Pension fund membership on the rise

By Honorine Kaze
September 2015
Prime Business

Namibia has seen an increase in total pension fund memberships from 253 278 to 364 045 within the past three years, NAMFISA has revealed in their latest financial report.

NAMFISA annual report 2011/ 2012 noted that out of the 253 278 memberships, 212 539 were of active members while 40 739 members were pensioners. On the other side, 324 686 members were active members out of the 364 045 members, with the remainder 39359 being pensioners according to the report of the financial year which ended in March 2015.

The total contribution from the membership has equally risen from N$ 3.1b in the financial year 2012 to N$ 5.6b for the current financial year.

According to the NAMFISA financial year 2015, the rise of the contributions funds were mainly due to factors such as members and employers contribution.

“Members and employers contributions towards retirement, which increased by 46% and 16% respectively, while additional voluntary contributions increased by 21%. The gains in total contributions can be attributed in increase in membership and in remuneration. Encouragingly, not only did contributions made towards the costs of the funds increase by a comparably low rate of 12%, but also the five years trend show that the bulk contribution constituted retirements savings,” the FY 2015 report states.

Furthermore, the FY 2015 report notes that voluntary contribution is cultivating a habit of supplementing their pension contribution; “This is encouraging particularly in light of increasing life expectancy over recent decades and the increasing numbers of the members who live longer after retirement.”

On the medical aid funds, the number of aid fund beneficiaries increased by 2.3% to 179 364 as at 31 December 2014 with the open funds reporting an increase in total beneficiaries of 3.5% whilst closed funds reported a decrease of 4.9% for the same period.

In terms of growth, NAMFISA also reported that their assets for the FY 14/15 have continued growing. The assets under the administration of investment manager grew by 10.4% to N$136.2b at 31 December 2014.

This increase was due to net new inflows of assets as well as to the reinvested income and the appreciation in invested assets.

“Investment managers continued to invest the bulk of assets under administration in Namibia. The assets invested in Namibia grew by 13.8% to N$66.7b or 49% of the assets in Namibia. This increase is due partly to an increased relocation of assets to Namibia and partly to relatively lower performance in foreign markets,” as described in the report.

Furthermore, the assets invested in unit trust schemes grew by N$4,8b to N$42.1 due to net new inflows of funds from pension funds as well from the reinvested income and the appreciation in invested assets.

The key investors of the assets were households, companies, unit trust schemes and pension funds. Despite a decrease in the households’ asset value from 58.3% in 2011 to 53.1% in 2014, it is still the main key investor in unit trust schemes.

“Household funds increased by 4.8% from 2013 to N$ 20b in 2014. Company assets made 20.3%, while other unit trust schemes constituted 11.6% of total assets. These units trust schemes operates fund of funds or as a feeder funds. Pension assets inflow increased by N$4.1b or 1.7times to 7.2 of total assets.”

In terms of micro lending, Namfisa report pointed out that the number of lenders rose from 273 in 2013 to 289 in 2014. However, the total value of loans disbursed during the period under review decreased year on year namely to N$2 259 m from N$2 261m reported in 2013.

The decrease was due mainly to a lower amount of credit from term lenders; “As result, of the total value of loans disbursed in 2014, terms loans amounted to N$ 1.6b, which accounted for 68.7% of the total value of disbursed loans.”

On the expenditure side, the total expenses increased by 25% from N$ 744.6m reported earlier to N$ 928 m as at 31 December 14. The expense mainly include administration fees, investment management fees, insurance premiums and other costs such as actuarial, auditing, consultancy and trustees expenses.

“Investment fees made up the bulk of the cost at 30% followed by insurance premium (28%) and administration fee (26%). The growth in total expenses can be attributed to the same factors that led to the increase in membership and general salary increment.”

In terms of strategic goals, NAMFISA is currently drafting of regulations and standards to support the implementation of the financial institutions with various bills such as NAMFISA bill meant to reform NAMFISA by expanding its mandate, increasing its supervisory powers, and improving its governance capacity.

The other bills include Financial Institutions and Market (FIM) bill to capacitate and modernize all the laws that govern all industries that the authority currently regulates with the exception of the Usury Act, 1968 which regulates and continue to regulate the micro lending and credit agreement industry amongst others.

In his last interview with Prime Focus Magazine before his untimely passing, NAMFISA Chief Executive Officer, Phillip Shiimi, stated that the firm has entered into their second year of the three strategic years rolling.

“It also saw the acceleration of the process related to drafting and ultimate promulgation of the FIM bill, NAMFISA bill and the Financial Services Adjudicator bill as well as accompanying subordinate legislation, this is vital in giving the financial environment a different complexion to more effectively address the need of present day Namibia.”

NAMFISA’s CEO adds, “These modern laws will also give impetus to the implementation of the Namibia Financial Sector strategy- the national long term development strategy for the financial sector.”