Call for delay in retirement to boost savings
Gaone Marumoloa | Friday March 3, 2017 15:29
The early retirement age in the public service is currently at 50 years.
Giving a presentation at the Botswana Pensions Society (BPS) annual conference in Gaborone on Monday, Jefferis said inadequacy of pension funds is due to inadequate contributions, poor investment returns, early retirement, high cash withdrawals and low annuity rates.
Early retirement reduces both the contribution period and the accumulation period of investment returns. It also reduces pension levels, because annuities have to be paid for longer life expectancy at retirement,” he said.
He suggested that pensions can be improved by raising the early retirement age in public service and by encouraging more investment choices for pension fund members’ example: low fee products. Also to avoid well-intentioned but misguided policies, such as restrictions on offshore investments, monitor asset manager fees and consider regulatory impact on administration and compliance costs and hence fees. Also present at the conference was the Retirement Funds Director at the Non-Bank Financial Institutions Regulatory Authority (NBFIRA), Bopelokgale Soko who said the main objective of pension is to provide members with income during the post employment period, adding that pension income adequacy is the extent at which the pension income replicates the standard of living they had while working in Botswana.
She said pension assets are at P74 billion from 87 pension funds.
“Coverage is very low. From a working population of 58% (1.1 million) only 237, 482 people are covered. Pension sustainability is affected by macro-economic changes such as the concern of the sponsoring employer and individual’s employment,” she said.
Jefferis also pointed out that in order to improve pension, the public should consider more restrictions on encashment and monitor annuity profits and fees due to limited competition and better regulation of annuity providers, especially by pension funds.
He said to encourage competition in the annuity market, retirees should be allowed to purchase foreign annuities and also to issue more long-term government bonds.