The Namibia Financial Institutions Supervisory Authority (NAMFISA) says the preservation of retirement benefits will ensure that a portion of employees’ retirement savings is preserved throughout their working lives.
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.
NAMFISA CEO Kenneth Matomola on Thursday said the regulation, which have received wide criticism recently, will result in more income for members of retirement funds after they retire, or for their dependents if such members die.
“The public is informed that the main purpose of a retirement fund is to gather and grow savings to provide an income to the member when he or she retires, or otherwise to the member’s dependants if the member passes away. In addition, if the member becomes disabled and thus unable to work before reaching the retirement age, the retirement fund may provide such member with a disability benefit, usually in the form of monthly payments,” he said.
“In contrast, withdrawing retirement savings in cash before retirement and using them to meet short-term financial needs results in many people not having enough savings to take care of themselves and their needs, thus entirely depending on social grants or the pillar one pension from the government for survival when they retire.”
“The main cause of concern from the public regarding the draft regulation is the fact that once FIMA comes into force on 01 October 2022, members of retirement funds, upon early withdrawal, will not have access to 75% of their fund credits, as this portion must be preserved until the early retirement date as provided for in the rules of the retirement fund.”
Matomola said the formal consultation with industry players on all the draft proposed standards and regulations under FIMA are currently at an advanced stage, with solicitation of comments from the industry regarding the proposed standards and regulations having ended on the 28th of February 2022.
“NAMFISA is busy considering and evaluating the comments received and, where necessary, consult further on them with the industry before finalizing the standards to be issued by NAMFISA, and regulations for the Minister of Finance to consider for promulgation. The final standards and regulations will be published in the Government Gazette on 1 October 2022 when FIMA becomes operational,” he said.
The proposed FIMA legislation will replace the existing legislation for non-banking institutions regulated by the NAMFISA and will govern retirement and medical aid funds and their administrators, short- and long-term insurers, collective investment schemes, and asset managers.
