Renthia Kaimbi
The Financial Institutions and Markets Act (FIMA) now prohibits employers from deducting financial losses due to employee theft, fraud, dishonesty, or misconduct directly from pension benefits.
The practice was previously permitted under Namibia’s repealed Pension Funds Act and had, for decades, left retirement savings vulnerable to employer claims based on more than a signed admission of liability.
Under the repealed Pension Funds Act, section 37D expressly allowed retirement funds to deduct amounts owed to an employer where the loss arose from theft, dishonesty, fraud, or misconduct, provided the employee admitted liability in writing or a court judgment was obtained.
In practice, this meant that during disciplinary proceedings, often under immense pressure, employees could sign acknowledgements of debt, effectively allowing employers to recover losses directly from their retirement savings without independent judicial oversight.
Retirement funds author and pension industry professional Vincent Shimutwikeni has described this as a “deliberate legislative shift toward strengthening the protection afforded to retirement benefits.”
Explaining the implications of the new law, he stated that the “FIMA adopts a materially narrower and more protective approach” than its predecessor.
Section 277 of FIMA now permits only specifically regulated deductions from pension benefits, including tax obligations, maintenance orders, medical aid subscriptions, funeral expenses, and certain insurance premiums.
“What is notably absent, is any provision permitting deductions from pension benefits in respect of theft, fraud, dishonesty or misconduct based on internal acknowledgements of debt, written admissions of liability, disciplinary findings or similar employer-driven processes,” he stated.
He further stated that employers, therefore, no longer have statutory authority to recover alleged losses directly through internal processes.
Any recovery must instead occur through independent legal proceedings before a competent court – a process separate and distinct from the administration of the member’s pension benefit.
This shift is reinforced by section 274 of FIMA, which, as Shimutwikeni notes, “expressly protects pension benefits from reduction, transfer, attachment or execution except where permitted by law.”
In light of this, he added that retirement benefits enjoy statutory protection unless a deduction falls squarely within the narrow categories authorised by FIMA.
Shimutwikeni pointed to understandable reasons why lawmakers moved away from the previous position.
“Employment relationships are seldom characterised by equal bargaining power,” he observes.
“Employees facing disciplinary proceedings, dismissal, criminal allegations or financial hardship may sign acknowledgements of debt or admissions of liability under considerable pressure and without fully appreciating the long-term implications for their retirement savings.”
Retirement benefits, he argues, are not ordinary assets.
“In many cases, pension savings represent an employee’s final remaining financial safeguard after employment ends. Once depleted, those savings may never realistically be restored before retirement.”
FIMA therefore appears aimed at ensuring that pension benefits are not easily diminished through internal employer processes lacking independent judicial oversight.
Importantly, FIMA does not remove an employer’s right to recover losses caused by employee misconduct.
“Employers remain fully entitled to institute civil proceedings and obtain judgement where losses can be proven,” Shimutwikeni clarifies.
“What FIMA does is draw a clear legal distinction between internal employment processes and the statutory administration and protection of pension benefits.”
For retirement funds and trustees, the amendment strengthens governance and reduces the risk of unlawful deductions being effected against members’ retirement savings.
Boards must now ensure that no deduction is permitted unless it falls squarely within the deductions expressly authorised under section 277.
Trustees are required to apply these statutory protections and administer pension benefits strictly in accordance with FIMA.
“Pension benefits are no longer lawfully accessible through internal admissions of liability, acknowledgements of debt or disciplinary mechanisms in the manner previously permitted under the repealed Pension Funds Act,” Shimutwikeni explained.
Employers, employees, trustees, and retirement funds must therefore appreciate that the legal landscape governing pension deductions in Namibia has materially changed.
Government Institutions Pension Fund (GIPF) chief executive officer Martin Inkumbi recently noted the changes to deductions from pension benefits.
“GIPF is prohibited by FIMA to withhold or deduct any damages or financial loss suffered by the employer resulting from theft, fraud, dishonesty, or misconduct of the employee or member from the member’s pension benefits,” he stated.
Inkumbi clarified that this prohibition applies even if the member has provided written consent or has been convicted by a court of law.
As a result, he encouraged employers to pursue civil proceedings directly against the employee or member in order to recover any damages or financial losses incurred.
