By Staff Reporter
WINDHOEK, May 3 — This is the third instalment of the series on ‘Understanding the Context of Pensions in Namibia in 2023’. In the previous articles, we covered the pillars defined in the World Bank Pension Provision Model, including Pillar 0, and Pillar 2, which includes pension provision via employer-sponsored retirement funds. In this article, we will continue with our review of Pillar 2.
The article discusses the social benefits of retirement funds and the key factors to consider when a member retires, particularly tax implications, and areas of Pillar 2 reform that policymakers are likely to be contemplating. Employer-sponsored retirement funds have positively contributed to Namibian society for over 50 years, providing a tax-incentivized opportunity for employees to save for their retirement. Such funds have also played an essential role for families whose breadwinner has passed away or is unable to work due to injury, accident, or illness.
The Pension Funds Act, Act No 24 of 1956, mandates that trustees distribute death benefits to dependents of deceased members, ensuring due consideration is given to the needs of all dependents, including the most vulnerable. Retirees may also choose to receive a tax-free cash lump sum, and the remaining amount will be taxed at their marginal tax rate, depending on whether they retire from a provident or pension fund.
This article delves into the differences between the two and the implications of the living annuity as an alternative annuity product. We also highlight the government’s efforts to phase out provident funds and FIMA’s potential impact on retirement benefits in Namibia.
Understanding the social benefits of retirement funds and the factors to consider during retirement is crucial to ensuring a comfortable retirement for employees in Namibia. Policymakers should continue to consider reforming retirement funds to align with current realities and ensure a secure future for retirees. – Namibia Daily News