Hundreds of Pensioners Cashed Out P266m Before Retiring

Law gives them power to withdraw up to half of their money BPOPF expresses serious concern Members cash out to start businesses or settle debts BPOPF says some of these ventures fail The Botswana Public Officers Pension Fund (BPOPF), one of the country’s largest institutional investors, has expressed concern over a rising trend in pension benefit encashments following the amendment of the Retirement Funds Act. Changes to the law, approved in 2022, allow members to withdraw up to half of their pension savings. Since then, a growing number of members have opted to cash out the maximum amount. During the 2024/2025 financial year, 1,992 members withdrew a combined P266 million. Speaking during a media briefing on Wednesday, BPOPF board chairperson Gaone Macholo said although the law permits half encashment, most members take the full amount — a decision she warned could undermine long-term financial stability in retirement. “While it’s good that members can access their money, in the long term, it doesn’t work in their favor,” Macholo said. “Our goal is for pensioners to retire earning between 66 percent and 81 percent of their previous income through the Net Replacement Ratio (NRR).” Macholo said high encashment rates significantly reduce members’ NRR. For example, a member expected to retire with 88 percent of their salary may see that figure drop to half or lower after withdrawing half of their savings. “For someone earning P10,000 a month, this could mean dropping to just P5,000 in retirement,” she said. While some members cash out to start businesses or settle debts, Macholo cautioned that many of these ventures fail, leaving retirees financially vulnerable. She advised members to consider withdrawing smaller amounts, such as 30 percent, instead of the maximum. Under the revised law, deferred members can also encash up to 50 percent of their pension to clear existing obligations, including mortgages, or cover medical expenses — a change from the previous one-third cap. BPOPF Principal Officer Moemedi Malindah also urged members to be cautious. “If your pension is the foundation of your retirement, you're better off than risking it on uncertain ventures,” Malindah said. “We see many people try, and when it doesn’t work out, they’re left to survive solely on the reduced pension.” He warned that by withdrawing half their savings, members also reduce their ability to purchase annuities that could guarantee financial stability post-retirement. “This isn’t just about BPOPF,” Malindah added. “Members can buy annuities elsewhere. The concern is about retirement security across the board. The crisis begins immediately when members withdraw too much too soon.” Despite the challenges, BPOPF’s financial performance remains stable. The Fund collected P4.8 billion in contributions during the financial year and paid out P4.5 billion in benefits. Assets Under Management (AUM) increased from P108 billion to P116 billion, reflecting 7.7 percent growth. For the period, BPOPF declared an interest rate of 6.84 percent for active and deferred member portfolios, 6.12 percent for the pre-retirement switch portfolio, and 6.53 percent for the recently introduced Tshomarelo portfolio. The profit pensioners’ portfolio was declared at a flat 5 percent.

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Hundreds of Pensioners Cashed Out P266m Before Retiring

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