An article in the Windhoek Observer (and other newspapers) of 5 August, under the headline “Proposed national pension fund could transform retirement industry” by Chamwe Kaira is explicitly based on a report by Simonis Storm Securities. It highlighted some of the key findings of Simonis Storm Securities’ recent report on the proposed National Pension Fund. The full report is, however, considerably more nuanced than a short summary can convey. It does not argue against extending retirement provision in Namibia. Rather, it questions the proposed design, the absence of settled rules and safeguards, and the sequence in which implementation appears to be contemplated.

Simonis Storm’s report, Rules Before Money. Let’s talk about the National Pension Fund, starts from an important premise: Namibia has a real retirement-coverage problem. Many working Namibians reach retirement without funded retirement provision and remain dependent on the universal old-age grant and family support. Simonis Storm expressly supports extending retirement provision to people who currently have none.

Its conclusion is therefore not that a National Pension Fund should be abandoned. Rather, it argues that the rules governing such a fund should be settled before compulsory contributions begin. The report summarises its position succinctly: the reform is worth doing, but the present sequence is not.

What is presently being modelled?
The design analysed by Simonis Storm is a defined-benefit arrangement funded by a compulsory contribution of approximately 15.9% of insurable earnings, in addition to the existing Social Security contribution.

The 15.91% rate is not simply an arbitrary payroll charge. It is the level contribution calculated in the ILO actuarial model to finance the promised benefits over a 100-year period. Simonis Storm notes that the underlying pay-as-you-go cost would eventually reach approximately 28.1% by 2119.

The model provides a pension credit of 1.33% of insurable earnings for each year of contribution, together with disability and survivor benefits and retirement generally from age 60. The accumulated rights are recorded in an individual pension-credit account, but the member does not own an accessible investment balance in the manner of a conventional defined-contribution fund.

That distinction is important: contributors acquire a defined pension entitlement, rather than a pot of assets that can ordinarily be withdrawn or transferred at will.

The contribution rate is not yet the whole story
Although the 15.9% contribution is central to the model, a number of essential details remain unresolved.

Among these are:

Simonis Storm therefore cautions against treating the 15.9% contribution as though the complete statutory contribution structure has already been settled. It identifies the final contribution rate and incidence between employer and employee among the matters that should be resolved in legislation before implementation.

The exemption question may be more important than the contribution rate
For the existing retirement-fund industry, Simonis Storm regards the exemption question as the single most important design issue.

The Social Security Act already makes provision for exemption of members belonging to an approved scheme. The ILO design considered in the report, however, does not use that exemption. Under that model, all covered employees would contribute to the National Pension Fund irrespective of whether they already belong to an adequate occupational retirement fund.

Simonis Storm considers four possible approaches:

The report describes the no-exemption design as its central case, but this is an analytical scenario, not a settled policy outcome. Simonis Storm assigns a subjective 40% probability to the defined-benefit model without exemption, 35% to partial exemption, 15% to a contribution-offset model and 10% to full exemption or redesign.

This distinction is essential. The future of occupational funds will depend less on the headline contribution percentage than on the eventual exemption rules.

What happens to existing employer funds if there is no exemption?
Simonis Storm’s argument is essentially economic rather than legal.

An employer currently contributing 10% or 15% of payroll to an occupational fund is unlikely to absorb an additional employer contribution of approximately 7.95% indefinitely if the national contribution is split equally.

Under the report’s illustration, the employer’s total retirement-funding cost could temporarily rise to approximately 17.95% or 22.95% of payroll. Simonis Storm’s expectation is that most employers would respond by reducing or restructuring their occupational-fund contributions instead of absorbing the full additional cost.

That means many existing occupational funds could increasingly become supplementary or top-up arrangements, rather than the employee’s principal retirement vehicle.

For employees who currently have no retirement provision, this is not necessarily problematic: the compulsory arrangement would provide retirement protection where none existed before.

For employees already belonging to a sound occupational fund, however, the benefit is less obvious. They may simply see one form of retirement provision substituted for another, while losing some of the flexibility, investment choice, advisory structure and supplementary benefits presently available through occupational funds.

Simonis Storm therefore draws a sharp distinction between the uncovered and the already-covered employee. It regards the case for compulsory provision as strong for the former and considerably weaker for the latter.

The impact is on future contributions, not confiscation of existing assets
This is another important distinction in the report.

Simonis Storm does not argue that existing retirement-fund assets will be confiscated or automatically transferred to the National Pension Fund. Its concern is instead the loss of future asset formation.

If employer and employee contributions are redirected to the National Pension Fund, existing occupational funds would receive lower future contribution inflows. Over time their assets would therefore grow more slowly, and some mature funds could become increasingly cash-flow negative.

Simonis Storm identifies approximately N$92.4 billion of retirement assets outside GIPF as the portion of the market where diverted contribution flows would translate particularly directly into lost mandates and reduced future asset formation. GIPF itself is also potentially within the scope of the national scheme.

The issue is therefore not the seizure of existing assets. It is what happens to the future contributions that would otherwise have continued building those assets.

Why reduced contribution flows matter to investment markets
The report connects this question to a wider economic issue.

Retirement funds are major providers of long-term investment capital. If mature funds receive lower contribution inflows while continuing to pay retirement and withdrawal benefits, they may have to increase liquidity, sell longer-dated assets and reduce exposure to less liquid investments.

Simonis Storm identifies infrastructure, private equity, unlisted investments, agriculture and energy as areas potentially affected by this change in investment behaviour.

Its concern is that Namibia could consequently lose part of the patient capital supplied by retirement funds.

This is not presented as an immediate collapse of investment markets. It is a transmission mechanism: lower contributions lead to slower asset growth, which leads to smaller investment mandates and ultimately a smaller pool of long-duration private-sector capital.

How large could the National Pension Fund become?
The report presents several scenarios, and the distinction between them is important.

Simonis Storm estimates that ten years after commencement, the fund could hold:

The upper N$87 billion figure is therefore not the report’s base-case forecast.

The gross-potential scenario assumes constant contributions, no benefits, no administration costs, no leakage and no implementation ramp. Simonis Storm expressly cautions that realistic assumptions produce materially lower outcomes.

Even at the lower end of the estimates, however, Simonis Storm notes that the National Pension Fund could rapidly become one of the largest institutional investment pools in Namibia.

The governance question may ultimately be more important than size
One of the strongest sections of the Simonis Storm report concerns governance.

The proposed National Pension Fund would, on the structure currently contemplated, fall under the Ministry responsible for labour rather than under FIMA and NAMFISA.

Simonis Storm contrasts this with existing retirement funds, which operate within a prudential, fiduciary and disclosure framework and under regulatory supervision.

Its position is straightforward: a compulsory fund should be subject to governance, disclosure and fiduciary standards at least equivalent to those applying to the retirement funds it may partly displace.

The report also identifies a structural conflict. Government could simultaneously be:

Simonis Storm does not suggest that any of these roles is illegitimate. Its concern is that combining them without independent governance, custody, procurement and reporting safeguards creates an institutional conflict that should be addressed before significant compulsory assets accumulate.

The informal-sector problem remains unresolved
The social objective of the National Pension Fund is, in part, to extend retirement provision to workers currently excluded from formal retirement-fund arrangements. Ironically, these workers are also the hardest to collect contributions from.

Formal-sector employees are relatively easy to reach because contributions can be deducted through payroll. Domestic workers, farm workers, casual workers, micro-enterprise employees, self-employed workers, and workers in the informal economy are increasingly difficult to include.

Simonis Storm warns that the system could therefore begin by collecting effectively from the formal sector while struggling for years to reach the very groups whose lack of retirement provision provides much of the justification for the reform.

The report argues that reaching informal and irregular workers will require flexible contribution systems, mobile payment mechanisms, low minimums, contribution holidays and potentially explicit subsidies.

These systems have not yet been designed.

Implementation is likely to take considerably longer than previously suggested
Simonis Storm does not regard early implementation as realistic.

Its central estimate is that the first contribution would be collected around 2030, with a possible range from 2029 to 2032.

The reasoning is practical. The enabling legislation still requires expansion; the actuarial basis dates back to 2019 and needs to be refreshed; regulations must determine the contribution and exemption structure; and collection, administration, custody, and investment systems must still be designed and procured.

This is Simonis Storm’s estimate, not an announced government implementation date.

Simonis Storm’s preferred alternative
Perhaps the most important indication that the report should not be read as opposition to pension reform is its own preferred design.

Simonis Storm proposes:

The philosophical difference is therefore significant.

The model examined in the report creates a broad compulsory national defined-benefit scheme, potentially including employees who already have adequate retirement provision.

Simonis Storm would instead use the national system primarily to extend coverage, while preserving existing arrangements that already achieve the policy objective.

The real debate is about architecture, not merely contribution rates
The most useful contribution of the Simonis Storm report is perhaps its shift of the discussion away from the headline figure of 15.9%.

Before compulsory money begins flowing, far more fundamental questions need answers:
Who must participate?
Who may be exempted?
What constitutes an “adequate” existing retirement fund?
What rights does a contributor acquire?
Can those rights be transferred?
Who regulates the fund?
Who appoints and removes those responsible for its governance?
Who decides how its assets are invested?
What prevents investment decisions from being influenced by fiscal or political considerations?
How will informal-sector workers actually be brought into the system?
And who ultimately carries the financial risk if the defined-benefit promise proves more expensive than anticipated?

Simonis Storm identifies eight matters that should be settled before launch: contributions, earnings thresholds, exemptions, ownership rights, benefits, oversight, investment governance, and the practical coverage mechanism for informal and irregular workers.

Its central message is consequently broader than a debate about whether Namibia should have a National Pension Fund.

Namibia may well have a strong case for extending compulsory retirement provision to workers who presently have none. The more difficult question is whether that objective requires replacing or weakening retirement arrangements that are already doing the job, and whether compulsory contributions should commence before the governance, regulatory and investment framework is fully settled.

That is why the title of the Simonis Storm report is particularly apt: Rules before money