator has a statutory obligation to enforce the law assigned to it. A regulator is a monopoly because there cannot be more than one institution with the same responsibility. However, does it mean a regulator should not serve its clientele because it is a monopoly? Having dealt with regulators throughout my career, I know there are pragmatic and dogmatic regulators. When one’s business depends on a regulator for running an effective business, the regulator's attitude makes a huge difference to one’s well-being. Do regulators realise how their attitude can impact their legally entrusted clientele’s well-being, or do they even care?
The minutes of the last industry meeting, referred to under the NAMFISA column below, are worth studying. NAMFISA decided to implement ‘block periods’ to submit rule amendments. Industry raised several valid concerns. The regulator’s responses to some of the concerns are telling. One would have preferred to experience a spirit of pragmatism and try understanding the practical aspects of pension fund management. Instead, the practitioner is left with the challenge of adapting his systems and procedures and coercing his clients to adapt their routines and procedures to fit into the regulator’s framework.
Employers not important to the Minister?
The Namibian Employers Federation (NEF) is an active and vibrant organisation delivering great value to its employer members.
Yet, when the Minister of Finance compiled the Technical Advisory Committee (TAC) to consult the broader public on the proposed Regulation RF.R.5.10 on the preservation of retirement benefits and to provide recommendations on any matter on Chapter 5 of the FIMA for consideration, the Minister did not consider it appropriate to invite any representatives from the NEF despite the media release on the TAC’s inauguration claiming that the NEF is represented. One hopes that it was merely an oversight and that the NEF’s invitation will follow, or else it would cast a question mark on the much-professed ‘PPP’!
Benchmark’s unique children’s pension product
Over the past 24 years, RFS built up an excellent reputation in the market. It started from scratch in 1999 and is the largest private fund administrator by some measures. RFS was founded by Namibians, only operates in Namibia, and is owned by its management and staff, distinguishing it from all competitors.
RFS is a business driven by an entrepreneurial spirit and the best interests of its stakeholders, including pension funds and their members. Short-term profit motives never drove it, and RFS has forsaken many opportunities for short-term gain in the interest of its long-term sustainability. We aim to create a happy working environment for all staff and satisfied clients. Our track record of retaining and regaining clients bears testimony to this philosophy.
Soon after the company was founded and still struggling to establish itself in a market controlled by foreign operators, RFS founded the Benchmark Retirement Fund (BRF). BRF adopted RFS’ business philosophy and delivered exceptional growth, from zero to being the thirds largest fund, measured by assets under administration! In the early days, the Registrar, still in the Ministry of Finance then, implored RFS to provide coverage to small groups, which found no accommodation elsewhere. Over the past 23 years, the fund developed a unique range of products that accommodates one-man businesses to the largest funds. It accommodates individuals preserving for their retirement, pensioners, and children of deceased members. All products we developed were our response to existing and prospective market needs.
When the Receiver of Revenue informed pension funds in the early 2000s that a minimum of 34% of the deceased member’s capital must be paid out through annuities, the market faced a severe dilemma regarding children’s and other small annuities. There were no products available in the market. In a very short time, RFS developed a product for Benchmark Retirement Fund that allows it to offer children annuities and other small amounts that found no accommodation elsewhere. It will have been a great relief to many pension funds obliged to provide annuities to beneficiaries of deceased members. Because of the small amounts typically involved, RFS introduced a much-reduced fee scale for such small amounts so as not to defeat the purpose of this product.
When RFS designed BRF and new products, it has always been and still is very wary of monopolising any aspect of the fund. Instead, it consciously ensures that participants may freely choose from alternative product and service providers. Beneficiaries of deceased members also may arrange an annuity with any product provider of their choice. BRF is unique in this respect. RFS only provides the administration service to the fund, which is RFS’ core business and the reason for having established BRF, and it cannot efficiently be split up between different providers. However, it remains a decision of the fund’s trustees.
Over the last few months, the product RFS designed for children of deceased fund members got into the headlines in the media. When creating a product, RFS must recognise possible tax and pensions law implications and rely on legal opinions if the law is unclear. Sometimes such legal opinions are contradicted by the opinion of other seasoned legal experts, as was the case with the annuity for children of deceased fund members. It was initially considered a death benefit when the child dies. The legal expert reasoned that it is not a death benefit as it was already allocated by the fund under the relevant section of the PFA when the fund’s member passed away and that it vested in the child enjoying all protections of the PFA! No one can, therefore, lay hands on the child’s pension fund benefit, be it in the event of sequestration, an execution order against the child’s estate, or its insolvent estate, which should be applauded by every pension fund member and their dependants. The child’s guardian may also not cede, transfer or hypothecate the child’s pension fund benefit, which may not always suit the guardian. Consequently, the capital left over after the passing of a child beneficiary must now be paid to the child’s estate instead of being redistributed by BRF’s Trustees as before. Therefore, RFS prepared an amendment to the fund’s rules and recommended that the trustees amend the rules accordingly.
Fund members or beneficiaries can arrange an appointment with RFS to clarify doubts. As the fund sponsor, RFS is open to providing all required information and acts strictly in the interests of the fund, its members, and beneficiaries. RFS is proud and operates in line with its well-established and proven 24-year track record and reputation, both unequivocally recognised in the market!
Tilman Friedrich is a chartered accountant and a Namibian Certified Financial Planner® practitioner, specialising in pensions. He is a co-founder, shareholder, Chairman of the RFS Board, retired chairperson, and now a trustee of the Benchmark Retirement Fund.
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 Compliment
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Compliment from a pensions administration officer
Dated 5 June 2023
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“Dear Ladies and Gentleman
That is amazing service, thank you very, very much. I didn’t expect such a fast response and it’s really appreciated…
Thank you and best regards.” |
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Read more comments from our clients here...
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Benchmark: a note from Günter Pfeifer
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Important circulars issued by the Fund
The Benchmark Retirement Fund issued the following circular in May:
- Circular 202305 – ‘clarity on withdrawal benefits for members eligible for early retirement’.
Clients are welcome to contact us if they require a copy of any circular.
Günter Pfeifer was the Principal Officer and a trustee of the Benchmark Retirement Fund for many years. He holds a Bachelor of Commerce (Cum Laude). Günter completed his articles with Deloitte & Touche in Windhoek. He completed the De Beers ‘Program For Management Development’ at Gordon Institute for Business Science and the Advanced Development Program at the London Business School. He was formerly the Financial Manager of De Beers Marine.
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News from RFS
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Long service awards complement our business philosophy
RFS’ business is primarily about people. Whenever a fund changes its administrator, it loses fund information and knowledge. Similarly, every time the administrator loses a staff member, our clients lose corporate memory. As a small Namibian organisation, we cannot compete with large multinationals technology-wise because of the economies of scale, and sophistication global IT systems offer. We differentiate ourselves through excellent personal service and commitment to our clients, and IT systems that are more flexible, versatile and adaptable, and more appropriate for the Namibian environment. We are proud of our staff retention as we know that it is the key to our success!
5 year anniversary
- Leande de Bruyn (1 July)
- Helena Simon (1 July)
- Menesia Nangolo (1 July
We express our sincere gratitude to Leande, Helena, and Menesia for their loyalty and support over the past five and fifteen years and look forward to their continued dedication and commitment to the company, our clients, and our colleagues!
Important circulars issued by RFS
RFS issued the following circulars in May and June:
- Circular 2023.05-02 – ‘Administration system exploration’
- circular 2023.06-03 – ‘Confirmation of registered service providers.’
Clients are welcome to contact us if they require a copy of any circular.
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 News from NAMFISA
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30 March 2023 Industry Meeting minutes
NAMFISA circulated the minutes of the industry meeting held on 30 March 2023. The meeting was attended by 21 NAMFISA representatives and 26 persons representing 11 private funds (5 administered by RFS), six service providers, and the RFIN. Here are some of the key topics discussed:
- NAMFISA will share the updated fund re-registration plan under the FIMA with the industry.
- NAMFISA will introduce ‘block periods’, from 1 January 2024, for rule amendment submissions from 1 May until 1 July and from 1 September until 1 November. No rule amendments will be considered outside these block ‘periods’. However, where an amendment affects the financial position of a fund, NAMFISA will consider an application “on an urgent basis”. NAMFISA will also consider extending the second block to 23 December and will inform the industry. Funds must adapt their annual meeting plan to fit in with NAMFISA’s ‘block periods’ where the meetings routinely result in rule amendments, such as investment manager or portfolio changes. By implication, all service providers must change the routine of their fee and cost revisions to fit in with these ‘block periods’ and their clients’ programmes.
- Rule amendments must now be submitted in tabular form showing the before and after wording and the reasons for the change.
- NAMFISA conducted an exercise on fund management costs across the entire industry and computed different ratios for the industry to serve as a benchmark. The information will be shared with the industry.
- The NAMFISA board approved 37 standards and seven regulations relating to pension funds. These were published on the NAMFISA website and cannot be revisited until the FIMA is promulgated. Once it is, the public will have another 30 days to comment. NAMFISA is willing to have another face-to-face meeting to review the rejected industry comments and may accept some of these if they are raised within the 30-day period referred to.
- Three draft standards were issued for comment (GEN.S.10.2 -fit and proper; GEN.S.10.10 – outsourcing and GEN.S.10.21 – treating customers fairly).
- NAMFISA provided an exposition on the annual returns (71 active funds; total assets – N$ 204.6 bn; 46% of investments invested in shares, 35% in bonds, a total of 50% in Namibia and 30% offshore; 334,000 contributing members, 41,000 pensioners), complaints received (34 in q4/2022 vs. 54 in q3/2022, 7 on non-payment of benefits and six on non-payment of contributions), and its various departments’ functions.
- Rule amendments must be submitted on ERS and as hard copies.
- NAMFISA presented its quarter 4/2022 offsite inspection findings:
- Governance risks
- Board not constituted per rules;
- Fund rules only prescribe two meetings per year;
- Legal, regulatory, and compliance risks
- Increased complaints for non-payment of benefits;
- Late payment of contributions;
- Non-compliance with unlisted investment requirements;
- Strategic risk
- Excessive administrative costs to total costs.
Minister establishes a Technical Advisory Committee (TAC) on the FIMA
NAMFISA sent out the Minister’s media release on establishing a Technical Advisory Committee (TAC) to consult the broader public on preserving retirement benefits. The Minister has postponed the implementation of the FIMA.
Pertaining preservation of retirement benefits, the Committee –
- Must compare with and benchmark to SADC member states, international standard-setting bodies, i.e., the International Organisation of Pension Supervisors (IOPS), and other countries outside SADC concerning policy and legislation regarding the preservation of retirement benefits;
- Facilitate public consultation;
- Submit recommendations to the Minister.
The TAC may also provide recommendations on any matter pertaining to Chapter 5 of the FIMA for consideration by the Minister of Finance and Public Enterprises.
The TAC is comprised of representatives from –
- Ministry of Finance;
- Bank of Namibia;
- RFIN;
- TUCNA, NUNLW, NANLO;
- Pension funds that are not RFIN Members;
- Employers Federation.NAMFISA will act as the TAC’s secretariat.
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 Legal snippets
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Payment to a beneficiary fund
In a complaint relating to the payment of a section 37C benefit to a beneficiary fund, the surviving spouse of a deceased member lodged a complaint on behalf of her two minor children, who had been allocated 15% and 25% of the benefit, respectively. The issue raised in the complaint was the chosen mode of payment by the board of the Fundsatwork Umbrella Provident Fund (“fund”), which was to pay the benefits to the Momentum Umbrella Beneficiary Fund (“beneficiary fund”).
The complainant was aggrieved with the board’s decision to transfer the benefits allocated to the two minor children to the beneficiary fund, alleging that the same occurred without first obtaining her consent. She stated that the benefits do not earn interest in the beneficiary fund. The fund submitted that the law does not specify the factors to consider when deciding whether to pay a minor’s benefit to a beneficiary fund or their guardian. However, in general, it considers the following factors before deviating from paying the benefit to a guardian:
- The amount of the benefit payable to the minor;
- Cost efficiency of using a trust or beneficiary fund;
- The ability and qualification of the guardian to administer the funds;
- Other gains or bequests and the mode of payment of such benefits;
- The age of the minor and the need to ensure that the benefit can be sustained until the age of majority;
- The household circumstances of the minor that may potentially lead to the lumpsum payment not being used for the exclusive use of the minor.
The fund stated that it considered the share of the death benefit allocated to the minor children and that it includes provision for dependency up to age 23. Further, there should be a balance when each of the minors reaches the age of majority. This estimation was based on the total household income considering the deceased’s salary and the complainant’s unemployment status. The deceased’s nomination form nominated the minor children a year before his death. The fund also disputed that the complainant did not provide her consent for payment to the beneficiary fund and stated that the complainant approved the application and payment method regarding the minor children.
The beneficiary fund referred to its rules and stated that the termination date for the minors’ benefits had not been reached. It further provided tables demonstrating that the benefits had indeed earned interest and that the administration costs were not more than the interest earned.
The Adjudicator held that payment in respect of a minor child’s benefit to a guardian should occur in the normal course of events unless there are cogent reasons for depriving the guardian of the duty to administer the financial affairs of his orher minor child. Referring to the case of Ramanyelo v Mine Workers Provident Fund [2005] 1 BPLR 67 (PFA), the Adjudicator reiterated that the board must consider the following factors in determining whether to pay a benefit to the guardian or a beneficiary fund:
- The amount of the benefit;
- The ability of the guardian to administer the monies;
- The qualification (or lack thereof) of the guardian to administer the monies; and
- The benefit should be utilised in such a manner that it can provide for the minor until she attains majority.
In this matter, it did not appear that the board assessed the complainant’s ability to administer the benefit on behalf of the minor children. Her unemployment status did not automatically mean that she could not administer the funds if same was paid to her. Thus, the reasons advanced by the board were not in line with the factors set out in the Ramanyelo matter. However, the fund notified the complainant of the mode of payment in respect of the minor children’s benefits i.e., the fund informed her that the said benefits would be paid to a beneficiary fund and the complainant agreed to this. Having obtained the complainant’s consent, the fund transferred the benefit to the beneficiary fund. Section 37C(2)(a)(iii) of the Act states that payment to a beneficiary fund is deemed to be payment to the relevant dependant.
The Adjudicator held that the fund discharged its duty in terms of section 37C. The complaint was dismissed on the basis that the complainant consented to the payment of the minor children’s benefits to the beneficiary fund. However, the Adjudicator stated that the beneficiary fund should not manage the funds in a manner that current needs are sacrificed to ensure that there is a pay out to the beneficiaries when they attain the majority. The funds should be used to defray current legitimate needs especially as the complainant (their mother) is unemployed.
From the South African Adjudicators 2022 Annual Report
How rules can change the outcome for survivors
We recently had two similar cases with very different outcomes because the respective fund’s rules differed.
In the first case (Fund A), the member retired from her provident fund in November 2022. In her retirement notification, she indicated that she wanted to transfer two-thirds of her retirement capital to Old Mutual to purchase an annuity, as the fund’s rules provided. She then approached a broker who filled in an application form. When the member died three months later, the member and her broker still did not sign the application form. There was, thus, no valid instruction the fund could rely on to finalise her retirement.
In the second case (Fund B), the member also retired. About three months later, the member passed away without exercising his retirement options per his fund’s rules. There was, thus, no valid instruction the fund could rely on to finalise his retirement.
Fund A rule for retirement
- “A period of three months from the MEMBER’S retirement shall be allowed for the MEMBER to advise the FUND in writing as to whether he wishes to receive his retirement benefit in cash or purchase a pension as provided for in cash.
- If, after the expiry of the three months period, the MEMBER has not exercised his retirement benefit option, his retirement benefit will be paid into the Guardian’s Fund for his benefit, whereafter he shall have no further claim against the FUND.”
Fund B rules for retirement
“The Pension payable on a Member's retirement shall be purchased from a Registered Insurer in the name of the Member. The terms and conditions applicable to such Pension, including options elected by the Member and the determination of any benefits arising on his death, shall be subject to the provisions of the Act and shall be set out in writing by the Registered Insurer; provided that the Pension so purchased shall be compulsory, non-commutable, non-assignable and payable for life and the purchase shall be subject to any further requirements of the Revenue Authorities. Each Member hereby appoints the Trustees as his duly authorised agent to do all things necessary to procure the purchase of the Pension.”
The outcome
- Fund A
Before RFS could finalise the member’s retirement claim, her broker notified RFS of her death three months after she left her employer. The problem was that she opted to take 1/3 in cash, and 2/3 should have been transferred to purchase an annuity with Old Mutual. She signed a notice of transfer to Old Mutual, but she never agreed with the final terms of Old Mutual, and no contract between her and Old Mutual was in place by the time of her death. Old Mutual could not accept the transfer since no signed agreement with the member exists. There was, thus, no valid contract between the member and the insurance company the fund could rely on to finalise her retirement. Effectively, the member never exercised one of the available retirement options in the rules when she passed away. The rules do not provide for such an exceptional situation, and the fund must dispose of the benefit under section 37C of the Pension Funds Act. It means the trustees must trace all dependants, consult the member’s written beneficiary nomination and apply their discretion on distributing the available capital between dependants and nominees.
- Fund B
The deceased member never exercised a retirement option under the fund’s rules. However, the rules direct that the trustees must act on behalf of the member. It does not affect the deceased member’s retirement. The trustees must decide whether they will commute one-third of the capital. They must also decide for whom they will arrange an annuity and from which insurer. Conceivably, the trustees should apply section 37C to establish who the dependants were and how much to allocate to each dependant. After that they must arrange an annuity policy for each person to whom they allocated a portion of the deceased’s capital.
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Snippets for the pension fund industry
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Highlights from Sanlam SA’s benchmark survey
Sanlam’s 42nd Benchmark report has painted a bleak picture of the state of retirement and medical aid savings among the population. The highly respected report found 63% of South Africans were anxious about their finances right now, with 87% saying they felt financial stress. For 58%, this was impacting their physical and/or mental well-being.
The lack of adequate savings suggests that concerns about the future are indeed valid. Alarmingly, one in five consumers believed they may never be able to retire at all. A further 42% said they felt a sense of insecurity or lack of control over their financial future…
Among some of the key findings of the 42nd Sanlam Benchmark Report are:
Retirement may be a thing of the past
In 2040, are we facing a South Africa where much of the population never retires? What does this mean in a nation where youth unemployment escalates every year? The Benchmark research revealed that, positively, 75% of respondents contribute to some form of retirement fund… however, 25% do not...
How South Africans are feeling about the Two- Pot System
Findings showed a mix of sentiments around the proposed Two-Pot system for retirement funds…a total of 21% would consider withdrawing funds in an emergency, while 13% expressed a willingness to access a portion of their benefits. A small segment, 8%, said they probably would take advantage of this new system. Interestingly, a resolute 23% stated they wouldn't touch their savings at all.
On the matter of medical aid
44% of respondents enjoyed employer-provided medical aid, highlighting the prevalence of health benefits as part of compensation packages in South Africa. However, the fact that 20% of respondents had no medical aid at all raises concern over the potential financial risks these individuals face in the event of health emergencies…”
Read the full article and get a link to the Sanlam survey results, here...
Beginning of the end of unit trusts in SA
“Bank Zero chairman Michael Jordaan said the Johannesburg Stock Exchange’s (JSE’s) decision to allow active funds to list signals the beginning of the end of unit trusts in South Africa.
On 18 May 2023, the JSE announced the listing of the first Actively Managed Exchange Traded Fund (AMETF) – a collective investment scheme (CIS) listed and traded on the market.
Previously, the only ETFs allowed domestically were those that passively tracked underlying indices or physical commodities.
The first AMETF listing was made possible by amendments to the JSE’s listings requirements in October 2022.
Investment managers are now able to list ETFs with active investment strategies and will no longer be restricted to purely tracking a benchmark…”
Read the article in Daily Investor of 2 June 2023, here…
Editor’s note: It will be interesting to see if Namibia will follow the SA precedent.
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Snippets of general interest
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Nominating an executor – key factors to consider
The role of an executor is to step into your shoes after your death to ensure that your assets are distributed in the best interests of your estate and those that you love. It’s an important job that requires a unique combination of skills to ensure that the estate is administered efficiently, effectively, and timeously.
While you may be tempted to appoint your favourite aunt or your best friend to administer your estate, our advice is to first consider the following:
Special combination of skills
An executor must have a good understanding of business and finance, accounting and tax, as well as the relevant legislation pertaining to estate administration and the law of succession…
Interpersonal skills
An executor plays an important communication and relationship management role in that they are required to collaborate with several different parties including your heirs and beneficiaries, creditors, debtors, business partners, and even those you may have chosen not to include in your will…
Professional expertise
Although our law permits you to nominate a family member or friend as executor, bear in mind that it is up to the Master of the High Court to confirm the appointment. If the Master is not satisfied that the person you have nominated is sufficiently qualified to do the job, they will request that your executor be assisted by a professional agent such as an attorney, accountant or fiduciary specialist.
Location and physical ability
While someone who is not a resident of South Africa may be appointed as executor of your estate, keep in mind that this may cause unnecessary delays and costs to your estate…
Appointing a family member or beneficiary
Although it is possible for a beneficiary of your estate to be nominated as executor, it is important to first understand the difficulties that may arise from such an appointment. In the same vein, appointing a family member or someone who stands to benefit from your will as executor can give rise to family tensions and animosity…
Costs
Executor’s fees are regulated by statute and are set at a maximum of 3.5% (plus VAT) on the value of the gross assets in your estate plus 6% of income accrued and collected after your death. However, in many instances, these fees are negotiable depending on the size and complexity of your estate.
Age, health, and longevity
Other important factors worth considering are the age and health status of the person you have appointed, bearing in mind that certain functions of the executor may require them to attend to certain matters in person, including standing in queues…
Multiple executors
Nominating multiple people as executors of your estate comes with its own set of challenges, so think carefully before appointing more than one person…
Read the full article by Gareth Collier in Moneyweb of 25 May 2023, here…
Nine rules of thumb for the young investor
Adriaan Pask, Chief Investment Officer, at PSG Wealth shares nine rules of thumb for younger investors who want to secure a strong financial future.
Rule 1: Plan to reach your 100th birthday
Many studies have found that advances in medicine, technology and overall quality of life have resulted in the average person’s lifespan increasing by about three years for every ten years that pass.
Rule 2: Consider inflation
Protecting your savings against inflation is crucial.
Rule 3: Start early
When you do not add to- or grow your savings, your required savings rate doubles every decade.
Rule 4: Know where to get ‘bang for your buck’
Investments need to have exposure to growth assets like equities to counter inflation.
Rule 5: Being overly conservative can be a risky strategy
Not all asset classes are engineered to protect savings against inflation. For example, cash is a great way to cater for short-term income needs but is the weakest guard against inflation.
Rule 6: Compound interest is your greatest ally
Over the short term it may not seem like the difference between 7, 8, 11 or 15 percent is all that much, but these differences grow and compound over time.
Rule 7: Risks reduce over time
Although equities can be volatile over the short term, they move closer and closer to their long-term returns as time passes.
Rule 8: The plan is the map, and the map is sacred
Planning and preparation are integral parts of wealth creation. When markets turn volatile (as they often do), it’s important to recognise that these events have already been factored into the plans a financial advisor has prepared for you.
Rule 9: Take advice
Investors who heed the advice of professional financial planners have a better chance of reaching their investment goals.
Read the full article by Adriaan Pask, CIO of PSG Wealth in Moneyweb of 15 June 2023, here…
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And finally...
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Funny anecdotes
ATTORNEY: Doctor, before you performed the autopsy, did you check for a pulse?
WITNESS: No.
ATTORNEY: Did you check for blood pressure?
WITNESS: No.
ATTORNEY: Did you check for breathing?
WITNESS: No.
ATTORNEY: So, then it is possible that the patient was alive when you began the autopsy?
WITNESS: No.
ATTORNEY: How can you be so sure, Doctor?
WITNESS: Because his brain was sitting on my desk in a jar.
ATTORNEY: But could the patient have still been alive?
WITNESS: Yes, it is possible that he could have been alive and practicing law.
From a book called 'Disorder in the American Courts' and are things people actually said in Court, word for word, taken down and now published by court reporters who had the torment of staying calm while these exchanges were actually taking place.
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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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