As a provider of financial solutions, such as life assurance policies and investment products, Momentum Namibia believes that retirement funds are an important part of the country’s economy, as it supports a country’s retirees financially without having them rely solely on government funds.
“They provide a form of retirement saving for employees, who probably would not have saved the money if it had been paid to them directly. In this way, it almost forces a savings culture and mentality, which in the long term benefits the employee and the country,” says Frik van Zyl, head of broker distribution for Momentum Namibia.
However, economic factors ranging from job losses and high debt, cause people to panic and instead of preserving their pension benefits, they end up cashing it in, suffering huge tax implications in the process.
Van Zyl advises against panicking when markets turn negative and chasing returns, but rather focusing on long-term capital gain. “If you are young, start in a higher risk portfolio, and as you age and go through the different life stages, you become more moderate in the levels of risk that you take.” he adds.
Fluctuating markets have a direct impact on retirement benefits and their returns to members as many funds invest directly into equities and shares. However, investment return cannot be the only factor that is considered when deciding how capital should be invested.
Social, financial and, in some instances, environmental factors, should be taken into account. Ultimately, retirement fund administrators should take a responsible approach to investing in accordance with the Namibian Pension Funds Act by ensuring that employees’ money is protected and investment growth is achieved.
Some of the challenges involved with the management of retirement funds include member education, promoting a savings culture, outdated legislation, as well as an increasing number of unclaimed benefits.
Compliance risk regarding changes in pension regulation, loss of business, increased cost of reinsurance, reputational damage resulting from failure to amend rules in accordance with new retirement fund legislation are some of the risk factors facing pension funds in the country.
It pays for employers to carefully research retirement fund options that are transparent with a diversified portfolio across different asset classes, assessing the return on savings and expectations on whether employers are expected to buy annuities at retirement or remain invested and draw an income.
Pension schemes are not only beneficial post retirement, but consist of tax and insurance benefits which cover death, disability and retirement offered to members while they are part of the fund.
These have proved to be far more affordable as opposed to employees having to take out cover on an individual basis. This is achieved mainly due to the economies of scale.
Van Zyl emphasises that individuals can ensure that the resources they have available for retirement will meet their daily financial needs by preserving their benefit when changing jobs or leaving employment.
By contributing the maximum amount possible or allowed towards your retirement savings and by starting as early as possible with a reputable and well governed retirement scheme, individuals and employers can rest assured in the knowledge that their retirement needs will be taken care of.