Govt eyes plan that will force Namibians to save

MOST Namibians do not put away money for their retirement, placing the burden on Government to look after them with State pensions, a challenge the State cannot handle alone, says a financial expert.

Compounding the situation was the fact that people retired at an earlier age and had less to live on during retirement, said Johannes Gawaxab, Managing Director of Old Mutual Africa Operations. Speaking at a conference for the retirement fund industry at the end of last week, Gawaxab said annual calls to increase State pensions, pressure to establish a basic income grant and a nation that hardly put savings away for their old age called for a rethinking of the industry.Labour Minister Alfeus Naruseb said Government was still aiming to establish a national pension fund in the “near future”, starting with a contribution of five per cent of a person’s salary, up to 12,6 per cent by 2038.”Official statistics show that about 420 000 Namibians are economically active, but only 160 000 of them contributed towards a registered retirement fund in 2005,” Gawaxab said.”Some 60 000 citizens paid into individual retirement annuities and that leaves the remaining 200 000 of the economically active persons likely to rely on Government to help them fund their retirement years,” he added.According to official statistics, 123 000 Namibians receive monthly State pensions of N$370 at an annual cost of N$546 million, plus 18 000 disabled people who receive disability grants of N$500 a month, costing the State about N$83 million a year.Life expectancy in Namibia has dropped from 58,4 years in 1995 to 40,2 years in 2006, which leaves fewer people to pay contributions into retirement policies.Gawaxab noted that 20 years ago people retired at the age of 65 with an average life expectancy of 14 more years, while today retirement often started as early as 55 and people lived for an average of 28 years longer.”This means that today one needs about 90 per cent more capital to buy the same level pension as in the 1980s and about 50 per cent more capital to buy the same inflation-linked pension.”Minister Naruseb said since 1997 Government had been preparing to get a national pension fund off the ground but it was regarded as competition by the private retirement fund industry.Nevertheless, his Ministry would go ahead with it, he said, noting that the International Labour Organisation (ILO) had conducted a study on the matter by 2002.”A task force consisting of the employer sector, the labour unions and Government then made recommendations to my Ministry and we submitted them to the relevant Cabinet Committee dealing with the implementation of the fund,” Naruseb said.”The envisaged national pension fund will be complementary and is not a substitute for existing pension schemes,” Naruseb emphasised.”We want to establish a sound scheme and it might take a little longer.The ILO report recommended starting with initial contributions of five per cent, split equally between employers and employees, to be increased gradually to 12,5 per cent by the year 2038.”It was further recommended that social grants should fall away once the national pension fund was established.Speaking at a conference for the retirement fund industry at the end of last week, Gawaxab said annual calls to increase State pensions, pressure to establish a basic income grant and a nation that hardly put savings away for their old age called for a rethinking of the industry.Labour Minister Alfeus Naruseb said Government was still aiming to establish a national pension fund in the “near future”, starting with a contribution of five per cent of a person’s salary, up to 12,6 per cent by 2038.”Official statistics show that about 420 000 Namibians are economically active, but only 160 000 of them contributed towards a registered retirement fund in 2005,” Gawaxab said.”Some 60 000 citizens paid into individual retirement annuities and that leaves the remaining 200 000 of the economically active persons likely to rely on Government to help them fund their retirement years,” he added.According to official statistics, 123 000 Namibians receive monthly State pensions of N$370 at an annual cost of N$546 million, plus 18 000 disabled people who receive disability grants of N$500 a month, costing the State about N$83 million a year.Life expectancy in Namibia has dropped from 58,4 years in 1995 to 40,2 years in 2006, which leaves fewer people to pay contributions into retirement policies.Gawaxab noted that 20 years ago people retired at the age of 65 with an average life expectancy of 14 more years, while today retirement often started as early as 55 and people lived for an average of 28 years longer.”This means that today one needs about 90 per cent more capital to buy the same level pension as in the 1980s and about 50 per cent more capital to buy the same inflation-linked pension.”Minister Naruseb said since 1997 Government had been preparing to get a national pension fund off the ground but it was regarded as competition by the private retirement fund industry.Nevertheless, his Ministry would go ahead with it, he said, noting that the International Labour Organisation (ILO) had conducted a study on the matter by 2002.”A task force consisting of the employer sector, the labour unions and Government then made recommendations to my Ministry and we submitted them to the relevant Cabinet Committee dealing with the implementation of the fund,” Naruseb said.”The envisaged national pension fund will be complementary and is not a substitute for existing pension schemes,” Naruseb emphasised.”We want to establish a sound scheme and it might take a little longer.The ILO report recommended starting with initial contributions of five per cent, split equally between employers and employees, to be increased gradually to 12,5 per cent by the year 2038.”It was further recommended that social grants should fall away once the national pension fund was established.