THE Namibian Employers Federation (NEF) says the Financial Institutions and Markets Act (Fima) might make prospective employers think twice about offering a pension fund to their employees.
This forms part of the debate over moves to preserve pensions until the age of 55, a regulation that could come into force on 1 October.
The NEF secretary general, Daan Strauss, says employees would be affected by their employer’s move.
He explained that experience has shown that only a few employees make efforts to contribute to a pension fund if they have to make such a decision on their own.
“If they are not compelled by their employer to contribute to a pension fund, then they will eventually become the government’s problem, similar to the unemployed. This will place a further huge burden on taxpayers,” he noted in a statement this week.
The secretary general went on to say Fima proceeded to the parliament without much discussion and deliberation and was published in the Government Gazette.
Finance minister Iipumbu Shiimi is now required to publish a date on which Fima effectively becomes Namibia’s new non-banking financial services law. Strauss added that employers are currently not obliged to provide retirement benefits to their employees, thus Fima, in its present form, could be devastating for employers, and in the long run also for the Namibian economy.
Moreover, he noted that chapter 5 of Fima poses severe risks for employees and imposes strict obligations on employers.
“NEF certainly trusts that this is not an effort by the government to make up for their own failure to make the economy grow, to create job opportunities and to create room for economic investments.
“Thousands of people could potentially become unemployed and dependent on the state for survival. The government’s response is seemingly to slaughter the goose laying the golden eggs,” he stated.
Under the Pension Funds Act, Strauss stated that the employer only has one obligation towards the fund, being the payment of contributions within seven days of the month in respect of which they were deducted.
He explained that failure to pay contributions as required constitutes an offence, and the offender is liable to a fine not exceeding N$200 upon conviction.
Additionally, under Fima, the employer’s obligations and liability for fines will take on new dimensions. This means that the company, its directors, and officers shall remain jointly and severally liable for any unpaid contributions and the prescribed interest thereon.
As a result, Strauss said any director or officer may thus face personal prosecution to recover outstanding contributions.
“While there are employers who might make deductions from employees’ salaries and then either fail to pay it over to the pension fund or delay the payment thereof for other purposes, the sanctions for such failure seem to be draconian and completely out of proportion. You can hardly expect investment if a CEO faces the risk of being jailed for what could also be an innocent mistake or failure to ensure the timeous transfer of funds to the pension fund,” Strauss noted.
He stated that Fima should look at the further dampening effect, not only on new foreign investment but also on new entrepreneurial activity.
He said the act should include probable total cessation of enterprises currently without pension schemes, creating such for their employees.