By Tokiso TKay Nthebe
Why Every Pension Fund Member Must Understand the Law
Ignorance of the law is no excuse.
“Ignorantia juris non excusat.”
That Roman law principle applies directly to your retirement savings.
As we continue this retirement education series, there is one uncomfortable truth:
Many pension fund members contribute every month — but have never read, or even heard of, the law that protects their money.
If you are contributing to a pension or provident fund in Lesotho, you are protected by the Pension Funds Act.
But protection only works when you understand your rights.
What Are Pension Laws?
Pension laws are rules that regulate how retirement funds operate.
They exist to:
- Protect members’ contributions
- Ensure proper governance
- Enforce transparency
- Prevent abuse or mismanagement
- Hold trustees and employers accountable
In Lesotho, retirement funds are regulated and supervised by the Central Bank of Lesotho.
This oversight is designed to safeguard your retirement savings.
But here is what many members misunderstand:
Because most pension funds in Lesotho are defined-contribution (DC) funds, the responsibility to retire with enough money lies primarily with you.
Let’s break that down.
Defined Benefit vs Defined Contribution — Why It Matters
🔹 Defined Benefit (DB) Funds
In a defined benefit fund:
- Your retirement income is calculated using a formula.
- The formula considers years of service, salary, and an accrual rate.
- The employer carries the investment risk.
If investments perform poorly, the employer must still meet the promised benefit.
🔹 Defined Contribution (DC) Funds
In a defined contribution fund:
- You and your employer contribute a set percentage.
- Your retirement benefit depends on:
- Total contributions
- Investment performance
- Fees
- Time invested
In this structure:
The investment risk sits largely with you.
This is why understanding the law is not optional — it is essential.
Key Member Rights Under the Pension Funds Act of 2019
Let’s unpack some of the important protections you should know.
1️⃣ Right to a Comprehensive Prospectus
Your pension fund must provide a prospectus.
This document should clearly state:
- That the fund is regulated by the Central Bank of Lesotho
- The type of fund (DB or DC)
- The retirement benefits offered
- The fund’s objectives
- Details of the Board of Trustees
- The name of the Principal Officer
If you have never seen your fund’s prospectus, request it.
Transparency is your right.
2️⃣ Right to Receive a Benefit Statement
Your fund must provide you with a benefit statement within three months after the financial year-end.
Your benefit statement should include:
- Your personal details
- Fund registration details
- Date you joined
- Total contributions (employee + employer)
- Voluntary contributions (if any)
- Investment value
- Your nominated beneficiaries
This is not just a document.
It is a financial health report for your future.
Do you review yours every year?
3️⃣ Full Disclosure of Fees and Investment Options
The law requires funds to provide clear and factual information about:
- Investment choices available
- Associated risks
- All fees charged (administration, asset management, etc.)
Fees matter more than most people realise.
Even small percentage differences can significantly reduce your retirement savings over 20–30 years.
If you do not understand your fees, ask.
4️⃣ Beneficiary Nomination Is Mandatory
You must complete a beneficiary nomination form.
And you should update it regularly — especially after:
- Marriage
- Divorce
- Birth of a child
- Death of a dependant
This form guides trustees in distributing benefits if you pass away.
Without it, delays and disputes may arise.
Many members only think about this after a tragedy.
Be proactive.
5️⃣ When Can Deductions Be Made From Your Pension?
Your pension benefit is protected.
Deductions are only allowed under specific legal circumstances:
- A court-issued maintenance order
- A housing loan granted through a pension-backed loan arrangement
- A court judgment against you for financial loss suffered by your employer due to unlawful conduct
Outside of these limited cases, your retirement savings cannot simply be deducted or seized.
That protection is powerful.
But again — you must know it exists.
Why This Matters for Working Professionals (25–50+)
If you are 25–35:
- You have time on your side.
- Understanding the law now prevents costly mistakes later.
If you are 35–45:
- Your pension balance is growing.
- Governance, fees, and contribution rates matter more than ever.
If you are 45–50+:
- You are closer to retirement.
- Understanding withdrawal rules and benefit structures becomes critical.
The law provides the framework.
But you must engage with it.
The Bigger Conversation
Too many professionals assume:
“My employer has a pension fund. I’m covered.”
But here are better questions:
- Do I know my fund type?
- Do I understand how my benefit is calculated?
- Have I reviewed my latest statement?
- Do I know my contribution percentage?
- Is my beneficiary form updated?
Retirement is not passive.
It requires awareness.
Final Thought
The Pension Funds Act exists to protect you.
But protection is strongest when members are informed.
Do not wait until:
- You resign,
- You retire,
- Or a crisis happens
… to start understanding your rights.
Because retirement is not just about saving.
It is about safeguarding what you save.
Source:
Pension Funds Act
Regulations of 2020
Tokiso TKay Nthebe is an author, podcast host, financial coach, and lead advisor at TKO Financial Wellness & Advisory, who guides professionals who are overwhelmed by investing and retirement information – and have disposable income to invest- to gain clarity, control, and a plan they trust, so they can make their money work for them while preparing for retirement.
Visit www.tkofinancialwellnessacademy.com or email info@tkofinancialwellness.com for personalised coaching and resources.
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