Retirement Funds Act empowers NBFIRA

Proposed amendments to the Retirement Funds Act, which replaced the repealed Pension and Provident Funds Act, of 1988, seeks to strengthen and widen the oversight authority of the Non-Bank Financial Institutions Regulatory Authority (NBFIRA).

The Bill, which has been passed by Parliament, was presented by Minister of Finance Peggy Serame. The Retirement Funds Act commenced in April 2017 and following its implementation, it became necessary to review some Sections of the law to further align them with local experience, international standards, and best practices for the protection of the benefits of the members.

It was also necessary to put in place Anti-Money Laundering and Combating the Financing of Terrorism-related clauses in accordance with the Financial Intelligence Act, she explained.

The objective of the Bill is to repeal and re-enact, with amendments, the Retirement Funds Act. The Act provides for licensing, regulation, and administration of all retirement funds, including pension and provident funds, funds administrators; and for matters incidental to or connected therewith.

At Clause 52 the Bill provides for improved encashment of residual funds in instances where: a deferred member has defaulted on any loan other than the mortgage owed, such that the amount which can be accessed to pay for the loans is increased from the current one-third to 100 percent of pension, provided that the pension can cover the whole amount of the loan; a deferred member has defaulted on Mortgage loans owed.

According to Serame, this is a new provision that allows access to a deferred pension to repay mortgage loans for principal homes; and when a deferred member has become terminally ill and has to pay for medical expenses.

This is also a new provision, which will allow access to a deferred pension to pay for medical bills in respect of terminal ailments.

Serame revealed that these enhanced encashments in the Bill are for deferred members only and as for other categories such as active members and pensioners, it is important to make changes from an informed position as management of pension funds is complex and requires actuarial valuations into a distant future, which is uncertain.

Serame said that her Ministry through NBFIRA is conducting a study to review the effect and impact of allowing encashment concessions for active members and pensioners on the pension system in Botswana. The results of the study are expected in November 2022.

The adopted changes will be processed as subsequent amendments as soon as the study is completed.

The Bill introduces new Clauses 28 and 29, which place a duty on regulated entities to establish measures to prevent money laundering and financing of terrorism.

The Clauses also introduce a requirement to report any evidence of a financial crime to NBFIRA, which is suspected in any institution or in the provision of services in the Retirement Funds industry.