Row over trust funds
The High Court's Guardian Fund doesn't have the capacity to administer the trust funds of all orphans in Namibia, the pension fund industry says.
An amendment to the law on the administration of estates allows for the state to take full control of a deceased estate if the beneficiary is a minor, and to disburse those funds at their will.
Pension and trust fund institutions are very concerned about the new law centralising payments due to minors from inheritances and pension funds to the care of the Master of the High Court's Guardian Fund.
They are eager to meet with the justice ministry this month amidst worries that the law is constitutionally questionable and could annihilate private pension and trust funds.
“The new law, as it stands, stands to wipe out all trust administration institutions legally registered with the Master of the High Court,” says Marthinuz Fabianus, managing director of Retirement Fund Solutions and a board member of the Retirement Funds Institute of Namibia (RFIN).
Fabianus referred to the Administration of Estates Amendment Act of 2018, gazetted at the end of December last year, which has given rise to serious questions and concerns.
Fabianus said the amendment act should be recalled “as soon as possible as its implications are too far-reaching”, in order to “avoid a potential collapse of the administration of payments to minors due to poor planning with a lack of capacity”.
He said the law had been “poorly considered” and could face legal challenges.
In neighbouring South Africa, the courts have ruled that the guardian of a minor has the first right to decide how and where to invest the proceeds of a minor under their care, paid from a pension fund, and with the new law, this choice would become redundant.
“The freedom of choice in a free market system to use registered trust funds is now removed from pension funds and from each Namibian who can no longer decide to use their trustees of choice to administer the inheritance of their minor beneficiaries.”
He added that as far as he was aware, no consultations were held with the pension fund industry or other institutions affected by the act prior to the implementation of the law, apart from the January notice that industry consultations would take place this month.
He also questioned the capacity of the Master of the High Court division to carry out the mandate with its current capacity.
He said the monies payable could amount to many millions and said come 1 March, when the law is to be implemented, “we will be in a precarious situation.”
Reasons
According to the justice ministry, in a January notice to affected institutions, the amendment act was based on “challenges and shortcomings in the existing legislation”.
Shortcomings included the fact that the Administration of Estates Act of 1965, “did not provide for the proper protection of monies due to minors or deceased estates, among others”.
Specifically, the ministry said it had received “many complaints by minors that never receive such monies from their guardians or that high administration fees do not allow real growth of these monies.”
Elsie Beukes, Master of the High Court and custodian of the Guardian Fund, explained that “the purpose for taking over all monies due to minors” was based on complaints of high administration fees and the fact that some guardians “often claim the same expense at more than one institution that hold money for a beneficiary and funds are depleted quickly.”
Beukes said these issues reduce the benefit received by the beneficiary “significantly”.
She added that the amendments make provision for an investment framework that includes the establishment of an investment committee and policy to ensure “a more transparent and effective governance of the investments made by the Master of the High Court”.
Further, a new online integrated financial and case management system has been developed and implemented, she said.
Applications will be electronic and the Guardian Fund will operate 95% paperless.
She said the Guardian Fund currently administers approximately N$1.4 billion for more than 40 000 beneficiaries, and payments amounting to N$65 million were made to beneficiaries during the 2017/18 financial year.
She said the money consists mainly of inheritances and death benefits from deceased estates or pension funds, and the amendment act requires that “any other monies due to a minor must also be paid to the Guardian Fund”.
She confirmed that for now, all institutions are continuing with payments as before until consultations with the various institutions for the “takeover of funds” takes place, to ensure no interruption of payments to beneficiaries.
The amendments act also addressed the fact that even though the Guardian Fund was audited by the auditor-general, it did not provide for a compulsory annual audit.
No sense
Fabianus stressed that the centralisation of payments, where it was previously decentralised, will mean a “duplication of administration and a serious wastage of resources”.
He added that pension funds in particular are managed in terms of the Pension Funds Act and also registered with the Receiver of Revenue for income tax purposes.
“Annuity income payments payable to minors in terms of the rules of funds should strictly not be included in the amounts to be made to the Master. If this were the intention, it will rob pension funds the paternalistic and fiduciary responsibilities of trustees.”
Namibian Sun approached several relevant industry members, most of who declined to comment until the consultative meetings.
The Government Institutions Pension Fund (GIPF), which is also affected by the amendment, stated only that it “acknowledges the impact of the Administration of Estates Amendment Act, but unfortunately cannot comment on the extent thereof. Therefore, the fund is currently in communication with the relevant authorities to gain more clarity”.
Fabianus added that following due consultations with the industry, the minister of justice could consider “regulations that aim to foster certain standards in the administration of trusts registered with the Master of the High Court”.
JANA-MARI SMITH
Pension and trust fund institutions are very concerned about the new law centralising payments due to minors from inheritances and pension funds to the care of the Master of the High Court's Guardian Fund.
They are eager to meet with the justice ministry this month amidst worries that the law is constitutionally questionable and could annihilate private pension and trust funds.
“The new law, as it stands, stands to wipe out all trust administration institutions legally registered with the Master of the High Court,” says Marthinuz Fabianus, managing director of Retirement Fund Solutions and a board member of the Retirement Funds Institute of Namibia (RFIN).
Fabianus referred to the Administration of Estates Amendment Act of 2018, gazetted at the end of December last year, which has given rise to serious questions and concerns.
Fabianus said the amendment act should be recalled “as soon as possible as its implications are too far-reaching”, in order to “avoid a potential collapse of the administration of payments to minors due to poor planning with a lack of capacity”.
He said the law had been “poorly considered” and could face legal challenges.
In neighbouring South Africa, the courts have ruled that the guardian of a minor has the first right to decide how and where to invest the proceeds of a minor under their care, paid from a pension fund, and with the new law, this choice would become redundant.
“The freedom of choice in a free market system to use registered trust funds is now removed from pension funds and from each Namibian who can no longer decide to use their trustees of choice to administer the inheritance of their minor beneficiaries.”
He added that as far as he was aware, no consultations were held with the pension fund industry or other institutions affected by the act prior to the implementation of the law, apart from the January notice that industry consultations would take place this month.
He also questioned the capacity of the Master of the High Court division to carry out the mandate with its current capacity.
He said the monies payable could amount to many millions and said come 1 March, when the law is to be implemented, “we will be in a precarious situation.”
Reasons
According to the justice ministry, in a January notice to affected institutions, the amendment act was based on “challenges and shortcomings in the existing legislation”.
Shortcomings included the fact that the Administration of Estates Act of 1965, “did not provide for the proper protection of monies due to minors or deceased estates, among others”.
Specifically, the ministry said it had received “many complaints by minors that never receive such monies from their guardians or that high administration fees do not allow real growth of these monies.”
Elsie Beukes, Master of the High Court and custodian of the Guardian Fund, explained that “the purpose for taking over all monies due to minors” was based on complaints of high administration fees and the fact that some guardians “often claim the same expense at more than one institution that hold money for a beneficiary and funds are depleted quickly.”
Beukes said these issues reduce the benefit received by the beneficiary “significantly”.
She added that the amendments make provision for an investment framework that includes the establishment of an investment committee and policy to ensure “a more transparent and effective governance of the investments made by the Master of the High Court”.
Further, a new online integrated financial and case management system has been developed and implemented, she said.
Applications will be electronic and the Guardian Fund will operate 95% paperless.
She said the Guardian Fund currently administers approximately N$1.4 billion for more than 40 000 beneficiaries, and payments amounting to N$65 million were made to beneficiaries during the 2017/18 financial year.
She said the money consists mainly of inheritances and death benefits from deceased estates or pension funds, and the amendment act requires that “any other monies due to a minor must also be paid to the Guardian Fund”.
She confirmed that for now, all institutions are continuing with payments as before until consultations with the various institutions for the “takeover of funds” takes place, to ensure no interruption of payments to beneficiaries.
The amendments act also addressed the fact that even though the Guardian Fund was audited by the auditor-general, it did not provide for a compulsory annual audit.
No sense
Fabianus stressed that the centralisation of payments, where it was previously decentralised, will mean a “duplication of administration and a serious wastage of resources”.
He added that pension funds in particular are managed in terms of the Pension Funds Act and also registered with the Receiver of Revenue for income tax purposes.
“Annuity income payments payable to minors in terms of the rules of funds should strictly not be included in the amounts to be made to the Master. If this were the intention, it will rob pension funds the paternalistic and fiduciary responsibilities of trustees.”
Namibian Sun approached several relevant industry members, most of who declined to comment until the consultative meetings.
The Government Institutions Pension Fund (GIPF), which is also affected by the amendment, stated only that it “acknowledges the impact of the Administration of Estates Amendment Act, but unfortunately cannot comment on the extent thereof. Therefore, the fund is currently in communication with the relevant authorities to gain more clarity”.
Fabianus added that following due consultations with the industry, the minister of justice could consider “regulations that aim to foster certain standards in the administration of trusts registered with the Master of the High Court”.
JANA-MARI SMITH
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