Retirement funds worried about FIM Bill

Retirement Fund Solutions believes that the Financial Institutions and Markets Bill would have severe consequences for employers, workers and pension funds.

12 October 2018 | Economics

“For the employer, there will be no incentive to offer a pension fund under the FIM Bill anymore and there is no legal compulsion to do so” - RFS

NDAMA NAKASHOLE

Retirement Fund Solutions (RFS) has expressed concern over the Financial Institutions and Markets (FIM) bill which will soon be tabled in parliament, labelling it an “onslaught on the pensions industry”.

RFS believes that the bill and related developments will have a serious negative impact on everyone who has been saving up for retirement in a pension fund.

RFS board chairman Tilman Friedrich told Market Watch yesterday that the bill is a complex one and its complexity means it will be very expensive to manage.

According to him, the bill, which will regulate insurance companies, medical aid funds, pension funds and other non-banking financial sectors, will require resources to be complied with and since it is costly, all parts involved will spend more money to meet the requirements.

As a result, people who save up for their future in pension funds will have to carry the cost of that.

“There is a whole lot of things around that bill that will require costs,” he said.

During the launch of its annual report on 30 August 2018, Namfisa CEO Kenneth Matomola mentioned the FIM Bill as one of the regulator’s highlight bills that will be promulgated and implemented in the current financial year.

Cause of demise

In a letter to finance minister Calle Schlettwein dated 3 October 2018, Friedrich pointed out some of the key developments which he said are likely to cause the demise of the industry.

According to him, the FIM Act has numerous severe consequences for employers and employees.

Aspects of the bill that will be negative for the industry include Namfisa levies, the Income Tax Act provisions concerning pension funds as well as VAT on asset management services to pension funds.

The establishment of GIPF under a separate law, GIPF using its market dominance and taxpayer guarantees to compete with the private sector on a low-cost ticket under the guise of Kuleni, as well as the establishment of an umbrella fund for SOE pension funds are also some key issues that RFS gave a red flag in the letter to Schlettwein.

According to Friedrich those issues, plus others, have a negative effect on a significant part of the working population in Namibia - people saving for their retirement in pension funds.

Grievances

In its latest newsletter, RFS said that Namibia will be moving into a new era with the advent of the FIM Bill.

It says employers will also be required to support Namfisa in its prudential and market conduct supervisory endeavours.

“The employer will be prohibited from using the pension fund in support of its business objectives to attract and retain staff while the employer, including its directors and officers in their personal capacity, will be facing serious risks.

“For the employer, there will be no incentive to offer a pension fund under the FIM Bill anymore and there is no legal compulsion to do so,” says RFS

For the employee, RFS says the key advantage of a pension fund, namely the strong protection previously offered by Section 37 of the Pension Funds Act, has for all intents and purposes been removed from the FIM Bill.

“For employees earning below the minimum income tax threshold, the income tax regime offers no contribution incentive. For those earning above this threshold, the income tax regime will in many cases actually offer a disincentive,” it further claims.

As far as the tax exempt status of pension funds is concerned, the benefit is not all that meaningful when one looks at the income pension funds typically generate, RFS says.

“The individual investor would pay interest withholding tax on local interest income of a mere 10% and may be exposed to interest withholding tax on interested earned from foreign investments. This basically leaves some rental income of fairly little impact that pension funds typically generate and that is tax free when earned by a pension fund while the individual investor would have to pay tax at marginal rates on any rental income.”

Namfisa’s stance

Erna Motinga, Namfisa’s deputy CEO, last week said the FIM bill had been sent to the attorney-general for certification for submission to the National Assembly.

When she gave an industry overview at the African Insurance Organisation’s Reinsurance Forum held in Windhoek last week, Motinga said the bill would encourage localisation of core functions away from remotely controlled asset managers.

The envisaged regulatory regime introduces flexibility and responsiveness to market developments and also allows for the issuance of subordinate legislation by the minster responsible for finance or the regulatory authority, she said.

Motinga said the bill would give Namfisa an enhanced enforcement power, such as directing the removal of unfit key persons and issuance of administrative penalties.

Transparency and accountability to stakeholders as well as a redress mechanism for consumers of financial services through the financial adjudicator office are some of the issues that the bill is expected to introduce, she said.

Market Watch could not immediately get comment from Namfisa by the time of going to print.

Similar News

 

Vehicle sales hit another speed bump

13 hours ago | Economics

Jo-Maré Duddy – The 666 new vehicles that were sold in Namibia last month was the poorest January sales figure since 2006 and the lowest...

Africa Briefs

13 hours ago | Economics

SA needs to build confidence in power sectorSouth Africa needs to invest more to rebuild confidence in its ability to supply power, its energy minister...

Rosier January for construction

1 day - 19 February 2019 | Economics

Building plans approved by the Windhoek municipality last month showed a slight uptick compared to a year ago.Analysing the latest figures, IJG Securities said a...

Africa Briefs

1 day - 19 February 2019 | Economics

SA seeks to reopen costly renewables dealsSouth Africa wants to talk to independent power producers (IPPs) about lowering the price Eskom pays for electricity from...

Nigeria counts cost of postponed presidential poll

1 day - 19 February 2019 | Economics

Lagos - Nigerians who were surprised when the country's presidential election was postponed Saturday might suffer a second shock when they learn the cost, some...

Namibians owe lenders almost N$6bn

2 days ago - 18 February 2019 | Economics

Namibian consumers owed micro-lending institutions close to N$6 billion at the end of the second quarter of 2018, the Namibia Financial Institutions Supervisory Authority (Namfisa)...

Global unemployment down, but too many working poor

5 days ago - 15 February 2019 | Economics

Geneva - The global unemployment rate inched down last year, the UN said Wednesday, warning though that jobs often failed to guarantee decent living, with...

Nations must boost adult training in face of automation

5 days ago - 15 February 2019 | Economics

Paris - Developed countries need to "urgently" boost adult training and education programmes to deal with future mass job upheaval brought on by automation, the...

Cheaper fuel brings inflation relief

5 days ago - 14 February 2019 | Economics

Overall annual inflation in January was 4.7%, down from 5.1% the previous month. The decrease was due to a huge drop in overall transport inflation...

‘SOEs maintain clean audit reports’

6 days ago - 14 February 2019 | Economics

Auditor-general Junias Kandjeke has praised state-owned enterprises (SOEs) for continuously submitting clean financial reports for the past five years. Speaking during a meeting with SOE...

Latest News

Boyfriend appears for Unam student's...

13 hours ago | Justice

Paulus Nghipulenga (27) has appeared in the Oshakati Magistrate's Court for the murder of his girlfriend on Sunday evening at Ongwediva. She was...

Shaningwa humbled

13 hours ago | Politics

The Swapo leadership has ordered Swapo secretary-general Sophia Shaningwa to halt the recall of three Swapo councillors at Rundu, pending the outcome of a politburo...

First Lady enters shack fray

13 hours ago | Infrastructure

First Lady Monica Geingos has reached out to experts to bring their ideas on how to solve the housing crisis to the attention of policymakers....

Vehicle sales hit another speed...

13 hours ago | Economics

Jo-Maré Duddy – The 666 new vehicles that were sold in Namibia last month was the poorest January sales figure since 2006 and the lowest...

Marenica executes Namibian strategy

13 hours ago | Business

Jo-Maré Duddy - Marenica Energy Ltd has lodged nine exclusive prospecting licences (EPLs) with the ministry of mines and energy in Namibia over the past...

Africa Briefs

13 hours ago | Economics

SA needs to build confidence in power sectorSouth Africa needs to invest more to rebuild confidence in its ability to supply power, its energy minister...

Taxed to death

13 hours ago | Opinion

In their report titled ‘Quarterly Economics and Fixed Income 1Q 2019: What Lies Ahead in 2019?’, Simonis Storm Securities (SSS) said during recessions, among the...

TradePort gets manganese green light

13 hours ago | Environment

The environment ministry has issued TradePort Namibia, one of the South African companies planning to export manganese ore through the port of Lüderitz, an environmental...

Low Orange River threatens grape...

13 hours ago | Agriculture

The dangerously low water level of the Orange River could have a devastating impact on Namibia's production of table grapes, an important export product earning...

Load More