Effects of tax limits on pension funds savings

WARREN KOZONGUIZIIt has been well documented that increasing pension savings and assets within private companies results in a more active capital market and a higher rate of gross domestic product (GDP) growth. While the pandemic has influenced the age of retirement and more people are retiring early and therein claiming their pensions, these issues will only play a part in the short term. An increase in assets will greatly contribute to Namibian economic recovery by deepening the Namibian capital market and in turn lead to greater opportunity and job retention in the workplace. Increasing pension fund assets will also work to further enhance our economy’s performance as we move through various economic climates.We believe the Namibian government will take care in addressing tax limits of pension funds. Pension fund systems do not easily address short- and medium-term economic problems. They respond to macroeconomic and demographic circumstances slowly and generate long-term obligations and expectations. Responses with pension funds to temporary economic shocks, like the current crisis, need to be limited and implemented carefully in order not to set the pension fund system on a course that isn't in line with the country's economic objectives. Any changes need to reflect policymakers' objectives, expectations of society and constraints faced by the country. Since pension funds support a recovering economy, any taxation changes need to be considered alongside the mid-term as well as long-term goals of Namibia. While the introduction has already been made by increasing the tax deductable portion of pension savings, the output will also need to be addressed. At present, there is a limit of N$50 000 which has been placed on pension benefits above which a member is compelled to purchase a pension for their lifetime. This level is quite outdated since there is very little value added by purchasing a compulsory pension with such a small benefit. This is something that the Ministry would need to address as the amount of savings increases.Claims The economic downturn caused by the pandemic during the 2020-21 has reduced the retirement age of individuals not only in Namibia, but the rest of the world. This resulted in more people claiming their pensions early in order to navigate these hard times and this has impacted pension funds globally. It’s reduced fund contributions, increased fund liquidity and decreased asset prices. But while all these factors have taken a toll on pension funds globally, the effects are expected to only last in the short-term future. An increase in pension fund assets results in an increase in GDP, greater economic activity and higher opportunity levels in Namibia. The strategic increase in pension fund assets will not only secure pension funds' performances, but also contribute to the Namibian economic recovery.In closing, the pandemic has negatively impacted almost every industry. While we are expecting the economy to begin recovering in the latter half of 2022 and beginning of 2023, we will also have to effectively manage our assets in order to maintain performance over the coming months. By increasing our pension fund assets, we'll be able to not only strengthen our fund to the public, but also to positively contribute to the Namibian economy. And a recovering economy benefits each and every Namibian, not only our pension investors and clients.

Effects of tax limits on pension funds savings

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Republikein 2025-04-30

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Effects of tax limits on pension funds savings

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Republikein 2025-04-30

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