Africa-Press – Botswana. The Fund is concerned that while some members use their early withdrawals to finance business ventures or pay off debt, many of these plans do not succeed, leaving pensioners financially exposed.
In a trend that has raised concerns, a growing number of members of the Botswana Public Officers Pension Fund (BPOPF) are opting to withdraw large portions of their retirement savings before reaching retirement age.
Speaking at a press briefing in Gaborone recently, the Principal Officer of BPOPF, Moemedi Malindah, urged members to be cautious about accessing their pension funds early because such decisions can compromise financial stability in retirement.
Malindah stressed that for many members, their pension is the cornerstone of their retirement. “It’s risky to gamble it on uncertain ventures,” he said, noting that the Fund has seen cases where members deplete their savings and end up depending on significantly reduced incomes.
Too much withdrawn too soon
He said large withdrawals diminish the ability to purchase annuities that provide a guaranteed monthly income after retirement. “Even if members choose to buy annuities elsewhere, the fundamental issue remains – retirement security is undermined when too much is withdrawn too soon,” Malindah emphasised.
The trend follows amendments to the Retirement Funds Act in 2022, which now allow members to withdraw up to 50 percent of their pension savings prior to retirement.
BPOPF has acknowledged that the change was intended to provide financial flexibility but cautioned that it may lead to long-term financial insecurity. During the 2024/2025 financial year, 1,992 members collectively withdrew P266 million from the Fund under this provision.
Between 66% and 81%
According to the Chairperson of the BPOPF Board, Gaone Macholo, while the law permits members to encash up to half of their savings, most take the full amount, thus significantly reducing their Net Replacement Ratio, which is the percentage of income they receive after retirement compared to their pre-retirement earnings.
“Our aim is for retirees to receive between 66 percent and 81 percent of their pre-retirement income,” she said. “But a member who would have retired on 88 percent could see that drop to 50 percent or less after withdrawing half of their savings.”
Macholo added that while some members use their early withdrawals to fund business ventures or pay off debt, many of these plans do not succeed, leaving pensioners financially exposed.
BPOPF remains financially sound
She encouraged members to consider smaller withdrawals – such as 30 percent – rather than the full 50 percent that is allowed by law.
The amended legislation also applies to deferred members – those no longer contributing but not yet retired – allowing them to withdraw up to half of their accumulated savings. Previously, this group could only access up to one-third of their funds.
But despite the rise in withdrawals, BPOPF’s financial position remains sound. In the last financial year, the Fund received P4.8 billion in contributions and paid out P4.5 billion in benefits.
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