Parliament has called on Finance Minister Ipumbu Shiimi to suspend implementation of the Financial Institutions and Markets Act (FIMA), specifically the pension preservation clause requiring 75% of pension funds to be held until retirement at age 55.
The Parliamentary Standing Committee on Economics and Public Administration recommended that the clause be put on hold and subjected to further scrutiny.
The committee, chaired by Natangwe Ithete, raised concerns about the constitutionality of the clause, which has drawn widespread criticism from various sectors of society.
“Following concerns raised by the public over the Act, the committee led by its chairperson, Hon. Natangwe Ithete held extensive consultations including an oversight workshop held at Swakopmund in May this year involving stakeholders such as the Namibia Financial Institutions Supervisory Authority (NAMFISA), Government Institutions Pension Fund (GIPF), Retirement Fund for Local Authorities and Utility Services in Namibia and Retirement Fund Solutions, among others,” said Parliament Chief Information Officer George Sanzila.
The committee’s report, recently adopted by the National Assembly, also called for the involvement of the Attorney General to clarify the legal implications of mandatory pension preservation.
The report also recommended that the proposed regulations for FIMA should be tabled in parliament for approval before implementation.
NAMFISA, the financial regulator, has defended the clause, arguing that it is aimed at protecting pensioners from financial hardship in their old age.
However, critics contend that the clause infringes on individuals’ rights to access their money, especially in times of financial distress.
“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. Pensioners mostly end up depending on social grants from the state,” said Kenneth Matomola, the Chief Executive Officer of NAMFISA.
Matomola further said FIMA has the added advantage of shielding members’ retirement savings from bankruptcy or creditors.
On the other hand, the Retirement Fund for Local Authorities and Utility Services in Namibia (RFLAUN) opposed the pension preservation clause in FIMA.
The RFLAUN argued that the clause unfairly restricts access to pension funds, particularly for those who leave employment without other income sources and have financial commitments like home loans.
RFLAUN believes the clause infringes on individuals’ rights and calls for a more thorough investigation into the matter.
The fund also questions the overall suitability of FIMA for Namibia’s economic conditions, citing mandatory pension preservation and forced annuitisation as key concerns.
The implementation of FIMA, originally scheduled for October 2022, has been postponed due to the mounting opposition.
The Act is intended to replace the outdated Pension Fund Act of 1956 and align Namibia’s financial sector with international standards.
