1. AGENDA

• * Introduction

* Good practices in industry

*Results of GIPF

*Short comings

*Proposed regulatory changes

* Closing

Presenter: A.Jansen

PUBLIC PENSIONFUNDMANAGEMENT 2. GOOD PRACTICE INTRODUCTION

* All pension funds are governed by the Pension Funds Act of Namibia of 1956.

* Around 400 registered pension funds

• Mostly voluntary funds catering for civil servants and larger private & public companies

* We do not have a national pension fund covering all working citizens (shortfall ).

* Registered funds covers 120 000 members of the 500 000 economically active Namibians.

(GIPF the fund I work for has approximately 70 000 members)

* Social pension (less than minimum wage) have 125 000 recipients.

PUBLIC PENSIONFUNDMANAGEMENT 3.

1. Fully funded with assets invested in capital market (local and international)

- stock exchange

- bond markets

Reg.28: 35% Namibian assets ; Forex restrictions max 15 % offshore

PUBLIC PENSION FUND MANAGEMENT 4. PUBLIC PENSION FUND MANAGEMENT

2. Annual audits by independent auditors

3.Annual and Tri-annual actuarial valuations

5. PUBLIC PENSION FUND MANAGEMENT

4 . Prudent investment guidelines

4.1 No investments in employer/sponsors

Registrar limited discretion to grant exemption

4.2 Maximum & prohibited investments

e.g. equity/stocks max -75 %

Unlimited investment 5 %

No investments in coins & valuable artifacts.

6.

Appoint independent money managers

• To manage funds within the bounds of regulatory framework and laid down mandates

• Discretionary mandates to money managers

• Regular (continuous) monitoring of adherence to benchmarks (including peer comparisons)

PUBLIC PENSIONFUND MANAGEMENT 7. PUBLIC PENSIONFUND MANAGEMENTWHAT MAKES OUR INDUSTRY WORK

Choice under the act of different funds

- Pension Fund

- Provident Fund

- Retirement Annuity Fund

- Guaranteed funds (insurance companies underwrite)

Prior Approval of auditors and actuaries by the Registrar

Negatives

Other consultants e.g. Employee benefits, Asset consultants, etc. not needed to be prior approved by Registrar

8.

* Preferential tax treatment of the:

- the contributors

- the funds themselves

- the benefits

All funds have independent boards of trustees most have equal Employer /Employee representation(except GIPF tripartite)

PUBLIC PENSIONFUND MANAGEMENT 9. PUBLIC PENSION FUND MANAGEMENT RESULTS

No bankrupt funds

No fund unable to make benefit payments

Only two cases ofunauthorized transfer by company management from 2 funds to companies (done without knowledge and approval of the Registrar)

10. PUBLIC PENSIONFUND MANAGEMENT GIPF Investment performance Individual years to 30 June (%) 9.8 9.9 8.2 5.2 8.8 6.9 10.0 7.4 10.0 15.1 15.2 16.1 13.8 10.0 6.0 17.4 25.3 8.5 28.9 13.5 18.0 18.4 20.9 12.7 11.8 6.4 15.4 25.8 7.8 26.4 13.0 18.6 19.8 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 Namibian Inflation Fund Bench- Mark Return Fund Return Year ended30 June 11. PUBLIC PENSIONFUND MANAGEMENT GIPF Investment performance Periods to 30 June 2001(%) 9.8 9.8 9.3 8.2 8.4 8.1 8.4 8.3 8.4 9.1 16.1 14.9 13.3 11.4 12.6 14.6 13.7 15.5 15.3 15.6 20.9 16.7 15.1 12.8 13.3 15.3 14.2 15.7 15.4 15.7 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Namibian Inflation Fund Bench- Mark Return Fund Return Year ended30 June 2001 12. PUBLIC PENSIONFUND MANAGEMENT GIPF Administration cost as % of assets 1 967 084 2 754 868 3 340 500 4 330 407 5 164 981 6 554 282 6 828 277 8 682 442 10 700 000 0.19 0.20 0.23 0.24 0.31 0.43 0.49 0.61 0.49 1993 1994 1995 1996 1997 1998 1999 2000 2001 Assets at market value N$000 Admin cost as % of assets (incl. invest fee) Year ended 31 March 13. GIPF Average asset allocation

* Geographic: 15% International, 55 % RSA and 35% Namibia

* Across asset classes : 50-55 % Stocks , 30-35% Bonds 5-10% Real Estate and 5-10% Cash

Trading : 92.5%Quoted and 7.5% unquoted

Target rate of return 3% above inflation

PUBLIC PENSIONFUNDMANAGEMENT 14. PUBLIC PENSION FUND MANAGEMENT

5. REGULATIONS IN THE PENSION FUND ACT THAT IS IN PIPELINE

a) Funds must appoint own compliance officers

b) Changes to max holdings

c) Individual member choice

• *for Funds going from DB to DC

• *access to advisors

• *suitable default portfolio

• *compulsory information/education to members

15. PUBLIC PENSION FUND MANAGEMENT

5. REGULATIONS IN THE PENSION FUND ACT THAT IS IN PIPELINE (cont)

d) Funds compelled to seek expert advice

e) Compulsory to define,maintain and monitorinvestment policies

16. PUBLIC PENSIONFUND MANAGEMENT The Regulatory organization NAMFISA ( Namibia Financial Institutions Supervisory Authority )

Established as a juristic person

(to sue & be sued, collect own revenue)

To exercise supervision, in terms of the act and other laws over the business of financial institutions.

Revenues generated through levies on financial institutions under supervision.

Private pension fund assets supervised including GIPF is in excess of 55 % of GDP

17. PUBLIC PENSIONFUND MANAGEMENT Proposed national pension fund -partially funded of the Scheme Retirement/Disability Min=80% of minimum insurable earnings Max=80 % of wage base. Wage base=avg. oflast 3years of earnings. Eligible individuals receive a gift equalto 6 months of benefits upon retirements as a lump sum. Old Age: 15 years of contributions and 60 years of age with a retirement test between 60-65. Disability: Individuals under60 deemed to be permanently disabled and whose earnings dont exceed N$240.Minimum -N$300 Maximum N$4500 Amountof Benefit Eligibility Insurable Earnings Contribution Type of Benefit 4.2 % divided Equally b/w Employee and Employer also covers contributions for disability and survivor insurances. Retirement Disability Survivors/ Orphans Synopsis of our proposed Social Security Act 18. PUBLIC PENSION FUND MANAGEMENT Table continues Benefit formula: N$220*t/30+(0.01)* Wage base* T (t=years). Survivors/Orphans The spouse receives 40 % of the benefits as calculated under retirements.If children are less than 4, 20% each.If 4 or more, the remainder 60 % is split among them After 60the retirement benefit substitutes the invalidity one. 19. PUBLIC PENSIONFUND MANAGEMENT Shortcomings pointed out by the WB report of 2000 that we are currently addressing are the following

What contribution rate can the economy afford

The impact of HIV/AIDS and how that will impact above

The impact of granting exemptions

20. Thank you ! PUBLIC PENSIONFUND MANAGEMENT