CASE NO: NBFIT – 0003/2023
APPLICANT 3 V. NBFIRA
CASE NO: NBFIT – 0003/2023
Sector - Retirement Funds
1. Issue
1.1. Withdrawal of the remaining two-thirds balance of pension benefits after commutation at retirement, to complete multi-residential building.
1.2. Applicant retiring under the repealed Retirement Funds Act, 2014 but not purchasing an annuity as compulsorily required, until the new Act comes into force.
1.3. Applicant’s monthly pension being greater than the prescribed threshold for commutation of the whole amount of the benefit.
1.4. Whether withdrawal of the entire remaining benefit permitted by the Retirement Funds Act, Regulations, Rules of the Fund, or Income Tax (Superannuation Funds) Regulations.
1.5. Whether the Applicant can withdraw in terms of the new Act even though he commuted his one-third in terms of the repealed Act.
2. Summary of Facts
2.1. In the matter between Applicant 3 v. NBFIRA case number NBFIT-0003/2023, the Applicant lodged his appeal against the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) after it refused to allow his appeal against Alexandar Forbes Financial Services Botswana (AFFSB). The Applicant had two deferred pension funds after being retrenched twice, the last time being on or around 2020, upon reaching the retirement age he retired from AFFSB fund on or around 2021 whereat he withdrew his one-third pension benefit but did not purchase an annuity with the remaining two-thirds. He thereafter sought the encashment of his two-thirds pension benefit to allow him to complete his multi-residential building. His request was denied by both AFFSB and the Authority.
3. Issues for Determination by the Tribunal:
3.1. Whether the law permits a former member of a fund to encash the remaining two-thirds of his pension benefit under the new Act, having commuted his one-third under the repealed Act.
4. Relevant Provisions of the Law
4.1. Retirement Funds Act, 2014
Section 40(1)(a)
A licensed fund may deduct from a benefit payable to a member, or to his or her dependents or nominees, in the event of the death of the member –
(a) Any amount due on the benefit in terms of the Income Tax Act;
4.2. Retirement Funds Regulations
Regulation 30 (1)
Subject to the provision of sub regulation (2), the rules of a pension fund may provide for the commutation of a pension which is payable to a member on retirement, retrenchment, or resignation or to a former member, or to the surviving spouse, dependents or nominated beneficiaries of a member or former member following the death of the member or former member, of –
(a) all of the pension if the remaining pension after computation of one-third, in case of retirement and retrenchment, or one quarter in case of resignation, is less than such amount as determined by the Income Tax Act; or
(b) one-third in case of retirement and retrenchment or one quarter in case of resignation.
4.3. Regulation 2(1)(e) – Income Tax (Superannuation funds) Regulations
The rules for a fund or scheme may-
(i) allow a member to commute up to 33 1/3 per cent of his pension on retirement;
(vii) where the pension payable to a pensioner, a widow, widower, orphan, or dependant is less than P5,000 per annum, provide for the commutation, with the approval of the Commissioner General, of the entirety of such pension in a single lump sum payment.
5. Tribunal Judgement
The Tribunal dismissed the application for the following reasons:
5.1. The Applicant retired in 2020 during the tenure of the Retirement Funds Act, 2014, but his review application was only heard in January 2023 after the 2014 Act was repealed and replaced by the Retirement Funds Act, 2022. The Applicant’s matter was to be regulated by the repealed 2014 Act as the new Act does not apply retrospectively.
5.2. That the repealed 2014 Act does not allow members to withdraw their pension in order to complete a multi-residential building, nor did the Applicant’s fund rules or the Income Tax Act.
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