This move comes at a time when the Ministry of Finance and Economic Development is finalising amendments to the Retirement Funds Act that could allow pension fund members who have not yet started earning a monthly annuity to get loans from their funds under specific conditions or to use part of the accrued pension as security.
Finance minister, Peggy Serame recently told parliamentarians that a draft of the amendments had been sent back to the Attorney General’s office and would be brought back to the National Assembly soon.
This week, NBFIRA, which is the regulator of pension funds, floated a request for proposals on the matter.
The tender is titled: “Procurement of services for the engagement of a consultant/consultants to assess the scope for liberalising the legal framework to allow more withdrawals from retirement savings and the implications on the retirement funds and members of registered funds.”
Bids for the tender will close on April 22, the regulator said.
The possibility of allowing pension fund members to withdraw part of their savings for emergencies has triggered debate recently, with advocates saying amendments to the Act are required in light of the financial burden posed by COVID-19.
However, other economic commentators have cautioned that any relaxation of the statutes could render the safety net provided by pension funds irrelevant and thus deprive members of financial security when they retire.
The Botswana Public Officers Pensions Fund (BPOPF), which had previously expressed reservations about the proposed changes, recently announced that it was open to the amendments saying that, with the planned limitations, the move could be of benefit to financially stressed pension fund members.
For her part, Serame said any changes would be carefully balanced with the obligation to secure pension fund members’ financial security.
“We recognise that with our existing law, it’s difficult that it could help someone who is in trouble like the times that we are coming from with the pandemic,” she told legislators. “It would be tough for someone to pay for their property so that it is not taken away or for them to get health services.”
Serame however added: “Please hear me clearly: this is not about taking all the money. “I must stress that we are not coming up with a law where someone can go and take all of their pension. “I would be irresponsible to do that or allow that because we must remember what a pension is for. “It is so that when someone has left their job, they can be provided for.”
Pension funds, which typically have their assets tied in long-term investments, including less liquid types such as property, are reportedly carefully following the latest developments to gauge the impact on their investment strategies.
NBFIRA’s study is expected to focus on the impact of any proposed changes and estimate the extent of withdrawals that could be permitted without affecting long-term returns for pensioners.
