28 Jan 2024

For the period November 2021 to July 2022, 1 405 pension fund members encashed their benefits and 2 714 purchased pension annuities.

The Retirement Fund Act (2022), which increased pension threshold from P5 000 per annum to P20 000 per annum, has given rise to the number of encashment by members.

Botswana Public Officers Pension Fund’s Acting Director Corporate Communication, Mr Alan Ranthepha said after the new Act came into effect, from November 2022 to July 2023 there were 2892 encashments and 954 pension annuities.

Mr Ranthepha said it came to their attention that most members preferred to receive a cash lump sum as opposed to earning a pension of less than P20 000 per annum.

He said the amendments give members more options when planning their careers and timing their retirement, looking at their own particular circumstances.

Mr Ranthepha added that further to the key changes which increased the amount to be commuted on retirement from 33.3 per cent (1/3) to 50 per cent of pension entitlement, the business landscape locally could benefit immensely through upsurge of new entities.

He further cited strengthened competitiveness and providing members’ relief in emergency circumstances allowing them to focus on enhancing productivity.

And most importantly, Mr Ranthepha said the amendments provided the means for a dignified post-career life through pension savings.

Notably, he said, ‘the amendments might have the effect of encouraging early retirement and/or the movement from one job to another because they allow members to have enhanced access to retirement savings’.

This could have another secondary effect of reducing an employer’s wage bill, he said, citing that government had faced tough choices over the civil service wage bill in recent years.

Meanwhile, BITC Executive Director, Export Development and Promotion, Mr Temo Ntapu said the exemption on all gratuities, severance pay and retrenchment packages increased to 50 per cent technically puts more cash into the hands of those leaving employment or renewing contracts due to the increase in the tax exemption.

Mr Ntapu advised that members should carefully determine and firm up on expense level taking in to account what fund credit was required to match the expense.

He encouraged members to decide on the resultant position of cash they could take, adding that investing pension monies without prior analysis for firm decision could lead to financial loss. ENDS