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| Issued November 2023 | ||||
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| In this newsletter... | ||||
| Benchtest 10.2023 – ethics in governance, tax rulings create legitimate expectations, and more... | ||||
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| IMPORTANT NOTES AND REMINDERS | ||||
NAMFISA levies
BON announced after its October meeting that the repo rate remains unchanged at 7.75%. The interest rate on funds’ direct loans remains at 11.75%. Registered service providers Certain pension fund service providers must register with NAMFISA and report to NAMFISA. Download a list of service providers registered as of June 2023, here... |
Retirement calculator Use our web-based retirement and risk shortfall calculator for your personal retirement planning. Find it here... If you need help with your financial planning, get in touch with
RFS provides comprehensive support for trustees. Find a list of download documents to assist with governance and management of private funds, registered as of June 2023, here... |
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| IN THIS NEWSLETTER... | ||||
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In this newsletter, we address the following topics:
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In 'Tilman Friedrich's industry forum' we present...
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In News from the market', 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 31 October 2023 |
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| In October 2023, the average prudential balanced portfolio returned -1.5% (September 2023: -2.3%). The top performer is Investment Solutions Balanced Growth Fund, with -0.9%, while Namibia Coronation Balanced Plus Fund, with -2.4%, takes the bottom spot. For the three months, Allan Gray Namibia Fund takes the top spot, outperforming the 'average' by roughly 2.4%. Namibia Coronation Balanced Plus 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. (Refer to graphs 3.1.3 to 3.1.5 for a more insightful picture of the relative long-term performances of the portfolios and the asset classes.) The Monthly Review of Portfolio Performance to 31 October 2023 reviews portfolio performances and provides insightful analyses. Download it here... |
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| Navigating the Investment Landscape: A Guide for Residents in the SA Rand Common Monetary Area | ||||
| Investing in the SA Rand CMA presents both challenges and opportunities. By carefully considering the global context, understanding SA Rand's dynamics, and seeking professional guidance, investors can make informed decisions that maximise their potential returns while managing associated risks. The Benchmark Default Portfolio is a globally diversified portfolio appropriate for the average fund member with a long-term investment horizon. Graph 6.2 shows how well the black line of the Default Portfolio stood up against the yellow line of the average prudential balanced portfolio and the various underlying asset classes since 2010. Graph 6.2  The Fund’s board of trustees actively manages it in consultation with NMG, our investment consultants. It is aimed at members and employers who are hesitant to make investment decisions. In the Monthly Review of Portfolio Performance to 30 September 2023, we elaborate on the strategies an investor should follow under the above circumstances. It also reflects the editor’s views on current developments and their impact on investment markets. Download the Monthly Review of Portfolio Performance to 31 October 2023, here... |
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| The Crucial Role of Ethics in Good Governance | ||||
| Ethics lies at the heart of good governance and is pivotal in steering organisations, institutions, and decision-makers toward responsible, just, and transparent actions. In the realm of governance, whether in public administration, corporate management, or boards of trustees for pension funds, the significance of ethical conduct cannot be overstated. It serves as a guiding light in ensuring fair and moral decision-making, especially when significant financial interests are at stake. Importance of Ethics in Good Governance: Ethics within governance acts as the cornerstone of integrity, dictating that decisions should be based on moral principles, fairness, and accountability. This responsibility is paramount for boards of trustees managing pension funds. Trustees are entrusted with the financial security and well-being of the fund's beneficiaries, necessitating ethical considerations in every decision. Consequences of Failing to Apply Good Governance and Ethics: When ethics in governance falter, the repercussions can be dire. It leads to the erosion of trust, financial mismanagement, and compromised integrity and is equivalent to corruption. A lack of ethical practices could result in skewed decision-making, favouritism, or even exploitation, ultimately undermining the intended objectives of the fund and the trust beneficiaries have in the system. Ethical Dilemma in the Case of a Service Provider Offering Reduced Costs: Consider a scenario where a large service provider offers its services to an entity at half the cost of its smaller competitors and well below the cost it charges to other similar entities. This substantial price difference raises ethical red flags. It prompts a moral dilemma for the service provider and the pension fund's trustees. Is it Ethical for the Service Provider to Offer Services at Such Low Costs? From an ethical standpoint, such a steep reduction in service costs may indicate predatory pricing, potentially aiming to eliminate competition unfairly or compromise the quality of services provided. It raises questions about the sustainability and motivations behind such a pricing strategy. An ethical service provider should offer services at a fair price, ensuring quality and sustainability without engaging in practices that undermine healthy market competition. Is it Ethical for Trustees to Accept Such an Offering? Trustees of pension funds must act in the best interest of beneficiaries, focusing on long-term financial stability and ethical considerations. Accepting a substantially lower-cost service should warrant scrutiny. While reducing costs can benefit the fund and its members, the sustainability and quality of the service at such reduced rates must be thoroughly assessed to prevent any compromise in long-term financial health or service standards. Often, large players pursue the strategy of controlling their market. Once they control the market, they can dictate the price and service offering. Such a scenario removes choice and competition and can ultimately disadvantage the consumer of the service. Addressing the Ethical Quandary: How Should the Pension Fund Respond? The pension fund's response to a reduced-cost offering should prioritise the ethical implications. It is essential to comprehensively evaluate the services offered, assessing quality, sustainability, and potential long-term impacts on the fund. Additionally, trustees must ensure that their decision aligns with their fiduciary duty and ethical standards, avoiding shortsighted gains at the expense of long-term stability and choice. In conclusion, the ethical considerations in governance, especially within pension fund management, demand careful and moral decision-making. Trust, integrity, and responsible stewardship of funds are vital for the well-being of beneficiaries. Ensuring fair practices and ethical conduct not only preserves trust but also safeguards the system's long-term financial health and integrity. Such ethical dilemmas must be navigated with careful consideration of all stakeholders' interests, with the primary focus on maintaining ethical standards and the fund's sustainability. |
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| Pension Fund Administration: The Impact of Technology | ||||
| In the ever-evolving landscape of financial services, technology has become pivotal, especially in the administration of pension funds. This technological revolution has significantly transformed how service providers, fund members, and regulators interact and manage pension funds, improving efficiency, transparency, and accessibility. For Service Providers: Technology has revolutionised the operations of pension fund service providers. Automation and digitisation of processes have streamlined administrative tasks, reducing manual errors and enhancing operational efficiency. Advanced software and integrated systems facilitate faster data processing, record-keeping, and reporting, leading to quicker decision-making and better risk management. Moreover, artificial intelligence (AI) and machine learning (ML) applications aid in analysing vast amounts of data, providing insights into fund performance, member behaviours, and market trends. These insights allow service providers to offer members more tailored and informed investment strategies and personalised services. Cybersecurity measures have also become a critical focus for service providers. With sensitive financial data at stake, implementing robust security protocols is essential to safeguarding member information from cyber threats and ensuring data privacy. For Fund Members: The technological advancements in pension fund administration have significantly benefited fund members. Access to online portals and mobile applications enables members to conveniently monitor their pension fund accounts, check contributions, track investment performance, and make informed decisions about their retirement savings. Digital communication tools allow for real-time updates and educational resources, empowering members with the knowledge to make more informed investment choices and retirement planning decisions. Additionally, technology facilitates smoother and more efficient communication between fund members and service providers, reducing response times and improving overall customer service experiences. Conclusion: Technology is revolutionising pension fund administration, offering a spectrum of benefits, from streamlining operations to providing enhanced accessibility and security. The integration of technology has reshaped the pension landscape. However, while technology brings immense advantages, it also introduces challenges, such as new skill sets required from service providers' staff and fund members. It requires stringent cybersecurity measures, ethical use of AI and data analytics, and ensuring that all members have equitable access to technology-based services. The transition usually requires a substantial up-front investment by all stakeholders. The consumer will bear these costs and benefits from its advantages in the final analysis. As technology advances, its role in pension fund administration will continue evolving, promising improvements in efficiency, transparency, and member satisfaction while requiring continued vigilance and adaptability to address emerging challenges. This ongoing evolution will define the future of pension fund administration, shaping the landscape for years to come. |
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| NamRA's AVC rulings and the doctrine of legitimate expectations | ||||
| We have come across two NamRA rulings to two different funds this year, wherein NamRA ruled that additional voluntary retirement fund contributions are tax deductible. In one case, its confirmation of a fund's request omitted the critical word 'voluntary' despite the request referring to it. The second request correctly stated the law and concluded that additional voluntary contributions are not tax-deductible. It argued that they should be allowed as a deduction for the country's greater good. These bring into contention the doctrine of legitimate expectations. Per Black's Law Dictionary, this doctrine means "Expectation arising from the reasonable belief that a private person or public body will adhere to a well-established practice or keep a promise." In a South African Income Tax case, ITC 1682, Judge Davis said that "the expectation must be induced by the decision maker either expressly – by means of a promise or undertaking, or implicitly – by means of settled past conduct or practice …(and) if the public authority conducts itself first to create a legitimate expectation that a certain course will be followed, it would often be unfair if the authority were permitted to follow a different course to the detriment of one who entertained the expectation." The exposition on the legal principle of legitimate expectations primarily focuses on the concept that a public body, such as a revenue authority, may be bound by the doctrine of legitimate expectations. This doctrine stems from the idea that if a public authority creates a legitimate expectation in an individual or entity through its actions or statements, it would be unfair for the Authority to act contrary to that expectation, particularly if the individual has relied on it. NamRA issued rulings to two funds that contradict the relevant provisions of the Income Tax Act. The discussion on the doctrine of legitimate expectations suggests that if the Authority (NamRA in these two scenarios) makes a statement or issues a ruling that creates a legitimate expectation in a taxpayer, and the taxpayer acts upon that expectation, the Authority should generally be bound by it. The doctrine of legitimate expectations is rooted in fairness. It suggests that if these two funds rely on a clear and precise statement or ruling from NamRA and act upon it, NamRA should generally be held accountable if it subsequently decides to act contrary to the earlier statement, causing detriment to the taxpayer. As I pointed out, the first ruling omitted the keyword 'voluntary'. Following the above discussion, NamRA's ruling cannot be interpreted but must be applied to the letter. It means that additional contributions, if allowed by the fund's rules, are tax-deductible but not additional voluntary contributions. Under both rulings, there is one question that begs an answer. The rulings were requested on behalf of an employer and a fund, respectively. The employee benefits from the two rulings, not the employer or the fund. Can the benefitting employee argue that he decided to make additional voluntary contributions under a ruling issued to his employer or fund? Should the rulings not instead have been requested on behalf of the employees? In both cases, I caution the employers from proceeding, assuming that additional voluntary contributions are tax-deductible. Even if NamRA felt morally compelled to allow such contributions, it can reverse its decision at any time for the reasons I gave above. The doctrine of legitimate expectations might make the back-dating of the review a bit more difficult. However, NamRA could still argue that any rational person should have concluded that the rulings were defective. |
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| COMPLIMENT | ||||
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Compliment from a Principal Officer
Dated 11 August 2023 |
“Dear E You were a star for being in a position yesterday to assist me on short notice and almost immediately, when you were the only one in the office, to provide me with an electronic copy of our AFS. Amazing – staff members geared and hands-on to assist on behalf of their colleagues. Much appreciated. Regards.” |
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Read more comments from our clients, here...
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| BENCHMARK: A NOTE FROM GÜNTER PFEIFER | ||||
| Important circulars issued by the Fund | ||||
| The Benchmark Retirement Fund issued no new circulars since announcement no. 8 – appointment of trustee. Clients are welcome to contact us if they require a copy of any circular. |
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| NEWS FROM RFS | ||||
| RFS launches The Retirement Compass | ||||
| This quarterly newsletter is part of our social responsibility and initiatives to support the retirement fund industry. It aims to provide members of funds managed by RFS Fund Administrators and other stakeholders with industry news and insights presented in plain language. We congratulate Sebastian Frank-Schultz on launching this first newsletter under his pen and look forward to future issues. Comments, contributions and suggestions for future content are welcome. Send these directly to This email address is being protected from spambots. You need JavaScript enabled to view it.. Download the newsletter, here... |
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| A night under the African skies | ||||
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RFS celebrated its year-end function under this motto at the SKW courtyard on 3 November. Here are a few visual impressions from this most enjoyable and relaxing occasion to mix and mingle with colleagues and friends.
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The 2023 Social Committee
We say goodbye to the 2023 social committee, l.t.r., Janolene, Timothy, Venessa, Aliza and Sebastian, and thank you for all your dedication and hard work to light up our lifes in 2023! |
The 2024 Social Committee We welcome our 2024 social committee, l.t.r., Wilbard, Richardene, Florencia, Hermine, Cherryl, Cizelle and Elray and look forward to your creativity in shaping our social events 2024! |
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| Important circulars issued by RFS | ||||
RFS issued the following circulars in July:
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| NEWS FROM NAMFISA | ||||
| Date for public comment extended | ||||
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NAMFISA informed the public that the due date for submission of comments on subordinate legislation recently published in government gazette 8237 of 18 October 2023 was extended to 24 November 2023.
Comments must be submitted in the prescribed format. Download the public notice here… The subordinate legislation comprises standards for Collective Investment Schemes, CIS.S.4.8 and 4.22. Gazette number 8237. Download it here… |
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| Notice on inactive foreign funds | ||||
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In a notice to pension fund service providers of November 2023, NAMFISA advises that it will cancel the registration of a fund on proof that it has does not exist anymore. It requests the service providers to revert if they have relationships or hold any assets in the name of the funds reflected on an attached list to provide the contact details on their record to NAMFISA by no later than 30 days from the date of the publication.
Download the notice and attached list here… |
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| News from RFIN | ||||
| RFIN’s trustee training calendar | ||||
| 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 training calendar, you can find it under Education and Training here… |
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| News from the Market | ||||
| M&G offering investment training | ||||
| M&G offers free investment training to trustees and interested service providers. The session duration is about 5 hours, presented either face-to-face or virtually. It is concluded with a test and successful participants receive a certificate. Download a flyer here... |
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| LEGAL SNIPPETS | ||||
| Complaint about non-payment of disability benefits | ||||
| The complaint involved the non-payment of a disability benefit by the Edupen Umbrella Pension Fund to P. Kitzler, a member of the fund and an employee of Mondeor High School. The member's employment was terminated due to ill health, leading to the dispute. Arguments by the Member (Complainant):
Read the determination by the SA Pension Funds Adjudicator here… |
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| Transacting with foreign vendors | ||||
| Funds often acquire services and products from foreign vendors, such as software, consulting services, training, etc. Such transactions may have VAT and Withholding Tax implications. For an answer, one must study the Income Tax Act and the provisions of any double taxation agreement in force between Namibia and the other tax jurisdictions. Failure to comply with the VAT Act and the Income Tax Act concerning Withholding Tax, will expose the fund to penalties and late payment interest. As fund administrators, we do not purport to be tax experts. Such expertise can typically be sourced from Namibian audit firms. In instances where invoices are presented to us for payment in respect of goods or services acquired from a foreign vendor, we presume that the fund has considered the potential implication of VAT (import or normal VAT) and of Withholding Tax the fund may be liable for, as well as any relief granted by the double taxation agreement between the two countries concerned. In our understanding, the purchase of software from a foreign vendor represents a VATable import and VAT should be paid at the same time payment is affected. In our understanding, the cost of attending training or seminars outside Namibia does not represent a VATable import and VAT, if applicable in the foreign country, should be raised by the foreign vendor. Trustee and trainer fees payable to a foreign resident attract Withholding Tax unless the double taxation agreement provides relief. |
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| Revisiting Withholding Tax on services payments to non-residents | ||||
In practice, Namibians, including Namibian pension funds, mostly have dealings with South Africans, and in general, the services provided by South African service providers would be subject to Namibia's double taxation agreement with South Africa. This agreement prohibits the taxation by Namibia of any of the following income –
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| SNIPPETS FOR THE PENSION FUND INDUSTRY | ||||
| High interest rates: Are money market investments a good option? | ||||
| In uncertain and volatile markets, investors seek safety for their accumulated capital. Money market investments offer a safe haven and a sense of comfort in the short term. However, money market investments are unsuitable for long-term investors because they do not provide inflation-beating returns. South African equities and global equities have outperformed inflation over five years. Long-term investors with a somewhat aggressive risk profile should consider investing in South African or international equities. Consulting with a financial advisor can help you make the best investment decisions for your needs. Read the article by Aidan James Freswick of Brenthurst Wealth in Moneyweb of 8 September 2023 here... |
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| Three vital themes for investing over the next decade | ||||
| The Fabiana Fideli argues that long-term investors should focus on three essential themes: the environment, infrastructure, and innovation. The environment is the greatest threat we face in the next decade, and the author lists several companies helping to solve this problem. Infrastructure is another area of opportunity, with a global infrastructure gap of US$15 trillion. She recommends two companies that are making a difference in this sector. Innovation is her third theme, and she highlights two companies at the forefront of this area. She concludes that investing in the next ten years will differ significantly from investing over the past ten years. Investment firms must be prepared for exponential change and the challenges that will come with it. Here are some key quotes from the article:
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| SNIPPETS OF GENERAL INTEREST | ||||
| In retirement, you sometimes have to be cruel, to be kind | ||||
TThis article offers sound advice focused on three crucial areas:
Read The full article by Marius Fenwick in Monweyweb of 18 August 2023 here… |
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| Investing is a journey – advice for young investors | ||||
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Here are 15 steps young investors should follow to achieve investment success. Fund members who may choose different investment portfolios are also encouraged to heed the advice.
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| AND FINALLY... | ||||
| Wisdom from great philosophers | ||||
| "The ultimate economic goal is not to maximise wealth but to create a society of self-sufficient citizens who are not dependent on others." ~ Aristotle This timeless wisdom from an ancient thinker underscores the importance of balancing economic growth with social equity, ethical practices, and a focus on long-term sustainability. By heeding these principles, societies can foster prosperous and resilient economies that benefit all members of the community. |
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| Unsubscribe If you do not want to receive these newsletters {unsubscribe}click here...{/unsubscribe} Disclaimer Whilst we have taken all reasonable measures to ensure that the results reflected herein are correct, Benchmark Retirement Fund and RFS Fund Administrators (Pty) Ltd do not accept any liability for the accuracy of the information and no decision should be taken on the basis of the information contained herein before confirming the detail with the relevant portfolio manager. |
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