National Pension Fund in Namibia

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National Pension Fund in Namibia

  1. 1. AGENDA <ul><li>* Introduction </li></ul><ul><li>* Good practices in industry </li></ul><ul><li>* Results of GIPF </li></ul><ul><li>* Short comings </li></ul><ul><li>* Proposed regulatory changes </li></ul><ul><li>* Closing </li></ul><ul><li>Presenter: A.Jansen </li></ul>PUBLIC PENSION FUND MANAGEMENT
  2. 2. GOOD PRACTICE INTRODUCTION <ul><li>* All pension funds are governed by the Pension Funds Act of Namibia of 1956. </li></ul><ul><li>* Around 400 registered pension funds </li></ul><ul><ul><li>Mostly voluntary funds catering for civil servants and larger private & public companies </li></ul></ul><ul><li>* We do not have a national pension fund covering all working citizens (shortfall ). </li></ul><ul><li>* Registered funds covers 120 000 members of the 500 000 economically active Namibians. </li></ul><ul><li>(GIPF the fund I work for has approximately 70 000 members) </li></ul><ul><li>* Social pension (less than minimum wage) have 125 000 recipients. </li></ul>PUBLIC PENSION FUND MANAGEMENT
  3. 3. <ul><li>1. Fully funded with assets invested in capital market (local and international) </li></ul><ul><li>- stock exchange </li></ul><ul><li>- bond markets </li></ul><ul><li>Reg.28: 35% Namibian assets ; Forex restrictions max 15 % offshore </li></ul>PUBLIC PENSION FUND MANAGEMENT
  4. 4. PUBLIC PENSION FUND MANAGEMENT <ul><li>2. Annual audits by independent auditors </li></ul><ul><li>3. Annual and Tri-annual actuarial valuations </li></ul>
  5. 5. PUBLIC PENSION FUND MANAGEMENT <ul><li>4 . Prudent investment guidelines </li></ul><ul><li>4.1 No investments in employer/sponsors </li></ul><ul><li>Registrar limited discretion to grant exemption </li></ul><ul><li>4.2 Maximum & prohibited investments </li></ul><ul><li>e.g. equity/stocks max -75 % </li></ul><ul><li>Unlimited investment – 5 % </li></ul><ul><li>No investments in coins & valuable artifacts. </li></ul>
  6. 6. <ul><li>Appoint independent money managers </li></ul><ul><ul><li>To manage funds within the bounds of regulatory framework and laid down mandates </li></ul></ul><ul><ul><li>Discretionary mandates to money managers </li></ul></ul><ul><ul><li>Regular (continuous) monitoring of adherence to benchmarks (including peer comparisons) </li></ul></ul>PUBLIC PENSION FUND MANAGEMENT
  7. 7. PUBLIC PENSION FUND MANAGEMENT WHAT MAKES OUR INDUSTRY WORK <ul><li>Choice under the act of different funds </li></ul><ul><li>- Pension Fund </li></ul><ul><li>- Provident Fund </li></ul><ul><li>- Retirement Annuity Fund </li></ul><ul><li>- Guaranteed funds (insurance companies underwrite) </li></ul><ul><li>Prior Approval of auditors and actuaries by the Registrar </li></ul><ul><li>Negatives </li></ul><ul><li>Other consultants e.g. Employee benefits, Asset consultants, etc. not needed to be prior approved by Registrar </li></ul>
  8. 8. <ul><li>* Preferential tax treatment of the : </li></ul><ul><li>- the contributors </li></ul><ul><li>- the funds themselves </li></ul><ul><li>- the benefits </li></ul><ul><li>All funds have independent boards of trustees most have equal Employer /Employee representation (except GIPF – tripartite) </li></ul>PUBLIC PENSION FUND MANAGEMENT
  9. 9. PUBLIC PENSION FUND MANAGEMENT RESULTS <ul><li>No bankrupt funds </li></ul><ul><li>No fund unable to make benefit payments </li></ul><ul><li>Only two cases of “unauthorized” transfer by company management from 2 funds to companies (done without knowledge and approval of the Registrar) </li></ul>
  10. 10. PUBLIC PENSION FUND MANAGEMENT GIPF Investment performance Individual years to 30 June (%) 9.8 9.9 8.2 5.2 8.8 6.9 10.0 7.4 10.0 15.1 15.2 16.1 13.8 10.0 6.0 17.4 25.3 8.5 28.9 13.5 18.0 18.4 20.9 12.7 11.8 6.4 15.4 25.8 7.8 26.4 13.0 18.6 19.8 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 Namibian Inflation Fund Bench- Mark Return Fund Return Year ended 30 June
  11. 11. PUBLIC PENSION FUND MANAGEMENT GIPF Investment performance Periods to 30 June 2001(%) 9.8 9.8 9.3 8.2 8.4 8.1 8.4 8.3 8.4 9.1 16.1 14.9 13.3 11.4 12.6 14.6 13.7 15.5 15.3 15.6 20.9 16.7 15.1 12.8 13.3 15.3 14.2 15.7 15.4 15.7 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Namibian Inflation Fund Bench- Mark Return Fund Return Year ended 30 June 2001
  12. 12. PUBLIC PENSION FUND MANAGEMENT GIPF Administration cost as % of assets 1 967 084 2 754 868 3 340 500 4 330 407 5 164 981 6 554 282 6 828 277 8 682 442 10 700 000 0.19 0.20 0.23 0.24 0.31 0.43 0.49 0.61 0.49 1993 1994 1995 1996 1997 1998 1999 2000 2001 Assets at market value N$’000 Admin cost as % of assets (incl. invest fee) Year ended 31 March
  13. 13. GIPF Average asset allocation <ul><li>* Geographic: 15% International, 55 % RSA and 35% Namibia </li></ul><ul><li>* Across asset classes : 50-55 % Stocks , 30-35% Bonds 5-10% Real Estate and 5-10% Cash </li></ul><ul><li>Trading : 92.5% Quoted and 7.5% unquoted </li></ul><ul><li>Target rate of return 3% above inflation </li></ul>PUBLIC PENSION FUND MANAGEMENT
  14. 14. PUBLIC PENSION FUND MANAGEMENT <ul><li>5. REGULATIONS IN THE PENSION FUND ACT THAT IS IN PIPELINE </li></ul><ul><li>a) Funds must appoint own compliance officers </li></ul><ul><li>b) Changes to max holdings </li></ul><ul><li>c) Individual member choice </li></ul><ul><ul><li>* for Funds going from DB to DC </li></ul></ul><ul><ul><li>* access to advisors </li></ul></ul><ul><ul><li>* suitable default portfolio </li></ul></ul><ul><ul><li>* compulsory information/education to members </li></ul></ul>
  15. 15. PUBLIC PENSION FUND MANAGEMENT <ul><li>5. REGULATIONS IN THE PENSION FUND ACT THAT IS IN PIPELINE (cont) </li></ul><ul><li>d) Funds compelled to seek expert advice </li></ul><ul><li>e) Compulsory to define,maintain and monitor investment policies </li></ul>
  16. 16. PUBLIC PENSION FUND MANAGEMENT The Regulatory organization NAMFISA ( Namibia Financial Institutions Supervisory Authority ) <ul><li>• Established as a juristic person </li></ul><ul><li>(to sue & be sued, collect own revenue) </li></ul><ul><li>• To exercise supervision, in terms of the act and other laws over the business of financial institutions. </li></ul><ul><li>• Revenues generated through levies on financial institutions under supervision. </li></ul><ul><li>• Private pension fund assets supervised including GIPF is in excess of 55 % of GDP </li></ul>
  17. 17. PUBLIC PENSION FUND MANAGEMENT Proposed national pension fund -partially funded of the Scheme Retirement/Disability Min=80% of minimum insurable earnings Max=80 % of wage base. Wage base=avg. of last 3years of earnings. Eligible individuals receive a ‘gift’ equal to 6 months of benefits upon retirements as a lump sum. Old Age: 15 years of contributions and 60 years of age with a retirement test between 60-65. Disability: Individuals under 60 deemed to be permanently disabled and whose earnings don’t exceed N$240. Minimum -N$300 Maximum – N$4500 Amount of Benefit Eligibility Insurable Earnings Contribution Type of Benefit 4.2 % divided Equally b/w Employee and Employer – also covers contributions for disability and survivor insurances. Retirement Disability Survivors/ Orphans Synopsis of our proposed Social Security Act
  18. 18. PUBLIC PENSION FUND MANAGEMENT Table continues Benefit formula: N$220*t/30+(0.01)* Wage base* T (t=years). Survivors/Orphans The spouse receives 40 % of the benefits as calculated under “retirements”. If children are less than 4, 20% each. If 4 or more, the remainder 60 % is split among them After 60 the retirement benefit substitutes the invalidity one.
  19. 19. PUBLIC PENSION FUND MANAGEMENT Shortcomings pointed out by the WB report of 2000 that we are currently addressing are the following <ul><li>What contribution rate can the economy afford </li></ul><ul><li>The impact of HIV/AIDS and how that will impact above </li></ul><ul><li>The impact of granting exemptions </li></ul>
  20. 20. Thank you ! PUBLIC PENSION FUND MANAGEMENT

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