The changing business environment has forced the Government Institutions Pension Fund (GIPF) to review its actuarial valuation policy which requires that it be conducted every 18 months to three years, as part of efforts to mitigate any potential risk the fund might face.
“The Fund on a regular basis performs actuarial valuation to determine the level of its liability in relation its asset. In terms of the fund rules, GIPF is required to conduct an actuarial valuation on a triennial basis in order to be in a position to know its funding level at a given point in time. Based on the changing business environment, the Board adopted a strategy to conduct an 18 month valuation to closely monitor the risks and take appropriate action if required,” Chief Executive Officer, David Nuyoma said.
Without going into details, the fund, which is the country’s biggest with over N$116 billion in assets, said contingency funds have been set aside to enable it to settle members benefit when required to.
“Adequate risk reserve has been put aside to ensure that members` reserve are secure and the fund can pay the promised benefits anytime,” Nuyoma said.
The development at the fund which mainly caters for civil servants, comes as government has announced plans to embark on an early retirement scheme for civil servants between the ages of 55-59 years as part of a cost cutting measure, which according to First Capital Namibia could save GIPF N$670.5 million in personnel related expenditure.
Although government is yet to engage the fund regarding its announced plans, Nuyoma dispelled speculation that the fund could struggle to payout those targeted for retirement by government.
“In the first instance, it is important to note that the Government has not informed the GIPF of any plans to change the retirement age of civil servants. For your information, the GIPF is a defined benefit pension fund and member benefits are guaranteed by employers. Therefore, any changes in the promised benefit structure have to be funded based on the value determined by the Fund actuaries,” he said.
According to research done by First Capital, the GIPF could be forced to fork out as much as N$1.62 billion in pensions payouts if the government plans go ahead.
“If such a decision is to be made, the cost related to it will be borne by the employers to cover the potential future liabilities of members affected,” Nuyoma said.
The government spends $29.3 billion on personnel related expenditures of 91,295 civil servants, which translates to an average N$306,000 cost to government for each civil servant.
He said the expected reduction in contributions from the planned retrenchment, will have a minimal impact on the fund.
“The monthly contribution to the fund will marginally be lower due to the fact that fewer members will contribute to the Fund. But this won’t have any immediate impact on the fund, based on the fact that the fund has assets that are generating return on a monthly basis, all benefits to members that are retiring will be paid when due without any difficulties,” the GIPF CEO said.
Nuyoma said the announced five percent pension benefit increase to cushion its pensioners from the rising cost of living, which became effective at the beginning of the month will not negatively impact on the fund.
“The GIPF offers pension increases to its members after a due process has been conducted by management in consultation with the fund actuary. Therefore, no strain is anticipated as a result of the pension increases offered to the members this year,” he said.