Ithete blasts FIMA’s pension preservation clause
The chairperson of the Parliamentary Standing Committee on Economics and Public Administration, Natangwe Ithete, has blasted the Financial Institutions and Markets Act (FIMA) (Act No. 2 of 2021) for its stance on the proposed regulation (RF.R.5.10) for the preservation of retirement benefits.
“Do not conclude by saying if you give the entire nation their money, everyone will misuse it. And, you rather keeping it and giving them their money later, is wrong. Let people have their money, and invest in what they want. It is wrong to say if a few misuse their money, then all are disadvantaged,” said a concerned Ithete. He raised the concerns during a three-day stakeholders' consultation and oversight workshop on FIMA, organised by the parliamentary committee in Swakopmund this week.
The MP added that there is another challenge, that of giving too much power to one person to regulate and make overall decisions.
Under the new regulations and when FIMA becomes operational, 75% of a retirement fund must be preserved until the early retirement date, as provided for. This is done with the aim to ensure that more income is available to sustain pensioners after they retire, or otherwise their dependants in the event of death.
This stipulation is opposed to the common practice of withdrawing retirement savings early to meet short-term financial needs, which ultimately results in many people not having sufficient savings after retirement. In these cases, pensioners mostly end up depending on social grants or the government's old-age pension for survival when they retire.
FIMA, which was gazetted on 30 September 2021, replaces the outdated Pension Fund Act of 1956.
The consultations followed wide public debate and outcry, particularly on chapter 5, dealing with the preservation of pensions.
Meanwhile, Namibia Financial Institutions Supervisory Authority (Namfisa) CEO
Kenneth Matomola said FIMA is quite relevant to Namibia, and is not a tool to take people's money. Namfisa is mandated to regulate and supervise financial institutions and financial intermediaries to foster a stable and fair non-banking financial sector, promote consumer protection, and provide sound advice to the finance minister.
During his presentation, Matomola said the objective of FIMA is to consolidate and harmonise the laws regulating the non-banking financial institutions, financial intermediaries and financial markets in Namibia.
“FIMA takes a wider approach of regulating and supervising by addressing prudential and market conduct issues, including governance of regulated entities,” he explained.
Matomola stated that chapter 5 of FIMA also affords some benefits to retirement fund members, like increased member representation, surplus distribution and consumer protections.
“FIMA continues to protect members' retirement savings from their estate, bankruptcy/ insolvency, and creditors, while the member or their surviving dependants and/or nominees have not received these benefits. Where employers declare bankruptcy, contributions owed to retirement funds must be kept separate and paid to the retirement fund before any other money owed by such employers is paid,” the CEO observed.
He added that preservation rules must be sensitive to a variety of factors, including balancing the legitimate needs of employees for funds upon early withdrawal in certain cases, like re-training, hardship, disability with a shortened life expectancy, treatment of small benefits, as well as the availability of options for preserving benefits.
Responding to questions from the members of parliament, Matomola came out clear that the preservation of funds must be reconsidered.
“Becausewhenitwasconceived, the economic fundamentals are no longer the same. Therefore, let us reconsider that. Covid-19 brought
things we never knew about, and therefore, why shouldn't we reconsider it? I advised the minister to constitute an advisory committee to advise him appropriately on preservation,” he continued.
Earlier this month, finance minister Iipumbu Shiimi appointed and inaugurated a 36-member technical advisory committee (TAC), tasked to consult the broader public on a proposed regulation (RF.R.5.10) on the preservation of retirement benefits.
The TAC is chaired by Manfred Zamuee, while the entire TAC comprises representatives from the finance and public enterprises ministry, the Bank of Namibia, Namfisa, Secretariat of the TAC, Retirement Funds Institute of Namibia (RFIN), Trade Union Congress of Namibia, the National Union of Namibian Workers, the Namibia National Labour Organisation, pension funds not part of the RFIN, and the employers federation.
The date on which FIMA will come into operation will be communicated to the public at the appropriate time by the finance minister.