Pension Fund members urged to know when to switch portfolios
The Botswana Public Officers Pensions Fund ( BPOPF) will implement the Moderate Growth Portfolio, a low- risk strategy designed to limit the downside risk, while capturing some upside when markets do well, later this year in October.
This new product is among two others, Member Property Finance and Transfer Value Projects, all of which have been adapted into the institution’s strategy, to develop value- enhancing products for members. According to BPOPF Chief Investment Officer, Tshepang Loeto, the Moderate Growth Portfolio was created to allow members to reduce risk as they near retirement while also maintaining good returns.
He explained that the Moderate Growth Portfolio is less aggressive than the Active and Deferred Member Portfolio, which is mostly suited for younger employees who have just started work. “This portfolio is risky, but has higher returns,” Loeto said, adding that within this portfolio younger members have an opportunity to recoup loses if any as a result of the high risk in the investment. In addition, younger members still have time before they can retire.
The Moderate Growth Portfolio is also less conservative than the Pre- Retirement Switch Portfolio. “This product is well suited for any member who is 40 years and above. But the best advice from the Board of Trustees is to make the switch at most, five years before retirement,” he said. “For example, if you are planning to retire at 60, then you are encouraged to opt into the Moderate Growth Portfolio the year you turn 55. If you are planning to retire at age 45, then you are encouraged to opt into the Moderate Growth Portfolio when you turn 40,” Loeto says.
As per the law, early retirement is at 45, so by 40 members should start considering switching to this portfolio. By this time the belief is that a member would have made significant savings. Because of the lower risk, members can be assured that external negative economic factors such as global unrests or natural disasters, would not affect their savings. “In this way you are reducing your risk profile because at 40 you can’t take risks that a 20- year old can take,” he said, adding however that it is entirely up to members to take decisions considering their own personal investments.
Therefore, switching from Active to Moderate Growth Portfolio is optional. This portfolio is suitable for members wanting to move out of the aggressive portfolio, but still require more potential growth from their investments than is offered by the Pre- Retirement Switch Portfolio. The PreRetirement Switch Portfolio is for members who are left with about three years to retire. “This one reduces risk significantly because by the time you retire, there should not be any risk associated with your portfolio,” he said.
The switch is offered once annually, in October. What is not allowed is for members to switch from Pre- Retirement Switch Portfolio to Moderate or Active. Meanwhile, members have been urged to ensure that their tax returns are in order when they retire because this is one of the factors that cause delays in disbursement of funds. This follows complaints that the Fund pays late, while they have set a period of six weeks to pay all dues to retiring members. Director – Member Benefits, Mercy Robinson said several factors can cause delays in the disbursement of funds to members. Among them, incorrect date of birth of a member, absence of banking details and lack of contact numbers, among others. Robinson said, while this seems insignificant, it can cause great inconvenience when claims are made. Some members also neglect their obligation to do annual tax returns only to get stuck when they retire. “We can’t proceed with claims without clearance from Botswana Unified Revenue Services ( BURS). This causes delays because they have to check first before we can disburse payments to members,” she said, adding that there are pending claims that have been waiting for two years.
Robinson emphasised that all processes regarding the Fund are guided by the law.