If you are wondering who carries out each of the roles managing a retirement fund and what their responsibilities are, here are the key actors and their roles.
The board of trustees
Every retirement fund must have a board of at least four trustees to oversee the running of the fund.
The Pension Funds Act makes it a trustee’s duty to:
Specific duties listed in the Act are that trustees must:
At least 50% of the trustees must be elected by the members of the fund. As a member, make sure the trustees you elect have the right skills and commitment to help manage your retirement savings.
In the case of an employer-sponsored fund, the other 50% will typically be appointed by the employer.
In the case of a retirement annuity, preservation fund, umbrella fund or beneficiary fund, the fund can apply for exemption from the requirement that members of the fund elect members of the board.
But then 50% of the fund’s trustees must be independent trustees. Independent trustees must have the relevant experience to be a trustee and must not have any relationships that could affect their ability to act in the best interests of members. This includes not having been employed by the sponsor in the last five years.
The fund rules should set out the period of time trustees are elected for – typically three to five years.
In terms of a Conduct Standard published under the Financial Sector Regulation Act, trustees must complete a minimum level of training, the Trustee Toolkit, within six months of being appointed.
The FSCA also has the power to appoint trustees when a fund does not have a properly constituted board and to remove a trustee when it is of the view the trustee is no longer fit and proper.
A board can appoint sub-committees, for example, to make investment decisions or to deal with death benefits, but the committees must be chaired by a trustee.
In the case of an umbrella fund, the FSCA may require that management committees be set up at each participating employer or at sector or regional levels to ensure there is consultation and communication.
The principal officer
The board of trustees must appoint a principal officer to take care of the day-to-day running of the fund.
The principal officer, on instruction from the trustees, may outsource certain day-to-day matters to the administrator of the fund, but the principal officer and the trustees remain responsible.
The members
The rules of an employer-sponsored pension or provident fund will set out which employees must join the fund, but usually membership is restricted to permanent staff or those on long-term contracts. Membership must be compulsory for all employees (or a class of employees) in order for the fund to be recognised by the Commissioner of the South African Revenue Service.
Some funds have a maximum age restriction on membership.
The beneficiaries
The beneficiaries are your dependants and anyone else you nominate to receive the benefits of your retirement fund in the event of your death before retirement.
The administrator
Retirement fund administrators are often businesses within large life insurers, but some are independent and a few big funds are self-administered.
Administrators perform the following tasks:
The trustees appoint the administrator after evaluating its processes, systems, track record and costs.
The appointed administrator must be approved and licensed by the Financial Sector Conduct Authority. It must continually comply with certain requirements relating to the assets it holds, the liquidity of those assets, indemnity insurance, timelines for depositing contributions into a retirement fund’s bank accounts, the safe custody of documents and the appointment of an auditor.
The Pension Funds Act obliges administrators to:
The advisers and consultants
Employers often make use of employee benefits consultants to help them choose appropriate retirement funds and/or retirement fund benefits, including group life benefits. These consultants are essentially advisers to the trustees and may consult to the employer.
Retirement funds may also use asset consultants to draw up an investment policy statement and to assist them in choosing appropriate investments for the fund. Funds may also use benefit and legal consultants to assist in resolving more complicated matters.
The investment or asset managers
The trustees need to appoint one or more investment or asset manager to manage the investing of the money that you contribute to the fund. They often make these appointments with the help of consultants. Funds that offer you a choice of investments may give you, as a member, access to a range of managers who manage underlying investment options – often unit trust funds. This is done through an investment administration system or investment platform.
The actuaries
Defined benefit retirement funds, in particular, need to appoint actuaries to help work out the future liabilities and the level of funding required to meet those obligations. Defined contribution retirement funds also appoint actuaries who may double as valuators (see below).
The auditors
The trustees also have to appoint auditors to audit the fund’s accounts annually. Some smaller retirement funds are exempt from being audited.
The valuator
Trustees are also obliged to appoint a valuator who values the funds’ assets to ensure accuracy. This is particularly important when the fund holds unlisted assets such as property or unlisted equity or infrastructure assets. An actuary who is registered as a valuator can fulfil this role.
The FSCA
The Financial Sector Conduct Authority regulates retirement funds. Funds are obliged to register with the FSCA and administrators have to be licensed. Funds, their trustees and administrators need to comply with notices, guidelines and regulations issued by the regulator in terms of the Pension Funds Act.
