The Government Institutions Pension Fund (GIPF) benefit payments in the last five years between 2019 and 2023 totalled N$27 billion while employee contributions received over the same period amounted to N$22.4 billion, insights from GIPF’s integrated annual report for the 2023 financial year reveal.
This indicates a 20% higher pay-out in benefits compared to employee contributions received, exerting significant pressure on the benefit/contribution ratio, the Fund says.
The Fund’s benefits/contribution ratio reflects an increase of 25% to 148% (2022: 123%).
“The Fund noted a significant spike in this key ratio. Despite the positive growth in membership by 460 during the year, contributing to a rise in contributions received of N$146.4 million, there was a significant increase in benefits paid to members. The benefits paid surged from N$5.5 billion in the previous year to reach N$6.9 billion as of 31 March 2023.
“Management will continue to monitor this trend and is cognisant of the Fund’s maturity, as more members are expected to retire during the coming years. The growth in benefits payments is anticipated to increase while pensionable remuneration of members is expected to decline, resulting in further increases in the benefits/contribution ratio. The Fund will continue to collect all contributions that are due and ensure that defaulting employers are continuously reminded to comply with the Fund Rules,” explained GIPF.
For the last five years, contributions posted an average increase of 2% while benefits payments registered an average increase of 14%. The increase in benefits payments is attributable to the annual inflationary adjustment of 4.62% offered to pensioners for the 2022/2023 financial year, newly retired members, and newly onboarded annuitants totalling 9,560 (2022: 3,531) added during the period.
“Over N$3.1 billion was paid as pension benefits to the Fund’s pensioners and other annuitants, constituting 45% of the outflow of the Fund, which is an indication of a maturing Fund due to an increasing number of members retiring each year. A total of 9,038 benefit claims were paid out, representing an increase of 191 claims paid compared to 8,847 disbursed in the previous financial year.”
A total of 44 participating employers were maintained 2023 financial year, with 97,512 active members. Active membership during the year decreased from 98,623 to 97,512 indicative of a systematic decline in members over the past four years: a decrease of 1,111 members in 2023, 2,404 in 2022, 735 members in 2021, and 155 members in 2020.
“We envisage membership of the Fund to remain relatively stable at current levels. This expectation is based on the positive signs of economic recovery from the downturn experienced over the past few years and the Government’s stance on limiting public sector employment. We assume that within the public sector, only employee exits – either through retirement, death, or resignation – will be replaced, and there will be limited creation of new employment opportunities,” GIPF explains.
According to the integrated annual report, GIPF experienced remarkable growth, witnessing assets climb from N$117.5 billion in 2019 to N$151.8 billion by 31 March 2023.
“Through strategic investments, GIPF has played a pivotal role in driving social change and sustainable economic development for the collective well-being of the nation,” the GIPF says in the report.
With N$110.7 billion managed by investment managers, N$1.9 billion in direct investments, and N$38.5 billion in the Treasury Portfolio, GIPF’s solvency ratio increased substantially from 100.7% in 2019 to 115.5% as of March 31, 2023, reflecting shared value creation and an improved quality of life for members.
“GIPF has made remarkable strides in delivering excellent service, as evidenced by exceeding targets and achieving a 100% client satisfaction index. The Fund’s commitment to efficient member care is evident in reduced benefits payment turnaround times, with funeral claims processed near real-time, retirement claims in nine days, and death benefits in within seven months,” further said GIPF.