Leaner wage bill threatens GIPF’s sustainability

The trimming of the public service is threatening the sustainability of the Government Institutions Pension Fund (GIPF), says outgoing head David Nuyoma.

Nuyoma painted a gloomy picture to the media yesterday after a closed-door meeting with president Hage Geingob.

“That situation, I doubt it will change for the better,” he said, adding that this is typical with growing funds.

“As we mature, you have more people going on pension and the recruitments to replace them are less. So, that then plays out in the contribution payment ratio being out of balance,” he said.

The gender ministry has also seen the same spike in the number of pensioners. This year alone, almost 10 000 more pensioners will receive the old-age grant.

The pensioners increased to 202 294 from 192 544 last year, an increase of 9 750.

Nuyoma said after independence, a large number of civil servants came at once.

“So that large number is also leaving at once. And that is part of the reason why you have more people becoming pensioners quickly and fewer being recruited,” he said.

The chief executive officer said the spike on their side has been steady and less acute.

He added that it is not unique to GIPF and they have been able to manage the situation.

“What is important is what we are going to do to maintain enough liquidity in the event that there is a request for funds to pay,” Nuyoma assured.

Last year, The Namibian reported that at least 52,5% of GIPF’s active members will retire in the next 10 years.

Not only is the biggest member group in their 50s, but the average age of active members is 41 years and six months.

This is followed by pensioners, who are owed some N$32 billion.

The fund owes members between the age of 50 and 60 years N$33 billion.

Valuators have cautioned the fund’s management to ensure it invests wisely, as its inflows from contributions are currently N$3 billion less than outflows in terms of pension and other payouts.

This difference is now being compensated for by investment income, which as at 31 March last year stood at N$27 billion.

According to Humanity Employee Benefits, there is a need to ensure investments are aligned to members’ ages.

“We recommend that the trustees align the investment strategy to allow for the generation of liquid income that can be used to cover the contributions shortfall,” the actuaries said in their valuation report.