RFS rubbishes NaCC findings
THE Retirement Fund Solutions (RFS) has rubbished findings from the Namibia Competition Commission (NaCC) that concluded the pension fund administrators’ market can be considered oligopolistic.
The investigation was due to an allegation of uncompetitive practices in the pension fund service provider industry.
NaCC spokesperson Dina //Gowases, in a statement released earlier this month, said the commission initiated an investigation into pension fund administrators Alexander Forbes Financial Services Namibia, Metropolitan, Old Mutual and Retirement Fund Solution, jointly referred to as respondents.
NaCC took its cue from an online publication on 19 October 2016, titled ‘Nature of Commercial Practices in the Namibian Pension Fund Administration Market’.
The respondents offer administration services to umbrella pension funds in the pension fund industry.
The online publication stated the harmful practices of the sector noted the pension fund administrators are oligopolistic, based on imperfect competition, and they are not regulated by Namfisa under the Pension Fund Act, which makes it difficult for the administrators to be controlled.
Oligopoly refers to a market structure in which a small number of firms have the large majority of the market share as opposed to a monopoly where one firm dominates the market.
“This is due to the finding that the administrators and associated pension funds operate with the same common purpose, as a single economic unit, being vertically integrated. As a result of this finding, the commission is of the view that the redress (if any) to alter these relationships will best be achieved through direct regulatory intervention by the industry regulator (Namfisa) if such authority is granted through legislation (such as the Financial Institutions and Markets Act),” explained the spokesperson.
However, in a statement released this week, RFS managing director Marthinuz Fabianus said Namibian pension fund administrators on average must survive with 25 000 members per pension fund administrator, which makes some operators not economically viable.
“Given the fiercely competitive nature of the Namibian pension fund administration market, one must conclude that the economic theory that best describes the Namibian market is a ‘perfectly competitive’ market.
Fund administrators provide the same type of services – and to our knowledge, at least three of the service providers use the same pension fund administration system,” explained Fabianus.
Moreover, the MD stated there is full disclosure of fund administration fees in the service level agreements, and there is no price fixing amongst competitors.
On the NaCC finding that administrators and associated pension funds operate with the same common purpose, Fabianus said this may apply only to some administrators; it does not apply to all.
“RFS is the administrator of both private/stand-alone employer pension fund arrangements and founder of an umbrella fund, the Benchmark Retirement Fund. All our funds make use of different and unrelated non-administration serviceproviders,suchasactuaries, consultants, insurers, auditors and investment managers. RFS, thus, only performs fund administration services and nothing else,” stated Fabianus.
“We have jealously guarded our independence and believe this is what helped RFS to be one of the few viable fund administrators, with at least 25 000 members under our administration, he said.
According to Namfisa’s 2022 annual report, pension fund assets increased by 18% to N$213 billion in 2021, and current liabilities increased by 40.9% to N$3.4 billion as at 31 December 2021.
It further reported the industry reported an unclaimed benefits balance of N$176.4 million as at 31 December 2021, down from N$273.8 million reported as at 31 December 2020.
“This is an encouraging movement observed in the reporting period, which indicates that more members (or their dependants), whose pension fund membership ended without receiving their benefits, were traced and paid,” reads the report.
Looking at the market size, the report stated the number of local pension funds registered with Namfisa decreased by 35.2% as at 31 December 2021, bringing the total to 83.