Discussions around the proposed National Pension Fund (NPF) have entered a more structured phase following an employers’ consultation convened by the International Labour Organisation (ILO) under the UN Global Accelerator programme, which aims to support Developing Countries in strengthening social protection systems. The consultation forms part of an ILO-driven process that appears to run parallel to the separate reform initiatives currently being considered by the Government and the Social Security Commission (SSC).
Objective of the Proposed Reform
The ILO outlined a proposal to introduce a social insurance pension pillar alongside Namibia’s Old Age Grant and existing occupational (private) pension arrangements. The aim is to expand pension coverage, particularly among workers currently outside formal retirement savings systems, including lower-income and informal-sector workers, while increasing overall national retirement savings.
Industry Working Committee
In response, the Namibia Employers’ Federation (NEF) and the Namibia Savings and Investment Association (NaSIA) have coordinated a joint industry working committee, bringing together representatives from the retirement fund industry, actuarial profession and other stakeholders.
The committee has been tasked with conducting independent research on the potential implications of the proposed NPF model and developing informed industry input into the policy process.
Key Issues Raised
During the consultation, employers and industry representatives highlighted several key issues requiring careful consideration:
Objective of the Proposed Reform
The ILO outlined a proposal to introduce a social insurance pension pillar alongside Namibia’s Old Age Grant and existing occupational (private) pension arrangements. The aim is to expand pension coverage, particularly among workers currently outside formal retirement savings systems, including lower-income and informal-sector workers, while increasing overall national retirement savings.
Industry Working Committee
In response, the Namibia Employers’ Federation (NEF) and the Namibia Savings and Investment Association (NaSIA) have coordinated a joint industry working committee, bringing together representatives from the retirement fund industry, actuarial profession and other stakeholders.
The committee has been tasked with conducting independent research on the potential implications of the proposed NPF model and developing informed industry input into the policy process.
Key Issues Raised
During the consultation, employers and industry representatives highlighted several key issues requiring careful consideration:
- Co-existence with existing pension funds, including the risk of undermining voluntary retirement savings;
- Affordability of contributions and possible phased transition arrangements;
- Technical design questions, including replacement rates and ceilings on pensionable earnings;
- Practical mechanisms for including informal sector workers; and
- Governance and institutional capacity, including transparency, accountability and administrative readiness.
Independent Research
The industry working group plans to commission a study examining:
The industry working group plans to commission a study examining:
- the impact of the proposed NPF on Namibia’s existing pension industry;
- affordability under different contribution scenarios;
- replacement rates and adequacy under alternative designs;
- co-existence models between a national fund and existing pension arrangements; and
- governance and institutional capacity requirements.
The ILO indicated that this research will be relevant to the broader consultation process and will be reflected in its reporting.
Alignment with ILO Standards
The ILO also emphasised that any proposed framework should align with international social security standards, particularly those contained in relevant ILO conventions. In this regard, the organisation indicated a preference for a defined-benefit social insurance structure consistent with minimum social security principles.
Next Steps
The working group will shortly meet to consider appointing a consultant, agreeing on cost-sharing arrangements, and finalising the research scope. The study is expected to be completed within approximately six months.
As the policy discussion evolves, the industry’s research initiative is intended to ensure that any reform of Namibia’s retirement system is informed by independent analysis and practical implementation considerations.
Alignment with ILO Standards
The ILO also emphasised that any proposed framework should align with international social security standards, particularly those contained in relevant ILO conventions. In this regard, the organisation indicated a preference for a defined-benefit social insurance structure consistent with minimum social security principles.
Next Steps
The working group will shortly meet to consider appointing a consultant, agreeing on cost-sharing arrangements, and finalising the research scope. The study is expected to be completed within approximately six months.
As the policy discussion evolves, the industry’s research initiative is intended to ensure that any reform of Namibia’s retirement system is informed by independent analysis and practical implementation considerations.
Clarifying governance roles under the FIMA
One of the most persistent governance challenges in the retirement fund sector is the misunderstanding of the respective roles of trustees and administrators.
Because fund administrators perform most operational activities, trustees sometimes assume that responsibility for those activities has also been transferred. Under the Financial Institutions and Markets Act, however, this is not the case. Trustees retain fiduciary responsibilities even where administration functions are outsourced.
In this and the next newsletters, we will present the ten responsibilities most frequently misunderstood in practice, and many other differences between the PFA and the FIMA.
1. Trustees remain responsible even when administration is outsourced.
Many trustees believe that appointing an administrator transfers responsibility for operational functions. In reality, outsourcing transfers execution, not accountability.
Trustees must therefore continue to supervise the administrator and ensure that the fund is administered correctly.
2. Administrators do not make governance decisions
Administrators provide operational support, but governance decisions must always be made by trustees.
Examples of trustee decisions include:
- approving rule amendments,
- determining benefit policies,
- appointing service providers.
Administrators may advise trustees, but they do not have decision-making authority.
3. Trustees are responsible for the fund rules.
Fund rules are the legal constitution of the retirement fund. Trustees must ensure that the rules are:
3. Trustees are responsible for the fund rules.
Fund rules are the legal constitution of the retirement fund. Trustees must ensure that the rules are:
- compliant with legislation,
- correctly interpreted,
- applied consistently.
Administrators typically prepare rule amendment documentation for submission to NAMFISA, but trustees must approve the amendments.
4. Administrators execute benefit calculations, but trustees remain accountable.
Benefit calculations are usually performed by administrators. However, trustees remain responsible for ensuring that:
4. Administrators execute benefit calculations, but trustees remain accountable.
Benefit calculations are usually performed by administrators. However, trustees remain responsible for ensuring that:
- benefits are calculated correctly,
- payments are made according to the rules.
Operational accuracy, therefore, requires both administrative controls and trustee oversight.
5. Trustees are responsible for financial soundness
Administrators provide data to valuators, but trustees must ensure that the fund remains financially sound.
This includes monitoring:
5. Trustees are responsible for financial soundness
Administrators provide data to valuators, but trustees must ensure that the fund remains financially sound.
This includes monitoring:
- actuarial valuation results
- funding ratios
- contribution adequacy.
Financial soundness ultimately falls within the trustees’ fiduciary responsibilities.
The key governance principle
The relationship between trustees and administrators can be summarised by a simple rule:
Trustees govern. Administrators execute.
Trustees retain fiduciary responsibility for the retirement fund, while administrators provide the operational infrastructure required to implement trustee decisions.
Understanding this distinction is essential for maintaining strong governance and protecting the interests of retirement fund members.
Clear governance structures:
The key governance principle
The relationship between trustees and administrators can be summarised by a simple rule:
Trustees govern. Administrators execute.
Trustees retain fiduciary responsibility for the retirement fund, while administrators provide the operational infrastructure required to implement trustee decisions.
Understanding this distinction is essential for maintaining strong governance and protecting the interests of retirement fund members.
Clear governance structures:
- strengthen trustee oversight,
- improve operational reliability,
- reduce regulatory risk.
For trustees, understanding the distinction between governance and administration is one of the most important elements of effective pension fund governance.