Windhoek - Investing in a retirement or pension plan is possibly the best decision any employee can make. The pensioners in Greece may, however, not generally support this notion.

And in that there is an object lesson for Namibians and Southern Africans in general.

Making such a decision has become quite difficult given the volatility of the global economy; it has resulted in many pensioners running the risk of losing their pensions when they reach retirement age.

Look at debt-stricken Greece, which faces a default of pensions by the country’s financial sector. Its situation has been exacerbated by the actions of the government as it opts for stringent austerity measures as a last resort to maintaining sanity in their battered financial sector in the face of a possible exit from the eurozone.

Asset managers, insurance companies and financial advisory consultants have the tacit task of managing funds and earning interest on behalf of their clients in an environment that is likely to have them lose money as opposed to earn any return on investments.

The simple truth is there are fewer stable investments owing to the global financial turmoil and it does not seem like there is a definite solution in sight.

The primary factors leading to this are the reduced growth rate of China, the power house of economic growth for the past 30 years and which ‑ according to the World Bank ‑ achieved 10.4 percent growth in 2010 but may not be able to sustain this and is actually gearing for reduced GDP growth.

The continuing debt crisis in the eurozone and the impending fiscal cliff in the United States are also taking their toll on the global financial markets and these global challenges are putting fund and asset managers alike in a situation in which they run the risk of losing investors’ funds.

There is simply a lot of financial uncertainty and the players in the global financial sector are taking up extreme risks in order to try and achieve some certain level of return.

In response to this, Moody`s Investors Service - a global credit rating agency - downgraded the rating of a number of European and North American financial institutions recently. This shows that fund managers are becoming desperate in terms of their hunt for better returns to the extent that they end up taking extreme risks that can have very devastating repercussions.

“Retirees can’t afford to lose money in the market. It’s great (to invest) when you’re working. But you can’t when you’re withdrawing,” says Dan White, a financial planner in Glen Mills USA and founder of Dan White & Associates LLC.

The predicament faced by the custodians of pension funds in Greece is not peculiar to them as similar pressures have become a trend in the entire financial sector.

It is easy for fund managers to lose money in the financial markets just in the same fashion as you can lose a fortune on a game of blackjack or any other card game. This was the case when the social media platform founded by Mark Zuckerberg, Facebook, made its Initial Public Offering (IPO) on the NASDAQ Stock Exchange.

According to NASDAQ they traded over 600 million shares at the IPO price US$38 per share by May 21, 2012. However, to date the share price has recorded lows of US$28 and the volume of trade has sunk to barely 100 million shares.

This means that if a fund manager invested the premiums and contributions from clients in this stock and a client makes a claim, the fund manager may not be in a position to pay the claim and runs the risk of defaulting.

Obviously, there are risk management mechanisms that include the spreading of risk as well as the fund managers own insurance against such exposure. However, the essence of this is to elaborate how losses can arise and how easy it is to lose a fortune.

The Government Institutions Pension Fund (GIPF) in Namibia is not immune to these and other risks; hence the need for the appointment of a leadership and management team that will be able to make sound decisions and not only maintain the fund but possibly grow it even in the wake of global financial distress.

Local regulatory bodies like NAMFISA should have sound early detection mechanisms so as to protect innocent clients from any harmful practices and investments by fund custodians, as well as to ensure that the State will not need to use taxpayers’ money in government bailout packages as was seen in the US and Europe.

Pensioners need to be well-cushioned against any shocks that may erode their pension benefits as the pension only comes to be of necessity when a person can no longer fend for him/herself and has to rely on these benefits.

Pension funds need to have more stringent control mechanisms so as to ensure that they do not fall prey to negligent practices and fund managers need to be well versed in solid investment vehicles that do not lose value easily.

Due diligence thereby needs to be exercised by fund managers in the preservation and growth of pension funds and any other funds alike. This is not only the mandate of fund managers but it is their ethical responsibility.

A pensioner need not ask “who ate my lunch” when they discover one day that a fund manager has lost a lot of money due to negligence.