By Erastus Kalenga Hamunjela
The cost of choosing security over growth.
Every month, hundreds of thousands of Namibians contribute to their pension funds through their employers.
At the end of 2025, NAMFISA counted 428,426 retirement-fund members and N$301.7 billion in assets. Many of those members also pay into a retail retirement annuity.
This is not an argument against the annuity. It is an argument about whether it really makes sense to have it, especially if you already have a pension fund in place.
If an employer offers a pension fund, you are already in a long-term retirement vehicle. Contributions go in every month and the growth is not taxed along the way.
A retirement annuity does the same job. The difference is the lock-in and the fees. An employer fund can often still be reached if you resign. A retirement annuity cannot be touched before 55.
The problem starts with the tax deduction. In Namibia, contributions to pension funds, provident funds and retirement annuities all sit under one annual cap of N$150,000. It is one shared limit, not one for each product.
Say you contribute N$3,000 a month to the employer fund. That is N$36,000 of your own money against the cap. The employer’s matching N$3,000 does not count toward your deduction. A retail annuity of N$2,000 a month adds another N$24,000.
You are at N$60,000, not N$96,000, and you still have room. The cap fills when your own payments across the pension, the annuity and an education policy reach N$150,000. A large employer contribution does not get you there.
A retail retirement annuity typically charges between 1.5% to 2.5% or even higher per year in total costs. An employer fund, negotiating at scale, often runs at 0.8% to 1.2%. One percentage point sounds small. Over 30 years it is not.
Take N$2,000 a month invested for 30 years at 12% gross. At a 1% annual fee the final balance is about N$5.6 million. At a 2% fee it falls to about N$4.5 million. That is about N$1.1 million gone to the difference in the wrapper, and the fee is the only thing that changed.
The deeper cost is not the fee. It is where the money goes once it is inside. Namibian retirement funds must keep a significant portion invested locally.
The regulation is designed to protect members. It also means the portfolio cannot freely hold the highest returning assets in the world.
Inside a fund earning between 6 to 8% a year after fees, N$3,000 a month for 30 years compounds to about N$4.5 million. In a self-directed portfolio earning 14% a year, the same contribution compounds to about N$16.5 million. Same person, same debit order, same years.
The gap is the return and the fee, not a promise that the next 30 years will look like any single fund’s past performance.
The Satrix Nasdaq 100 has returned about 23% a year since inception in 2018 and about 12% over the past year. Past performance is not a plan.
Outside a retirement annuity a Namibian investor can hold global equity ETFs directly, with a total expense ratio starting around 0.42% and no minimum on EasyEquities. Inside an annuity the mandate restricts both the assets and the cost transparency.
The exit is where most people discover what they actually signed. At 55, up to one third of the balance can be taken as a lump sum, which under Namibian tax law is fully tax-free.
The remaining two thirds must be used to purchase an annuity that pays a monthly income for the rest of your life. On a living annuity the annual drawdown is set at between 5% and 20% of whatever remains. Take the maximum and the base falls.
Twenty percent of N$100,000 is N$20,000. The following year it is 20% of what is left. The income shrinks. The product does not end. On a guaranteed life annuity the insurer keeps the capital. The income stops when you die or when the guarantee period ends.
Either way, a retirement annuity does not mean access to your money. It means an income stream, taxed like a salary, from a pool you no longer control.
A retirement annuity makes sense in two situations. You are self-employed with no employer fund and you need both the tax deduction and the forced structure.
Or your employer fund has left unused room under the N$150,000 cap and the annuity is filling it, not duplicating it. If the cap is already full, you did not buy more retirement. You bought a less flexible copy of what you already had.
The one argument that holds regardless of tax or return is discipline. The lock-in stops you from cashing in your investment for a car, a holiday or a renovation.
For someone who genuinely cannot be trusted to leave long-term savings alone, the product solves a real problem. The brochure does not say it that way, but that is what it does. Some people need that constraint. There is no shame in knowing it.
If you have an employer pension fund, keep it. The employer contribution makes it valuable on its own. Before adding a retail annuity, ask your payroll department how much you personally contribute annually and whether you still have unused room under the N$150,000 cap.
If the room is gone, stop the debit order. Redirect that money into a self-directed investment account where you choose the assets, see the fees and are not locked in until 55 and you can invest in high growth assets.
If you are self-employed, an RA is a reasonable starting point. But run a self-directed ETF portfolio alongside it. The annuity handles the discipline and the deduction. The ETF portfolio handles the growth.
The question for both groups is not which retirement product is better. It is whether the money going into an additional product every month would build more wealth in your own hands, in assets you choose, at costs you can see.
Security has a price. The question is whether you know what you are paying for it.
Erastus Kalenga Hamunjela is a Namibian investment researcher and financial markets commentator with a strong focus on capital markets, investment literacy, and data-driven financial education. For Educational Investments, Business Consultation & Collaborations: erastuskalengier@gmail.com
Disclaimer
The information provided in this article is for educational and informational purposes only. It does not constitute financial, investment, legal, or professional advice. Readers should not rely on this content as the sole basis for making investment decisions and are encouraged to seek independent professional advice before acting on any information contained herein.
