TAKING a cue from Nobel laureate and Professor of economics at Columbia University Joseph Stiglitz, pension funds are an essential driver of macro-economic stability and contribute significantly to GDP’s of global economies including Namibia.
Essentially, pension fund investments gave impetus to the development of financial markets, stock broking and the asset management industry in Namibia but more so in this day there is no doubt that the assets invested in Namibia coupled with the amounts paid out to the retirement funds members (which was about N$13 billion for the past five years) have had a positive impact on the development of the economy as a whole, a reality that justifies the strength of retirement funds in the growth of the country financially.
As a bright current and future economic driver, pension funds further fulfil an important role in the economy by channelling the current pension savings into investments in financial assets and subsequently transforming these assets into a predictable post-employment income for many across the 14 regions of the country.
Locally, pension funds provide a range of contingencies, which may otherwise adversely affect household consumption. Uncertainty over the time of death, disability, retrenchment, pension, is a primary factor explaining the establishment of a pension plan. However the main goal of pension reform is to achieve adequate, affordable, sustainable and robust pensions while at the same time contribute to economic development
Indeed there are still challenges that the industry still needs to work on such as underdeveloped financial markets, poor literacy levels, ineffective administration and low per capita income. Cumulatively, these factors have resulted in a large majority of citizens being forced to find alternative ways of saving for retirement. Furthermore, the growing trend of young Namibians migrating in search of better living conditions in urban set ups has weakened traditional family social security structures, thereby impacting the socioeconomic conditions of the elderly – particularly those living in the rural areas.
However so as Deputy Minister of Finance Natangue Ithete alluded to at last week’s annual conference for the Retirement Funds; even though the main purpose of retirement funds is to reduce old age poverty by providing income to their members after retirement and to support the dependents of their members after their death, retirement funds do play an important role in the economy through accumulation of savings, contribution to the GDP and development of the financial markets.
For example, the NAMFISA 2014 Annual Report shows that the total assets of the retirement funds were N$119.6 billion in 2014, which was equivalent to approximately 85 percent of the Namibian GDP. About 41 percent of those assets were invested in Namibia.
Confidente. Lifting the Lid. Copyright © 2015