Envisaged national pension fund ‘a threat’
Smaller funds set to ‘haemorrhage members’
FIMA will require pension funds to employ the latest best practices, which could result in higher costs for pension fund members, Friedrich said.
Pension polymath Tilman Friedrich has warned that the mooted introduction of a national pension fund will see smaller funds haemorrhaging members due to their inability to contain costs.
He made the remarks in a letter to the industry, outlining the effects the envisaged national pension fund would have on the overall landscape.
“Given the absence of economies of scale in our industry, the proposed national pension fund will exacerbate the challenges by syphoning off membership from existing funds, particularly if it does not provide enrolment exemption to members of existing funds,” Friedrich said.
He also warned that any plans on the part of the Government Institutions Pension Fund (GIPF) could lead to a scenario where existing pension fund administrators face potential demise.
“If the GIPF, with its overwhelming size and resulting influence in the industry, proceeds with the mooted umbrella fund for state-owned enterprises, it is likely to usher in the demise of most fund administrators and other service providers - and of healthy competition in the industry, to the loss of fund members,” he said.
Higher costs
Friedrich further warned that the Financial Institutions and Markets Act (FIMA) would require pension funds to employ the latest best practices, which could result in higher costs for pension fund members.
“Under FIMA, pension funds will be expected to apply global best practices regarding their governance. Trustees and service providers must upgrade their skill and administrators must upgrade their IT systems - ultimately at the cost of fund members - to measure up to expectations.”
Namibia would need to balance the interests of its ageing population against the benefits it can derive from a national pension fund, he said.
“As the global population ages, defined-benefit pension funds face the challenge of ensuring long-term financial sustainability. There's a pressing need to strike a balance between providing adequate retirement benefits and managing the financial burden on pension systems. As Namibia is mulling a national pension fund, a defined benefit system may not be an appropriate solution.”
He made the remarks in a letter to the industry, outlining the effects the envisaged national pension fund would have on the overall landscape.
“Given the absence of economies of scale in our industry, the proposed national pension fund will exacerbate the challenges by syphoning off membership from existing funds, particularly if it does not provide enrolment exemption to members of existing funds,” Friedrich said.
He also warned that any plans on the part of the Government Institutions Pension Fund (GIPF) could lead to a scenario where existing pension fund administrators face potential demise.
“If the GIPF, with its overwhelming size and resulting influence in the industry, proceeds with the mooted umbrella fund for state-owned enterprises, it is likely to usher in the demise of most fund administrators and other service providers - and of healthy competition in the industry, to the loss of fund members,” he said.
Higher costs
Friedrich further warned that the Financial Institutions and Markets Act (FIMA) would require pension funds to employ the latest best practices, which could result in higher costs for pension fund members.
“Under FIMA, pension funds will be expected to apply global best practices regarding their governance. Trustees and service providers must upgrade their skill and administrators must upgrade their IT systems - ultimately at the cost of fund members - to measure up to expectations.”
Namibia would need to balance the interests of its ageing population against the benefits it can derive from a national pension fund, he said.
“As the global population ages, defined-benefit pension funds face the challenge of ensuring long-term financial sustainability. There's a pressing need to strike a balance between providing adequate retirement benefits and managing the financial burden on pension systems. As Namibia is mulling a national pension fund, a defined benefit system may not be an appropriate solution.”
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