Members of Parliament have advised finance minister Iipumbu Shiimi to put on hold all controversial clauses in the Financial Institutions Markets Act (FIMA). These include the seemingly contentious pension preservation clause.
The preservation clause, deemed mandatory as part of the current FIMA, is being vehemently opposed in many quarters. FIMA, which was gazetted on 30 September 2021, will eventually replace the outdated Pension Fund Act of 1956. The new legislation was initially expected to be implemented in October 2022.
Under FIMA and in terms of the draft regulations which have caused an uproar in public, it is proposed that members who leave a pension fund before retirement or early retirement age are compelled to preserve at least 75% of
their accumulated benefits.
This, the finance ministry argues, is done to ensure that more money is available to support pensioners when they retire, or to their dependents in the event of their death.
This stipulation is in contrast to the normal practice of withdrawing retirement funds early to address short-term financial needs, which leaves many people with insufficient savings after retirement. In these circumstances, retirees rely almost entirely on social subsidies or the government’s old-age pension to survive.
“The minister of finance, in collaboration with the Office of the Attorney General, must clarify the constitutionality of introducing a mandatory pension preservation clause of this nature, in legislation,” reads a report from the Standing Committee on Economics and Public Administration signed off by chairperson Natangwe Ithete.
The report further noted that the mandatory preservation requirement should be revisited to consider conditions to access funding, such as instances of
unemployment, dismissal/loss of income and dire financial needs.
It also recommended that Parliament should decide on the amount to be preserved to consider the views of the people who are affected by the decision.
Meanwhile, Shiimi had appointed and inaugurated a 36-member technical
advisory committee (TAC), tasked to consult the broader public on the proposed regulation (RF.R.5.10) of the preservation of retirement benefits.
The TAC is chaired by Manfred Zamuee.
The first task of the committee was to conduct research relevant across the Southern African Development Community (SADC) region and other parts of the world. The committee appointed an independent researcher to conduct this research on their behalf.
Zamuee yesterday confirmed to this publication that the committee hopes to present its recommendations to the minister by end of May 2024.
“We had a follow-up consultation in the Khomas region last week. We had mixed reactions, with rejections and valid proposals ranging from why we don’t reduce the preservation to 50% access, and 50% to be preserved. More suggestions included doing away with the mandatory aspect
altogether.
It’s no secret that one needs savings for a better life after retirement, but we are doing it with caution so it benefits Namibians,” said Ithete.
The date on which FIMA will finally come into operation will be communicated to the public in due course, and at the appropriate time by the finance minister.
Furthermore, some of the conclusions from parliamentarians include a separation of the controversial pension preservation clause from FIMA. This, the parliamentarians argue, is to enable the finance minister to act with a degree of autonomy while also ensuring the implementation of FIMA is not delayed or complicated, specifically by matters related to the preservation regulation.
Parliamentarians added that FIMA’s implementation is critical as the new legislation does not only deal with pension preservation alone, but also other important supervision aspects for the entire non-banking financial sector.