Retirement options in Botswana
The old age pension in Botswana is for citizens who are 65 and over. Currently this pays just P530 per month.
Anyone who doesn’t make their own plan for retirement is faced with financial hardship - and dependency on their children or other relatives.
When you look back at your life… what will you tell your younger self?
What about Botswana Pension Funds?
The largest pension fund in Botswana - the Botswana Public Officers Pension Fund (BPOPF) allows members to take early retirement from 45, while the normal retirement age is 60.
It’s highly unlikely that someone will be able to acquire enough assets by the age of 60 to retire with the same income that they have been earning up to that point.
There’s no way that someone is going to retire comfortably at 45.
Options for non government employers come from the pension fund administrators - Alexander Forbes, AON and Fiducia. If an employer doesn’t provide a company pension scheme, then an individual can look to the life insurance industry - Botswana Life, Metropolitan Life and Old Mutual all have retirement annuities based on insurance policies.
The full list of Botswana pension funds can be found on the regulator NBFIRA’s website: https://www.nbfira.org.bw/registered-pension-funds
What are the advantages and disadvantages of a Botswana pension?
The main advantages
Your contributions are paid from your pre-tax income. Botswana’s top rate of tax is currently 25% on earnings of P12,000 per month and more. So for a top tax payer, the tax relief is worth P250 for every P1,000 you save into a pension.
You can take a lump sum out of your pension of up to 1/3 of your pension fund value at retirement - tax free.
The main disadvantages:
Local regulations prevent pension funds from investing your money freely. The most stringent regulation is that preventing more that 65% being invested internationally.
Your money is locked up until you retire - and can’t leave unless its to another Botswana Pension Fund.
When you retire, the money has to buy you an income-for-life, locally in Botswana. The fixed rates aren’t good - P1,000,000 might only buy you an annuity of about P5,000 per month.
The income is taxable. Botswana income tax has to be paid on your annuity income.
So what should I do about planning my retirement?
There are lots of other investment options - just don’t put all your eggs in one basket.
Firstly, get financial planning advice.
Each person’s situation is different, so it’s important that you find an adviser that is Independent, and that you can trust to work on your side. We’d obviously suggest giving one of our financial planners a call on 3180111.
Secondly, do something about it now.
The longer you wait to start your financial plan, the more it will cost you to achieve the same goal.
Let’s say someone needs to save P2,500 per month now in order to retire securely at 65.
If they wait a month, they’ll have to save P2,525 instead. If they wait a year they’ll have to save P2,800 to reach exactly the same goal.
The rule of thumb is that the cost of delay is 1% per month - so act now.
