Business Reporter
THE Minister of Finance, Iipumbu Shiimi, has hit back at the current torrent of criticisms levelled against the proposed Financial Institutions and Markets Act (Act No. 2 of 2021) draft bill which proposes the regulation of retirement fund withdrawal, stating that in Namibia the history of the preservation of retirement funds is very poor as Namibians cash out their retirement savings at a high rate.
At the moment, the draft regulation proposes for members of retirement funds to preserve at least 75% of their minimum individual reserve (fund credit) until at least the prescribed early retirement age as set out in the specific fund rules.
Shiimi explained that the Financial Institutions and Markets Act, (Act No. 2 of 2021) which consolidates and harmonises the laws regulating financial institutions, financial intermediaries and financial markets in Namibia was passed by the National Assembly in 2020.
Under section 465(8)(m) of this new law, the Minister responsible for finance is empowered to make regulations relating to the preservation of retirement benefits. The minister has however emphasized that these regulations are still in the draft stage, and the public is encouraged to provide inputs for consideration.
“In the Namibian context, the history of preservation is very poor. Understandably, the high cost of living, household indebtedness, high levels of unemployment, and slowing growth in assets have placed retirement planning low on the priority list for most people.
“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,” Shiimi explained.
At an aggregate level, Shiimi stated that low retirement savings increase the future burden on the state due to more people becoming dependent on social grants and public services.
The minister also added that at present, early withdrawal from pension funds is more frequent as people change jobs as many as eight to 12 times during their working lives.
Furthermore, pension funds today are predominantly Defined Contribution (DC) funds where full vesting of pension benefits no longer penalizes early withdrawal, Shiimi explained.
