The National Superannuation Fund (NASFUND) had to pay members K6 million more than what it received in contributions last year due to rising unemployment.
NASFUND CEO, Ian Tarutia, revealed this during his presentation at the 2017 Annual Certified Practising Accountants Conference.
Tarutia said because they have had to pay out more, they have not made long term investments and are only focusing on the short term.
This means holding more cash so that they are able to pay out as and when members apply.
“Over the last three to four years, the gap between the contribution receipts that we are getting from employers in respect of members’ savings and employer contributions is reducing. And in fact, last year, we paid K6 million more than what we received in contribution invoices.
“So what does that mean for us? Our investment horizon has got to be much shorter. We’ve got to hold a lot more physical cash and not invest in longer term assets that may have the potential to provide higher return,” Tarutia said.
According to NASFUND, 72 percent of members partially or fully withdrew their savings in 2016 due to unemployment, while only 13 percent of withdrawals were from retirees.
Tarutia says while the organisation is a superannuation entity, it does not fully operate as one.
“There’s a very small number of our members actually withdrawing at retirement and a very large percentage that withdraw for unemployment purposes.
“As a consequence, the quality of life for our members after active employment in time is compromised or in time is poor because a large number of members are already reducing their savings through this constant withdrawal as and when they are in bouts of temporary unemployment.
“And in doing so for us a superannuation fund, there’s a sole purpose why we are here. Superannuation is about retirement, superannuation is about the long term. But because we’ve got this allowable which is enshrined in our legislation, we are not actually meeting that sole purpose.
“We’ve become in this trying and challenging times, a de facto bank account, and we’ve become a de facto welfare scheme.”
He added: “But that’s lazy money, and in terms of the investment guideline that we aspire to, by ensuring that we are optimising returns, we aren’t able to do that because of the obligation imposed on us to pay contributions.”
Tarutia said discussions have been held for the establishment of a taskforce to look into reviewing the superannuation legislation.
He said the longer savings remain in superannuation, the better the returns will be for members when they retire.