Story by George Sanzila
Date: 09/08/2024
Parliament has recommended that the Minister of Finance and Public Enterprises, Hon. Iipumbu Shiimi put on hold the controversial clause relating to the preservation of retirement benefits in the new Financial Institutions and Markets Act, Act. No2 of 2021, and that the regulations concerned be tabled in parliament for approval before implementation and enforcement by Namibia Financial Institutions Supervisory Authority (NAMFISA).
Parliament further suggested that the Attorney General must be roped in to clarify the constitutionality of introducing mandatory pension preservation in the new legislation, among a host of other demands. These recommendations are contained in a comprehensive report by the Parliamentary Standing Committee on Economics and Public Administration that was recently tabled and adopted in the National Assembly.
FIMA, which was gazetted in 2021 to replace the Pension Fund Act of 1956, has attracted a lot of criticism from all quarters of society, leading to the postponement of the of the implementation of the Act that was supposed to come into force as from 01 October 2022. What seems to have ruffled feathers is the pension preservation clause in the Act, that compels those that leave their employment before retirement to have access to only 25% of their fund credit while the rest is preserved until they reach the prescribed retirement age of 55 years. Following concerns raised by the public over the Act, the committee led by its chairperson, Hon. Natangwe Ithete held extensive consultations including an oversight workshop held at Swakopmund in May this year involving stakeholders such as the Namibia Financial Institutions Supervisory Authority (NAMFISA), Government Institutions Pension Fund (GIPF), Retirement Fund for Local Authorities and Utility Services in Namibia and Retirement Fund Solutions among others.
At that workshop, NAMFISA Chief Executive Officer, Kenneth Matomola reiterated the rationale behind the Act that it was meant to replace the outdated Pension Fund Act of 1956 that does not live up to the standards of the International Organization of Securities Commission (IOSCO) and that the legislation lacks innovation. He also told lawmakers that the International Monetary Fund (IMF) raised similar concerns about the ineffectiveness of regulation and supervision in the Namibian financial sector, particularly the non-banking financial institutions. He added that the clause that has been the bone of contention is solely aimed at consumer protection to ensure that pensioners are financially sustained when they reach the prescribed retirement age of 55 years or their dependents in the event of death.
“This stipulation is opposed to the common practice of withdrawing retirements savings early to meet short term financial needs, which ultimately, results in many people not having sufficient savings after retirement. Pensioners mostly end up depending on social grants from the state”, said Matomola. Matomola further stated FIMA has the added advantage of shielding member’s retirement savings from bankruptcy or creditors.
However, representatives of the Retirement Fund for Local Authorities and Utility Services in Namibia (RFLAUN), strongly disagreed with the clause noting that further investigations should have been done on those leaving their employment but have no other means of income, particularly if such people have financial obligations to meet such as the settlement of housing loans. They noted that the clause was an infrigement on the rights to take up a lump sum under the current laws calling on the Namibian parliament to live up to its role of oversight and representation by recalling the Act for further consultations and review. RFLAUN met a joint parliamentary committee over the same issue again early last year. Although acknowledging the good intentions of the Act, the local authority pension fund questioned the relevance of the Act in the Namibian socio-economic context, singling out compulsory preservation and forced annuitization as major concerns.
“FIMA is a product of the Canadian consultant working in collaboration with NAMFISA and consenquently, FIMA has introduced provisions such as compulsory preservation and forced annuitization which have not taken into consideration the unique nature of the namibian financial sector, its market and social economic practices”, noted the representatives of RFLAUN.
FIMA’s objectives are to consolidate and harmonise the laws regulating financial institutions, financial intermediaries and financial markets in Namibia and to provide for incidental matters.
