Finance minister Ipumbu has come out in defence of the preservation clause in the Financial Institutions and Markets Act (FIMA), arguing that the proposed regulations will instill a savings culture in the country.
This comes as several pension funds have distanced themselves from the inclusion of the clause.
“In the Namibian context, the history of preservation is very poor. Understandably, the high cost of living, household indebtedness, high levels of unemployment, slowing growth in assets have placed retirement planning low on the priority list for most people,” Shiimi told Parliament on Tuesday.
“The aim is to develop a regulation that appropriately balances the short-term financial needs of individual members, especially for emergencies, while still preserving the adequacy of pension savings in retirement.”
He said the existing low retirement savings culture in the country increases the future burden on the state with more people becoming dependent on social grants and public services.
“This is further compounded by the high number of informal sector employees that do not fall within the ambit of any savings pool. Furthermore, within the formal sector there has been a growing trend to cash in one’s retirement savings whenever the opportunity arises, either through a job change or when experiencing personal financial difficulties,” the Finance minister said.
“The problem is further exacerbated by rising life expectancies. The move towards ensuring that a larger proportion of retirement funds be preserved throughout the working lifetime of an individual results in increased security after retirement, but this must be weighed against genuine financial requirements for emergencies before retirement.”
Shiimi, who has the final discretion to review or rescind the proposed regulations before they are gazetted into law, however, said more consultations needed to take place with all stakeholders.
“This regulation is still in draft form, and constructive debate and participation by various interested bodies in the industry needs to take place before a final strategy is formalized,” he said.
The draft regulation will apply indiscriminately to every retirement fund registered under the Financial Institutions and Markets Act (FIMA), and the compulsory preservation of retirement benefits will apply to all retirement benefits that becomes due to, and to contributions made by, members of retirement funds following the date on which the FIMA comes into force.
