Are Your Retirement Savings Protected By Law?

How to Ensure That the Fund to
Which Your Retirement Contributions
Are Paid is a Registered Entity:
Saving for retirement is an
important part of planning your
finances in order to have the
financial freedom to enjoy your later
years, whether employed by someone
else or self-employed.
Most individuals in today’s working
environment understand this, and it
has become more important to save for
retirement during your working years.
The majority of employees who work
for private companies are covered by
defined contribution schemes (where
the retirement benefit is based on their
monthly contributions) while those who
work for public companies are covered
by defined benefit schemes (where the
retirement benefit is based on their needs
as determined by experts. It is a specified
amount and not necessarily based on
contributions).
Contributing to a pension fund
is the most preferred way of saving
towards retirement, and most times, is
compulsory for employees in company
benefit packages. This manner of saving
for retirement is said to be an easier way,
over a longer period.
It is also cheaper to save towards
retirement by contributing to a pension
fund because the cost of administration
and investment fees are lower for each
individual member when compared
to the costs that need to be paid if a
single individual were to make a private
investment.
Saving through employer-related
pensions also gives members options
of different types of investments, which
usually require high deposit amounts,
which an individual member contributing
to a pension fund by themselves would
not have had.
One would then expect that saving
for retirement by having your employer
make monthly deductions from your
salary would almost guarantee a payout
on retirement (assuming that good
investment decisions have been made
and all other market and regulatory
factors remain unchanged).
However, some have had their hopes
of financial stability during retirement
dashed because the fund into which they
had been depositing money, usually over
many years, did not meet expectations or
fulfill its promises.
It is important that as an individual
saving for retirement, you know the
importance of ensuring that your
deposits are protected by law under the
Pension Funds Act.
This article emphasises the importance
of ensuring that individuals are aware
of the clear purpose of their monthly
savings and that the fund to which these
contributions are paid, is registered and
regulated.
The Pension Funds Act, Act No.
24 of 1956 (hereinafter referred to as
the “Act”) is the law that regulates
pension funds. This Act is overseen
by the Namibia Financial Institutions
Supervisory Authority (NAMFISA). Only
pension funds that are registered with the
Authority are supervised under this Act.
The Authority has in the past received
a number of complaints regarding nonpayment
of retirement benefits. It came
to the attention of the Registrar that
some of the employees in question were
making monthly contributions into an
employee fund that is not a registered
pension fund. These contributions were
believed to be made to a pension fund
(as defined in the Act), but in actual fact
were not. This is a typical example where
employees have no protection available
to them under the Act as NAMFISA does
not supervise these entities.
What Do You Need to Know?
The fund to which you are making
monthly contributions for retirement
must meet the definition of a “pension
fund (i.e. “pension fund organisation”)
as written in the Act. This means that
the purpose of the fund must be clearly
defined to meet the definition as written
in the Act.
Once the definition is met, the fund
to which you are making monthly
contributions must then be registered
according to Section 4 of the Act, which
outlines the requirements that must be
met before registration can be granted.
A registered fund therefore has the
following characteristics:
An appointed principal officer who
manages the affairs of the fund and is the
first point of contact in the event that a
member requires information regarding
the fund;
A license issued by NAMFISA as proof
of registration. This certificate can be
obtained from the principal officer; and
Endorsed (indicated by an NAMFISA
stamp) rules of the fund, which outline
the rules governing the fund.
Therefore, if you are making monthly
contributions to a fund, that you believe
to be for retirement savings purposes, and
the fund is not a registered pension fund
with NAMFISA, the Authority will not
be able to protect you should challenges
arise. In other words, any complaints
reported to NAMFISA cannot be resolved
by it under the Pension Funds Act.
You may enquire through your
employer or by contacting NAMFISA
directly, to determine whether the fund
you are contributing to is a registered
pension fund or not.
According to Section 4 (1) of the Act,
“Every pension fund shall apply to the
Registrar for registration under this Act”.
Therefore, any fund that claims to be a
pension fund organisation as defined
in the Act must be registered under the
Act. Members contributing to any such
unregistered fund are urged to report
any such entities to the Authority by
contacting the NAMFISA complaints
department:
Physical Address: 27 Fidel Castro Str.
Alexander Forbes House, 6th floor
Telephone: +264 61 290 5000
The Registrar, under Section 32 of
the Act may require such unregistered
funds to furnish information which
the Registrar will use to conduct an
investigation to determine whether or not
the fund should be registered.
Finally, if an individual has or has
access to knowledge and expertise
required to manage their retirement
savings outside of a registered pension
fund or an employee fund offered by
their employer, for example, within a
unit trust, retirement annuity policy with
a long term insurer or any other form of
investment strategy, he/she is free to do
so.
It is not law that all retirement savings
must be made through a pension fund.
It should also be noted that employers
are free to require compulsory
membership to funds that are not
registered pension funds as a condition
for employment.

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