With the construction sector experiencing a significant downturn in recent years, many workers have faced job insecurity and a lack of social protection. This has led many workers to withdraw their accumulated savings for immediate needs or business ventures.
The Namibian Building Workers Pension (NBWPF), an umbrella fund for the construction sector, stated it recognises challenges faced by the construction sector and its impact on employers and employees. Despite these challenges, the NBWPF reiterated it is committed to empowering individuals with the knowledge and tools to secure a financially stable future. Therefore, the NBWPF encourages construction workers, and employees in general, to start contributing to their pension fund as soon as possible. This is because even small contributions can have a significant impact when compounded over time.
One key aspects the fund emphasises is the power of compound interest in building a solid retirement plan, regardless of an individual’s current financial situation.
“Compound interest is a powerful tool that can work in the employee’s or fund member’s favour when planning for retirement. It is the interest earned on both the initial investment as well as the accumulated interest from previous periods. As a consequence, over time, this can significantly grow the retirement savings and will provide the member of the fund more than they had initially invested,” the fund stated.
Thus, the NBPWF believes it is crucial that individuals, particularly those with lower incomes start contributing to a pension fund, very early in their lives, practically as soon as they start earning an income.
“Even small contributions made consistently over a long period, can make a very big difference. By taking advantage of compound interest, individuals can benefit from the growth of their investments over time,” reads a statement from the fund.
While it is mandatory for construction sector employers to register their workers with a pension fund, and for both to make a minimum contribution of 4% based on an employee’s salary to the fund, the importance of pension funds and starting early extends to employees in other sectors as well.
“For everyone that wants to ensure a comfortable retirement, it is critical that they understand the advantage of making compound interest work for their retirement plans,” stated principal officer of NWBPF, Enwich Kazondu.
“Imagine you plant a seed and the seed grows into a tree, producing more seeds that can be planted for further trees and growth. Each seed, if planted, will produce more trees. Similarly, pension fund contributions accumulate and grow exponentially over time, reducing the burden at the point of retirement. By understanding the power of compound interest, individuals can ensure a more comfortable retirement and provide financial security for themselves and their loved ones,” he added.