CEO JOHN ISACK

A WARM
WELCOME
TO
WISH YOU
ALL THE
BEST,
ISACK
JOHN
FROM THE
OFFICE OF
THE
CEO
MISS NAMIBIA
TALKS
“Budgeting is a fixed component of my
financial life. I do it monthly. This allows
me to stay in my financial lane, which
is very important because my line
of work involves a lot of
spending and that is
usually on impulse...”
Budget Sheet inside!
Page 16
Money Sense
Page 7
Learn easy ways to make
your money go further
every month. It’s like
paying yourself!
2
5
1
7
4
Fun &
Games
9
3
12
6
Page 18
8
10
11
P5
15
14
13
16
Photo by Chris Johnston
JUNE’13 EDITION
MISSION
DISCLAIMER:
The NAMFISA Consumer Education Bulletin is distributed quarterly,
free of charge. Views expressed by contributors are not necessarily
NAMFISA’s mission is to effectively
those of NAMFISA. Reproduction, copying or extracting any
regulate and supervise financial
without prior permission from the Editor.
institutions and to give sound
advice to the Minister of Finance.
VISION
NAMFISA’s vision is to be a
respected regulator of the financial
sector that fosters a stable and
part or whole of this publication may not be undertaken
EDITOR:
Isack Hamata
LAYOUT:
Ogilvy Namibia
COPYWRITING:
Ogilvy Namibia
DISTRIBUTION:
All distribution enquiries should be directed to the NAMFISA
safe financial system contributing
Consumer Education Department at the contact details listed below.
to the economic development of
CONTRIBUTIONS:
Namibia.
Contributions to this Bulletin are welcome.
The Editor reserves the right to edit submissions.
Send contributions to the Editor at:
VALUES
[email protected].
CONTACT DETAILS:
Call: 0800 290 5000
•
Teamwork
•
Service
•
Integrity
Visit: 2nd Floor, Sanlam Centre
•
Performance Excellence
Windhoek
SMS: 3030 (normal charges apply)
Write: PO Box 21250, Windhoek
E-mail: [email protected]
154 Independence Avenue
CONTENT
IN THIS EDITION:
3.
From the Editor’s Desk
4.
From the Office of the CEO
5.
FLI: SME as the Focus for FLI
7.
Money Sense: Easy Ways to Save Money
8.
Social Security Commission
9.
Financial Focus: Interview with Miss Namibia
10.
Water Sense: Easy Ways to Save Water
11.
Pension Funds: Maturity Values Explained
12. Medical Aid Funds
13.
Life Insurance: What You Should Know
14.
Financial Focus: Interview with Dr Frans Indongo
15.
FAQ: Questions & Answers
16.
Budget Sheet
18.
Fun & Games
Page 15: FAQ
Page 14: Dr Indongo
Page 13: Life Insurance
“I invested. I
wanted to cushion
the future. I’m a
financial success!”
- Joanna Kerns
&
8
Fun Page1
es:
m
a
G
2
1
4
9
3
6
8
10
11
1
14
13
16
WELCOME
MR ISACK HAMATA
I would like to thank John for the tremendous ener-
maintain financial discipline; a testimony on finan-
Bulletin. It is now a sought after publication all over
personality; a glossary of financial terms that con-
gy that he has expended on the Consumer Education
the country. In fact, we have received commenda-
tions from fellow regulators in the SADC region
about the quality of the Consumer Education Bulletin.
As new Editor of the Consumer Education Bulletin,
it is my duty to continue efforts to keep consumers
Mr. Isack Hamata, Editor
Dear Readers,
It is indeed an honour and a pleasure to take over from
John as editor of the Consumer Education Bulletin.
Since spearheading the launch of the Bulletin, John
sumers might encounter when engaging in finan-
cial transactions, and a puzzle we hope will be a
fun way to learn financial terms. As highlighted
earlier, we have retained our articles on the various
financial services and products, Frequently Asked
Questions and the very popular budget sheet.
abreast of developments and to highlight issues that
We will continue to keep our ear to the ground
aware of. As you have realised, the look and feel of
and ensuring that this Bulletin remains your pri-
are of concern and which consumers need to be
this edition of the Bulletin is different from previous
editions. While we have retained many of the old
features, we have added a few new ones with a view
to give the Bulletin a modern look and feel and make
it more reader friendly.
has done a tremendous job in educating and keeping
Among the new features we have in this Bulletin is
ers of financial services and products ought to know.
interviews with a local personalities on how they
consumers informed about key facts that all consum-
cial freedom by an established Namibian business
the “Financial Focus” column, which is based on
with the aim of making necessary improvements
mary source of information on consumer financial
education.
I invite you to write to us, the Editor and the CEO,
for any clarity that you may require or if you want
to bring issues to our attention you think require
NAMFISA’s urgent attention and action.
Thank you and happy reading!
FAREWELL MR JOHN NAANDA
Dear Readers,
Stakeholders who have assisted us in distributing
end of this Bulletin - to encourage you to plan your
I am sure most of you are wondering why I am bid-
further encourage the readers to continue read-
in a financial predicament.
ding farewell to you and where I will be going. To
relieve you from the anxiety and questions around
my future role, I would like to ensure you that I will
still be around to provide input where necessary and
to supply educational articles from my new assignment, which is still within NAMFISA.
In order to attain greater efficiencies, optimal use of
resources, and to prepare the Authority for enforc-
ing changes to relevant laws (Financial Institutions
and Markets (FIM) Bill and the NAMFISA Bill),
our Bulletins to as many people as possible. I would
ing our bulletins and the Stakeholders to continue
supporting our efforts through providing access to
information to all Namibians so that we can reach
our goal of having all citizens empowered and financially literate by 2030. It is through our distribu-
tion partners that we have increased the number of
And with that, I salute you
quarterly, and we anticipate to increase the number
best with your finances
(April 2010) to the current 10,000 copies distributed
of Bulletins distributed in the coming years.
In conclusion, let me leave you with a famous quote
Communications into one sole department - the
money they earned to buy things they don’t want to
Corporate Communications - headed by Mr. Isack
Hamata. Whereas I will be taking charge of the
newly established Collective Investment Schemes
Department.
Having said this, I would like to use this opportu-
nity to thank all the readers of our Bulletins and the
3
CONSUMER EDUCATION BULLETIN
“I salute you all and wish
you all the best with your
finances...”
copies printed and distributed from 3,000 quarterly
the Authority deemed it necessary to combine the
functions of Consumer Education and Corporate
finances accordingly so that you do not find yourself
by Will Rogers that says, “Too many people spend
impress people that they don’t like.” If there is one
lesson we can learn from that quote, it is to live within our means and to properly plan in terms of under-
standing our needs and wants. Many a time we hear
that people are in dire financial straits although they
seem to have sufficient income(s), and it is for this
reason that we have included a budget sheet at the
all and wish you all the
as you march towards
Vision2030!
Mr. John Naanda
“Rule No.1:
Never lose money.
Rule No.2: Never
forget Rule No.1.”
FROM THE
OFFICE OF THE
CEO
Since the launch of the NAMFISA Consumer Ed-
product or service is not working for him or her. This
you, the consumer, with the information you need to
to read the contracts or make the effort to have it
ucation Bulletins, we have endeavoured to provide
make well-informed financial decisions.
We would like to believe that we have been able to
help consumers of financial services to understand
their rights and obligations.
The importance of financial education cannot be
is usually caused when consumers don’t take time
regulation alone is not sufficient to protect their
rights; their behaviour plays a big role.
explained to them before signing. Consumers should
To ensure that we walk this path, you will find that
fore entering into contracts or transactions. It is the
It is meant for us to engage via this publication to
ensure that they understand all the risks involved be-
right of the consumer to demand from the service
provider that all the risks involved should be explained in plain and understandable language.
this revamped Bulletin has a “CEO Question Slot.”
ensure that we provide you with the necessary information and answers that you require. I look forward
to engaging with you.
overemphasised. It is essential for all consumers of
Claiming not to have known the stipulations of an
Enjoy your reading.
and tools to decide how to budget, buy a home and
have a contract cancelled. Consumers should out of
Mr. Phillip Shiimi
financial services to have the necessary information
fund their children’s educations, among others.
We understand fairly well the difficult economic
agreement or contract is not sufficient reason to
necessity ensure that they understand before signing
on the dotted line.
NAMFISA CEO
lems with being unable to repay loans, having their
“I am therefore making a
special plea to consumers of
financial services to ensure
that they fully understand their
rights and responsibilities.”
unwanted and avoidable situations that many con-
NAMFISA will continue its consumer education
circumstances under which many of our people live
and the need to make ends meet under tough circum-
stances. These circumstances unfortunately pressure
people to commit themselves to undertakings that
they cannot honour in the long run.
As a result, we find many consumers facing prob-
properties repossessed and blacklisted. These are all
sumers find themselves in.
Wittingly or unwittingly, consumers enter into con-
tracts to secure loans or to buy items on credit. Very
often, as our statistics prove, consumers do not take
due care to consider what they are letting themselves
in for. It becomes unfortunate that after a contract
has been entered into with a service provider or
supplier of goods, the consumer discovers that he or
she cannot afford the monthly payments or that the
- Warren Buffett
efforts, but will not succeed if consumers do not
react positively to our efforts. As CEO of NAMFISA,
I am therefore making a special plea to consumers of
financial services to ensure that they
fully understand their rights and
responsibilities. While NAMFISA’s
job is to regulate to ensure a
safe and stable financial
environment, consumers
must understand that
Get in touch with me! I want to hear your comments
and questions, and help empower you the only way possible –
through action! Reach me at: [email protected]
4
FLI
Contribution by:
SME AS THE FOCUS
FOR FINANCIAL
LITERACY INITIATIVE
“THE NUMBER
ONE PROBLEM
WITH TODAY’S
GENERATION
AND ECONOMY
IS THE LACK
OF FINANCIAL
LITERACY”
Alan Greenspan said those words and is the reason
the national Financial Literacy Initiative was established - to eliminate this problem.
The Initiative has been busy with activities to educate the nation at large.
Since its first year celebration on 15 March 2013,
the Initiative’s activities have been growing, with
the focus being more on micro, small and medium
enterprises. One of its activities, which focuses on
educating MSMEs in Namibia, is training through
the FLI, which has trained more than 1,000 micro-enterprises.
FLI has partnered together with a service provider
(SME Compete) to implement a Training-of-Trainers Programme to train SMEs to go out to the differ-
ent regions of Namibia and train micro enterprises
5
CONSUMER EDUCATION BULLETIN
on the basics of finances and money management.
market. The initiative with SME Compete is in the
preciate the training, deems it beneficial and sees the
needs of SMEs. With this new manual, which specif-
According to the trainers, the micro enterprises aptraining as the light needed to grow their business.
This is the reason the Initiative decided to upgrade
its training manual to cover the SME segment of the
process of developing a training manual to cover the
ically targets SMEs, the aim is to reach more SMEs
in need of financial knowledge.
Riturumikua Hei
The Financial Literacy Initiative is a national platform to enhance
financial education and comprises over 40 platform partners from the
financial sector.
Every month, the Financial Literacy Initiative offers you useful and
valuable tips and information on financial matters for businesses.
W SE
THIS MONTH:
MANAGING YOUR CASH FLOW
WHAT IS CASH FLOW?
Cash flow is basically the money that flows in and out of the business. This includes paying taxes, salaries, suppliers,
creditors, savings as well as receiving cash through sales, loans etc. One of the reasons why an SME can fail is because
of poor management of its cash flow.
HOW TO MANAGE YOUR CASH FLOW:
1. Always prepare a cash flow projection, which will help you to plan for your cash flow.
2. Keep a record of your finances by noting them down, this will help you to better control your finances and
keep track of the cash flowing into and out of your business.
3. Make it a priority to open a reserve account that will be used for unexpected emergencies for your business.
4. Do not combine your personal and business finances in one account. You may end up using cash that was
intended for the business growth for personal items.
VAT
SALES
CUSTOMERS
STATE
less
COSTS
equals
SUPPLIERS &
EMPLOYEES
TRADING PROFIT
TAX
less
BANKS
INTEREST
less
TAXATION
less
CASH FLOW DIAGRAM
DIVIDENDS
SHAREHOLDERS
equals
PROFIT RETAINED
FOR MORE INFORMATION:
www.fli-namibia.org
Ministry of Finance,
Fiscus Building, 10 John Meinert Str.
www.facebook.com/finlitnam
Tel.: (+264) 61 209 2295
Fax: (+264) 61 245 696
Private Bag 13295,
Windhoek, Namibia
77077 (40c/sms)*
*40 cents per SMS. Across all 3 networks.
Terms and Conditions apply.
SME Gazette Ad 200x260mm_March.indd 1
[email protected]
2013/03/25 10:51 AM
CONSUMER EDUCATION BULLETIN
6
Money Sense
EASY WAYS TO SAVE MONEY
1
2
Banks offer different rates and packages for different people
Presents are wonderful to buy and receive, but most times
offers you the lowest rates for your needs and notice the dif-
Save money and get in touch with your creative side by mak-
FIND THE
CHEAPEST
BANK FOR YOU
and no two banks are alike. Shop around for the bank that
ference on your next monthly statement.
MAKE YOUR
PRESENTS
INSTEAD
it’s about the thought behind the gift than the actual present.
ing your presents. Your loved ones will appreciate the effort
and your pocket will appreciate the savings.
3
4
Shopping can become unnecessarily expensive if you are not
When nobody is home, the only person benefitting from a
everything you intend to, but it also helps you stay focused
off lights before you leave home.
WRITE A SHOPPING
LIST BEFORE YOU
GO TO THE STORE
prepared. Having a shopping list not only makes sure you buy
and not buy needless things. Stay on track both with your
TURN OFF LIGHTS
BEFORE LEAVING
THE HOUSE
light left on is the electricity company. Save money by turning
shopping and your finances by making lists.
5
WASH YOUR
HANDS OFTEN
HOME COOKED
FOOD INSTEAD
OF TAKE-AWAYS
It’s simple: people who wash their hands often get sick less
Sure, take-aways are convenient and tasty. They are also ex-
missed from being sick by regularly washing your hands.
is almost always cheaper than eating out, and even small dif-
than those who don’t. Save money on medicine and work
7
6
CONSUMER EDUCATION BULLETIN
pensive and add up over time. Cooking at home for the family
ferences add up over time.
I)
D
E
(
e
c
a
Electronic Data Interf
Time is a commodity which is always under pressure. In the hustle of working against tight deadlines
and providing a professional service, everyone needs a helping hand. Through introducing EDI, the
Social Security Commission enables authorized employers to submit their monthly contribution
files electronically! Fast, accurate, efficient and reliable, in a secure confidential environment.
Contact us today and find out how you could benefit from this service.
For more information: Call: +264 (0) 61 280 7999 or visit our website at www.ssc.org.na
or Visit our offices at: Cnr A Kloppers & J Haupt Street, Khomasdal, Windhoek
YOUR
F
UR E O U R M
UT
N
SI O
IS
Vision: To be a world class provider of social security benefits to the Namibian Workforce and other Beneficiaries by 2012.
Mission: To professionally administer the funds for the efficient and sustainable provision of social security benefits to the
Namibian Workforce and other beneficiaries, consistently expand coverage and benefits, meaningfully contribute towards
socio-economic development, and improve quality of life.
SOCIAL SECURITY COMMISSION
CONSUMER EDUCATION BULLETIN
8
FINANCIAL FOCUS
MISS TSAKANA NKANDIH - MISS NAMIBIA
FOCUS: Financial Literacy,
Pension Funds & Life Assurance
1.
Miss
Namibia
Talks
How important is it to be money wise in your
sector today? How important is financial
literacy for your personal future and career?
The beauty sector, specifically pageants, is not as
big as it should be in our country, thus we are faced
with many financial constraints. I think it is more
important for us to be money wise than most sectors,
because money is harder to come by.
I think it is safe to say that financial fitness has become more important than physical fitness to most
people. Financial literacy helps me understand how
money works in the world, how to earn it, how to
manage it, how to invest it, and how to donate it to
help others. It is important for me to have a set of
skills and knowledge that allows me to make informed and effective decisions with all my financial
resources. This is important for anyone who wants a
fruitful financial life via any career.
2.
How do you make sure you stay on top of
your finances, i.e. budgeting?
Budgeting is a fixed component of my financial life.
I do it monthly. This allows me to stay in my financial lane, which is very important because my line of
work involves a lot of spending and that is usually
on impulse (clothing is my biggest weakness).
Photo by Chris Johnston
With technology being so advanced it is even easier
to keep track of your finances. My cellphone is another way that I keep track of my money. Cellphone
banking allows the bank to keep me updated on what
is happening with my money at all times.
It is always wise to equip yourself with what each
medical aid offers. For instance, how many doctors
will consult with me given my medical aid? Does it
offer coverage overseas? How many consultations
may I have in a year? How much are my monthly
deductions? Does it combine hospital and physicians services into one? These are some of the criteria I would use. It’s not one-size- fits-all, always do
your homework.
3.
4.
My budget helps me keep track of my spending
closely; it alerts me when I am spending too much
so I immediately know when and where to cut back.
How did you choose your medical aid?
What criteria were important to you?
I was born into my medical aid so to say. My dad is
a government employee and that means he qualifies
for the public service employee medical aid scheme
(PSEMAS) and, as a dependant, I became a beneficiary.
However, I am aware that while private medical
schemes are becoming more popular, it is always
important to do your research before committing
yourself to a medical aid.
9
CONSUMER EDUCATION BULLETIN
How often do you use your medical aid,
and what do you use it for?
ical aid schemes that exist and that there are yearly
meetings. However, I have never attended one. I do
not think that the general public is aware of this and
even less so about their rights to attend medical aid
funds’ AGMs, which is why distribution of information is so essential.
6.
Ms Nkandih, retirement is years away for
you! Do you contribute to a pension fund?
If so, do you keep track of your pension
fund’s growth?
Are you aware that medical aid funds have
Annual General Meetings (AGMs) and, if
so, do you attend them?
I have a personal retirement account. When I reached
financial maturity I knew that I had to do something to
ensure that I had a bright future at the end of my working days. I was a student then and I still am, although
I worked part-time. I made a decision to come up with
my own retirement fund and a certain percentage of
what I make is put away into it every month and I
make it my business to know how my fund is growing.
I was lucky enough to have worked in the health
sector for a while, I am aware of the different med-
Who knows, maybe this will allow me to retire early.
It does not hurt to dream.
My visits to the doctor are limited to the seasonal flu
or the occasional headache. My medical aid is used
strictly for medical purposes.
5.
Water Sense
EASY WAYS TO SAVE WATER
OUR COUNTRY IS RUNNING DRY! HERE’S HOW YOU
CAN HELP SAVE WATER AND MONEY AT THE SAME TIME:
1.
When washing dishes, don’t let the water run. Fill one
sink with wash water and the other with rinse water.
2.
Adjust sprinklers so only your lawn gets wet - not your
house or the street.
3.
Only use the dishwasher or washing machine when
they are full. These machines use a lot of water!
4.
When planning your garden, choose plants and bushes
that don’t require much water to live.
5.
Install a pool cover and inspect your pump for leaks.
6.
Use a broom instead of a hosepipe to clean your driveway.
7.
Recycle the water used to clean fruits and vegetables
to water your plants.
8.
Check taps inside and outside the house for leaks.
9.
Take showers instead of baths and keep them short.
Showering a minute or two less saves a lot of water
and money.
10. Put food colouring into your toilet tank. If it seeps into
the bowl without flushing, you have a leak. Fixing this
can save you thousands of litres!
11.
Put the plug in before you start filling the bath.
12. Defrost your food in the fridge as opposed to running
water over it.
13. Soak pots and pans instead of running water over
them while scraping.
14. Turn the water off while you are brushing your teeth.
15. Use a watch or timer to remind you when to stop watering your lawn or garden.
16. Install water-saving showerheads.
17. Fill the basin with a small amount of warm water and
rinse your razor in there. Running the tap while shaving
wastes a lot of water.
18. Cutting your grass too short allows more water to
evapourate. Using a higher lawnmower setting will fix
this.
19. Use containers and buckets to catch rainwater, which
you can then use to water plants later that week.
20. And lastly, our biggest water-saving tip:
Encourage your friends and family to help our country
by saving the precious little water we have left.
PENSION FUNDS
DISTINCTION
BETWEEN DEFINED
CONTRIBUTION FUNDS &
DEFINED BENEFIT FUNDS
1. DEFINED CONTRIBUTION FUND:
portfolio performs well and yields a good
investment performance;
Guaranteed full benefit pay-out on retirement
if the fund manages its risks;
Flexibility offered to choose investment categories, which is generally equity and fixed
income; and
It is easier to understand the concept of
defined contribution funds than the defined
benefit funds concept.
A defined contribution fund is a fund that provides
benefits on retirement that are based on the accumulated contributions made to the fund by the member,
employer (if any), as well as the investment returns
earned by these amounts. Expenses incurred in the
management and administration of a fund can be
levied directly from contributions or from the investment returns earned by the assets of the fund.
•
The member and employer contribution rates are
fixed and are specified in the Rules of a fund. Each
participant (member) in the fund is assigned an individual account to which the contributions (employer
and/or employee), any returns and their proportionate share of the expenses are allocated. Risk premium expenses, i.e. those expenses incurred to secure
the provision of death and disability benefits may
also be defined in the Rules. Retirement benefits are
not guaranteed because the members’ benefits are
subject to the fluctuations in the performance of the
fund’s investments and other risks.
Disadvantages:
Advantages:
• The value of contributions paid by the employer
and the member;
• The performance of the underlying investments
in the fund;
• Administration costs; and
• Prevailing annuity rates at the time the pension
is taken.
Benefits:
•
11
Higher pension at retirement compared to a
defined benefit retirement fund if the fund
CONSUMER EDUCATION BULLETIN
•
•
• The members benefits are exposed to investment
risk;
• There is no guarantee that the members’ pensions will keep up with inflation; and
• The members are not in a position to know their
ultimate pension reserves.
2. DEFINED BENEFIT FUND:
A defined benefit fund is a fund that provides a benefit upon retirement that is determined by a formula
set out in the Rules, based on the employee’s earnings history, tenure of service and age. The rate at
which the member contributes to a fund is usually
fixed as a percentage of that member’s remuneration. The employer’s rate of contribution is usually
determined by the amount that is required by the
fund to ensure that it meets its obligation of paying
benefits to its members as and when they arise.
An actuary computes the rate at which the employer
will be required to contribute in order to ensure that
the fund meet its liabilities. Unlike a defined contribution fund, all contributions and assets in respect of
all the members are “pooled” together and benefits
are paid from this pool as and when they become due.
Provisions are made in the funds’ rules for deductions to be made from the contributions made by
the employer and employee to pay for costs related
to the administration and management of the fund.
Risk premium expenses, i.e. expenses incurred to
secure the provision of death and disability benefits
may also be defined in the Rules.
Advantages:
•
•
The members’ exposure to investment risk is
borne by the employer and therefore all things
being equal, members are guaranteed to get
their benefits; and
In some instances the members’ benefits can be
extended to a spouse, depending on the type of
retirement payout that the members choose.
Disadvantages:
There are no guarantees that your pension will keep
up with inflation as increases are at the discretion
of the trustees and dependent upon the investment
returns within the fund:
•
Trustees can retain part of the investment return to build up a surplus in the fund, but this
would not affect the benefits at retirement;
•
In certain instances, the member’s final salary
is extremely important and can have a major
impact on your total benefit; and
•
The employer has open-ended liability on
contributions.
General Comments:
Although both pension fund arrangements are currently used in Namibia, the majority of pension
funds in Namibia are defined contribution funds.
With defined benefit funds, the employer assumes
MEDICAL AID FUNDS
the market risk, which can be either good or bad.
During periods of economic growth and rising asset
values, the cost of funding (i.e. contributing money
to the fund and investing it to accumulate funds necessary to pay the pensions when employees retire) a
pension decreases as the rising values of the investments enable the employer to contribute less out of
current revenues and still build the value of the fund
to cover future pension obligations. However, when
markets go down and asset values decrease with
them, the employer is forced to pump more money
into the fund in order to meet future obligations to
the retirees. This means that members are guaranteed to receive the benefits as outlined by the formula regardless of the market conditions.
The members, particularly the retirees, are not
harmed as their income does not decrease, but they
also do not receive any benefit (in terms of their
pension income) from the economic growth. When
inflation drives market values up, the employer
again benefits by being able to maintain the monthly pension income for the retirees while paying less
money to do so. The retirees, however, are harmed
because, while pension income remains constant,
the purchasing power decreases, thereby reducing
their standard of living.
“The worldwide trend
among employee-sponsored pension funds is
towards defined contribution funds.”
With defined contribution plans, market risks and rewards are reversed as the retirees assume most of the
risks and reap most of the benefits. When economic
growth causes investment values to increase, the retirees see their wealth and income increase, while
employers are unable to adjust their contributions
downward. Similarly, when inflation causes investment values to rise, employers are again unable to
adjust their contributions while retirees see the monetary value of their pension funds rise. While inflation-induced increases in pension values and income
generated by these rising values don’t increase the
retirees’ spending power (as all prices in the economy are increasing due to inflation), the inflation-induced increases in their pension values and income
offset the rise in prices, thereby allowing their standard of living to remain unchanged.
NAMFISA (“the Authority”)
been
to ensure that these changes are fair to mem-
tasked, amongst others, to regulate and se-
bers, but that they are compliant with all the
cure appropriate levels of protection for ben-
provisions of the Act.
eficiaries of medical aid funds. This includes
conducting an assessment of the proposed
In assessing contribution changes, the Au-
responding changes in the contributions to
which is a proportion of the fund’s total re-
annual alterations in benefits and the cor-
thority considers a fund’s solvency level,
fund these benefit changes. The contribution
serve over its total annual contributions. The
rates are specified in the Rules of the medi-
solvency level must be at least 25%. Addi-
cal aid fund.
tional variables that are taken into account
in the assessment are pensioner ratio, depen-
The Medical Aid Funds Act 23 of 1995 (“the
dent ratio and claims ratio. The performance
Act”) stipulates that a registered fund may,
of the fund in terms of operations, the demo-
in the manner directed by its rules, amend or
graphic data and expenses (managed health-
repeal any such rules or make any additional
care, non-health expenditures and adminis-
rules but, notwithstanding the provisions of
tration costs) are also considered. Moreover,
any other law, no such alteration, rescission
the prevailing inflation or consumer price
or addition shall be valid unless it has been
index (CPI) is considered to ensure that any
approved by the Registrar of Medical Aid
changes in contributions are reasonable.
Funds must also submit actuarial reports to
“I realised that financial
the Authority to justify the proposed contrieducation
is
something
rule amendments need to be approved before bution increases.
implementation. I needed to acquire.
The average contribution increase for the
And soon.”
Before any amendment to the rules as a re2013 financial year was 9.3% for open funds
Funds. Therefore, since contribution rates
are specified in the rules of the funds, any
sult of benefit changes can be made, a thor-
and 9.9% for closed funds. The main driv-
contribution changes has to be conducted.
NAMAF Benchmark Tariff Increases, which
ough evaluation of benefit changes vis-à-vis
er of the increase is medical inflation or the
The rationale of this evaluation is not only
was estimated to be an average of 7.85%.
AVERAGE CONTRIBUTION INCREASE
Conclusion:
Both pension arrangements have advantages and
disadvantages and strong arguments can be made
for both. The worldwide trend among employer-sponsored pension funds is towards defined
contribution funds as they do not have to assume the market risk. All things equal, the
choice of pension fund depends on whether the
employer or the members wants to assume the
investments risk (and inevitably the reward).
has
Average Increase
13.8
9.6
2009
2010
7.9
7.7
2011
2012
9.6
2013
CONSUMER EDUCATION BULLETIN
12
LIFE INSURANCE
MATURITY VALUES EXPLAINED
Cover
yourself
& your
loved ones
Insurance is a good way to protect yourself and your loved ones against unexpected financial and emotional strain. However, there is a difference between a
mature policy and an immature policy. Benefits are payable upon the death of
the insured or on the maturity date. You may not get the most out of your life
insurance policy if you aren't able to let it mature, so understanding the difference is critical in financial planning.
Maturity date
The date at which the face amount of a life insurance
policy becomes payable (end of the contract term)
by either death or other contract stipulation.
What a matured policy means?
When you have a mature policy, you have paid every premium to a date or age specified in the policy.
Having a mature policy means that the insurance
company should pay you both the face value and
cash value of the policy. You no longer have to make
premium payments once the policy is matured and
the insurance company has honored its obligation
towards you.
What is maturity value?
Maturity value is the amount the insurance company
has to pay an individual when the policy matures.
This would include the sum assured and bonuses.
If the policyholder passes away before the policy
matures, the beneficiary gets the sum assured along
with the bonus (if any), and if the policyholder is
alive when the policy matures, the sum assured as
well as any bonuses declared during the term of the
policy are paid to him or her.
13 CONSUMER EDUCATION BULLETIN
When does a life insurance policy mature?
It depends on how the policy was designed. A whole
life insurance policy, for example, matures when it
pays out a death benefit on policies that have no stated maturity date. A whole life policy is a life policy
that covers a person for a lifetime.
A mature insurance policy is one in which the guaranteed cash value of the policy equals the total face
value of the policy. Insurance policies gain their cash
value from the premiums you pay. In most cases, the
longer you pay your premiums, the closer you will
get to having a mature policy. Typically, mature insurance policies refer to most types of life insurance
policies (e.g. whole, universal), with the primary exception of term life insurance. Policies usually are set
to mature, or endow, when the policyholder reaches
age 60 or 65, however, every insurance company is
different. The date of maturity depends on your premium rates and the face value of the policy.
Misconceptions about maturity values
Policyholders sometimes have different expectations about maturity values and end up disappointed
when the policy finally pays out. It is important to
note that there are certain factors that may affect ma-
turity values, such as negative market performance,
cash withdrawals from the policies, inflation, etc.
A misconception is that a whole life policy will ma-
ture when premium payments are no longer due. The
premium payment period, however, is not indicative
of maturity. Instead, the premium payment period
simply indicates the rate at which premiums are paid
into the policy. The policy can then be designed to
accumulate cash value accordingly so that the poli-
cy matures at a given time. The reason for maturity
dates is to prevent your policy from continuing in-
definitely. This keeps the premiums lower than they
would be under a permanent policy, which provides
for lifetime payment of premiums.
Making extra payments does not actually change the
maturity date but will, however, push back the point
at which the insurance account would theoretically
have reached maturity value.
Taking out cash values during the term of an insurance policy may indeed affect the estimated maturi-
ty values negatively. The more you take from your
cash value, the more you affect your estimated cash
values by reducing them.
What to do when a life insurance policy matures
If you have reached the age where your whole life
policy matures, call your life insurance agent or the
insurance company to find out how you can lodge a
maturity claim.
FINANCIAL FOCUS
MR FRANS INDONGO
DR
FRANS
INDONGO
Granted to us by the Frans Indongo Group (Pty) Ltd.
And his thoughts on Financial Literacy,
Pension Funds & Life Assurance.
FOCUSES: Financial Literacy,
Pension Funds & Life Assurance
literacy in all my businesses. You cannot run businesses efficiently without these people.
1.
2.
How important has financial literacy been
in your life? How much has it contributed
to your business success?
The importance of financial literacy was huge.
However, you must appreciate that I did not have the
benefits of quality schooling and tertiary education.
I had to teach myself sound financial management
principles in the School of Life.
Nowadays, financial literacy is within reach of
many. Numerous good learning institutions and
management schools are ready to offer good financial training and education.
Today I am fortunate to employ managers with exceptionally good financial expertise and financial
Back in the day, which were the first financial services you explored when setting up a
business? To what extent has that changed
today?
When I started with my business career, I did not
even have the benefit of banking support/services as
you know it today.
Everything has changed. A wide variety of financial
services are available, especially if you have a sustainable business concept.
3.
How crucial is it to be financially literate in
Namibia today?
As indicated, you cannot run businesses efficiently without employing people with sound financial
background, which comes from financial literacy.
4.
Dr Indongo, do you contribute to a pension
fund? If so, do you keep track of your
pension fund’s growth?
No, I have grown my businesses to such a degree
that it is not necessary to contribute to a pension
fund.
However, people who are in a different position
than myself should consider contributing to such a
fund in order to provide for the days when they cannot work anymore.
5.
Is life assurance necessary? At what age
should a Namibian consider acquiring such
a service? And why?
It is very important, especially when you are young.
It serves as a guarantee in order to get finance for
business investments.
CONSUMER EDUCATION BULLETIN
14
FAQ
FREQUENTLY ASKED QUESTIONS
Q: Why does my cover lapse after missing one premium Q: Why can I not choose my preferred legal practitioner to
be paid from my legal cover?
payment?
A: A contract usually stipulates when cover will lapse if no premiums are A: That is usually because of what is stipulated in the terms and conditions
paid. One should remember, however, that premiums are paid in advance. of the type of cover taken out. Very often it is specified that the insurer will
Consequently, should payment not be effected for the period commencing, choose a legal practitioner from a pool of legal practitioners they engage with.
this would mean that you are not covered for that specific period.
If you accept those terms and conditions, you will be bound by them.
Q: What is NAMFISA doing to protect consumers from Q: Why may I not be provided with a legal practitioner
when I am a complainant in a criminal case?
falling prey to unscrupulous agents?
A: NAMFISA constantly embarks on Consumer Education Campaigns to A: That is because, as the complainant, you are automatically represented by
educate consumers to be cautious when entering into transactions and when the State Prosecutor, who will act as your legal practitioner in the matter. Con-
dealing with agents. Consumers are always encouraged to read the terms and sequently, there is no basis on which the insurer should provide you with a
conditions of contracts before signing them, and to ensure that they under- legal practitioner. Should the same facts also entitle you to lodge a civil claim,
stand all risk involved in any transaction they undertake. Consumers are also however, you may be provided with a legal practitioner.
advised not to put too much trust in agents and brokers, and that they should
be pro-active in that they read the contracts and ask relevant questions in relation thereto.
Q: Why do you accept the assessors report as final with
regards to a claim?
A: NAMFISA never accepts an assessors report before carefully analysing it.
If we accept an assessors report, it is because we are satisfied that, given the
circumstances, the conclusion therein is the most probable. Alternatively, after
analysing an assessors report we accept it at face-value only if the complainant
is unable to provide us with a reasonable explanation of the events.
“I believe that
the true definition of
wealth is loving what you
have rather than what
you don’t have.”
- Celso Cukierkorn
15 CONSUMER EDUCATION BULLETIN
Budget
Sheet
TAKE CONTROL OF YOUR FINANCES
1: MONTHLY INCOME
Income is the total sum of everything your household earns. Income can come from the salary of a steady job or work
you do on the side that brings in money.
You: Monthly salary (after tax)
Husband/wife: Monthly salary (after tax)
TOTAL INCOME (A)A:
2: MONTHLY EXPENSES
Expenses are everything that you spend your money on each month, such as food, water and electricity, and airtime.
Rent/mortgage/bond
Food (cooking at home)
Take-aways (KFC, Nandos)
Taxi/bus/petrol
Car loan repayment
School fees
Crèche/day care
Water and electricity
Airtime
2.1 EXPENSES YOU SHOULD HAVE
Medical aid
Life insurance
Funeral insurance
2.2 OTHER EXPENSES
TOTAL EXPENSES (B)B:
3: SAVINGS
We always stress the importance of putting money aside for the future.
Savings C:
4: ADDING IT ALL UP
Take your Income (A) and subtract the total of your Expenses (B) and then subtract your Savings (C) to see how much money you
will have left over at the end of the month.
E.g.
Income (A) = N$5,000; Expenses (B) = N$3,850; Savings (C) = N$500
Therefore: N$5,000 - N$3,850 - N$500 = N$650 left over at month-end.
CONSUMER EDUCATION BULLETIN
16
The A - Z
OF WHAT WE MEAN
Throughout the NAMFISA Consumer Education Bulletin you may come across words that
you do not know. Whenever that happens, flip to this section to learn what that word means.
Accounts payable: Money owed to other people or businesses. For
example, when you buy clothes from a shop (Jet, Ackermans) and
do not pay for it right away and have to pay it back every month.
Asset: An asset is an economic resource that a) can be owned, and
b) is expected to provide benefits in the future. Examples of individual assets: your house, car, jewellery, etc. Examples of company
assets: the factory building, office, plant and machinery, etc.
Bond: Security on a loan that requires repayment with interest.
Contribution: The premium paid to a medical aid fund and a pension fund.
Credit agreement: When you buy something (for example, a television) without paying for it right away. A credit agreement allows
you pay your TV off over several months/years.
Exchange rate: The value of one currency (for example, Namibian
Dollar) compared to another currency (for example, US Dollar). This
value changes all the time.
Expense: The money you spend on buying something or paying
for a service.
Funeral plan: A plan that pays out in the event of a death in order
to cover the heavy costs of a funeral. Should you or your wife die
unexpectedly, for example, the funeral policy will pay out to cover
for the costs of the funeral.
Income: Money received for work done.
Inflation: The increase in the price of goods and the decrease in the
value of money. For example this year bread costs a certain amount
(N$8.00), while next year the price will be more (N$8.50).
Investment: Something that is worth buying because it may be
worth more money later or may generate (make) money in the future to put your money into something with the interest of making
profit. An example would be buying a house with a friend (business
partner) and then renting out the house (e.g. N$8,000 per month)
for more than the loan repayment (e.g. N$5,000), resulting in a (e.g.
N$3,000) profit.
Loan: Money borrowed that is to be repaid with interest.
Liability: It is the condition of owing something of economic value to another party. It is important to note here that although debt
commonly comes to mind when one considers liabilities, not all
liabilities are debt. Companies may incur several types of liabilities,
for example: the outstanding money that a company owes to its suppliers would be considered a liability. Liabilities are in fact a vital
aspect of a company’s operations because they are used to finance
operations and pay for large amounts over time. Current liabilities
are debts payable within one year, while long-term liabilities are
debts payable over a longer period.
Matured Policy: A policy is said to “mature” when it reaches a desired or final condition; or when the worth value is paid out. In the
example of life insurance: the matured policy is reached when the
insured person dies.
Mortgage: Using your house as a security for a loan.
Retirement: The point at which you stop working (60 years old).
Savings: Money set aside for later.
Solvency: The state of having more assets than liabilities. An example of a business with solvency is a business that can pay all its bills.
Tax: A percentage of income and sales paid to the Government.
STAY UP-TO-DATE BY CATCHING THE NEXT CONSUMER EDUCATION BULLETIN FOR MORE
EXPLANATIONS AND EXAMPLES OF YOUR FINANCIAL RIGHTS AND RESPONSIBILITIES.
Proudly brought to you by NAMFISA.
“The goal of
retirement is to live
off your assets,
not on them”
- Frank Eberhart
“In investing,
what is
comfortable is rarely
profitable.”
FUN
- Robert Arnott
GAMES
1
3
2
4
5
6
7
8
9
10
11
12
13
14
15
16
17
ACROSS
DOWN
1.
The ability to meet maturing obligations as they become due
2.
A meeting with an expert, such as a doctor.
4.
The money you spend on buying something
3.
Money set aside for later
6.
Money borrowed that is to be repaid with interest
5.
Security on a loan that requires repayment with interest
8.
Money received from work done
7.
A middleman who buys and sells stock on behalf of an investor
9.
Fully developed (a policy)
10. The point at which you stop working
11. The report from your bank that says how much money you have left
14. A percentage of money paid to Government from income and sales
12. The danger your money is exposed to when investing
15. Annual General Meeting (abbr.)
13. The premium paid to a medical aid fund
16. Using your house as security for a loan
17. The system of money in general use in a country
CONSUMER EDUCATION BULLETIN
18
CONTACT DETAILS:
Call: 0800 290 5000 | SMS: 3030 (normal charges apply)
Write: PO Box 21250, Windhoek
E-mail: [email protected]
Visit: 2nd Floor, Sanlam Centre
154 Independence Avenue
Windhoek