CASE NO: NBFIT – 0001/2022

APPLICANT 1 V. NBFIRA
NON-BANK FINANCIAL INSTITUTIONS TRIBUNAL
CASE NO: NBFIT – 0001/2022

Sector - Retirement Funds
1.    Issue
1.1.    Withdrawal of remaining two-thirds pension benefits after commutation at retirement, to pay for loans.

1.2.    Applicant retiring under the repealed Act but failing to purchase an annuity, intending to benefit under the new Retirement Funds Act, 2022.

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 is permitted by the Retirement Funds Act, Regulations, Rules of the Fund, or Income Tax (Superannuation Funds) Regulations.

1.5.    Whether the law permits a member who retired under the repealed Act to benefit under the new Act.

2.    Summary of Facts
2.1.    In the matter between Applicant 1 v. NBFIRA case number NBFIT-0001/2022, Applicant lodged a review application against the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) after NBFIRA dismissed his appeal against NMG Administrators Botswana’s refusal to pay his entire pension benefit. Applicant retired from the public service on or around 31 December 2021, on medical grounds. He had withdrawn his one-third lump sum but had not purchased an annuity with his remaining two-thirds. Thus, he sought to encash the remaining two-thirds from his pension fund to allow him to pay for his medical expenses, pay for legal fees, maintenance and to liquidate some of his loans. His request was declined by both NMG and the Authority.

3.    Issues for Determination by the Tribunal:

3.1.    Whether the law permits a former member who has retired to encash the remaining two-thirds of his pension benefit under the new Retirement Funds Act, after commutation under the old Retirement Funds Act, to allow him to pay for his medical expenses, pay for legal fees, maintenance and to liquidate some of his loans.

3.2.    Whether the law permits a former member to opt not to purchase an annuity where the monthly pension will be P5, 000.00 per annum or greater.

4.    The Relevant Provisions of Law
4.1.    Retirement Funds Act – Section 40
The Act at Section 40 sets out different instances under which withdrawals from a member’s pension fund credit may be permitted.

This Section provides for the payment of debts at Section 40(1)(d) which reads:

“ In the case of a default on the repayment of any loan by the member in circumstances where his or her membership is not terminated, the amount of the benefit which the member would have received on termination of membership on the date of default, if such a deduction is only effected as a last resort after the board of the fund is satisfied that no other arrangement for the required payment can be made;” [own emphasis]

This section allows a member’s loan to be paid from their pension only where their membership with the fund has not been terminated, therefore it did not apply to the Applicant’s case since his membership to the Fund had been terminated as he had retired.

The Act defines a member as follows:

“means a person who is admitted to the membership of a fund in terms of the rules, but does not include any member or former member who has received all the benefits which may be due to him or her from the fund and whose membership has been terminated in terms of the rules;” [Own emphasis]

4.2.    Income Tax (Superannuation Funds) Regulations
The Income Tax Act at Section 32 (13) provides that;
“The withdrawal of a pensioner’s contribution will be determined according to the fund rules as well as the Income Tax (Superannuation Funds) Regulations”.


“Regulation 2(1)(e)
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;” [own emphasis]

4.3.    Rules of the Fund

Rule 5.4 of BPOPF Rules provides that on retirement a member may commute one-third of their pension and it reads:

“Rule 5.4

On retirement or retrenchment, a member may commute –

(a)    all of the retirement benefits if the remaining benefits after computation of one-third is less than such amount as determined by the Income Tax Act; or

(b)    not more than one-third of the pension or such a maximum amount as may be determined by legislation from time to time.”

5.    Tribunal Judgement
The Tribunal dismissed the application for the following reasons:
5.1.    The Applicant retired in December 2021 during the tenure of the Retirement Funds Act, 2014, therefore his withdrawal was dealt with under the said Act and not the 2022 Act as the law does not operate retrospectively.

5.2.    That the repealed 2014 Act, Fund Rules, and the Income Tax (Superannuation Funds) Regulations, only allowed members to withdraw their remaining two-thirds where the monthly pension would be less than P5, 000 per annum, which was not the case in this matter.

5.3.    The Rules of the Fund provided that an annuity option chosen cannot be altered and shall apply for the pensioner’s lifetime, therefore, the Applicant could not encash the full benefit as he was above the threshold.

5.4.    That the Applicant was not a member the Fund as he had already retired, therefore he could not withdraw from his pension benefit under Section 40 (1) (d) of the Retirement Funds Act, 2014.

Full Judgement Here