Retirement Fund Trustees in the Hot Seat

Why have the pressures on Retirement Fund Trustees increased? How can this new situation be managed?

Today’s trustees, unlike their predecessors of a few years ago, are under enormous pressure to act far more responsibly.  Why?

• Legislation: New complex legislative changes to the Pensions Fund Act impact numerous Funds in different and sometimes, in unexpected ways.
• Regulation: Regulatory authorities demand a greater level of knowledge, understanding and pro-active involvement by Trustees in performing their duties.
• Accountability: Members are becoming more informed and are looking to Trustees to manage their Funds more knowledgeably, diligently, competently and most important, transparently.
• Risk Management: Members are more exposed to greater risks in the now fashionable Defined Contribution (DC) Funds than they were in the previous Defined Benefit (DB) era. The burden of risk management has shifted heavily to Trustees.

Under these performance pressures the Trustees’ need for knowledge and competency has increased substantially. Trustees must be fully aware of and focussed on “what they have to know and what they have to do” in discharging their fiduciary responsibilities to the Fund. Additionally, many Trustees today are employee-elected. Member representatives may come from a variety of occupational and educational backgrounds that do not necessarily prepare or qualify them appropriately for the complexities of managing a Retirement Fund.

To meet these onerous responsibilities, Trustees must perform at a much higher level and be able to maintain that level continuously and consistently. The need for high level performance has been emphasised repeatedly by the National Treasury and the Financial Services Board.

Finance Minister Trevor Manuel says:

"We need to be doing a lot more by way of trustee training, and we need to be strengthening the rules of ethics for trustees so that the inter-relationship between retirement funds and fund asset managers and advisers is correctly balanced. Trade unions and other organisations independent of financial services companies need to do more to develop training programmes for trustees.” (Personal Finance – October 2003)

How can the Stakeholders of Funds ensure that the Trustees are appropriately qualified to manage Funds?

Trustees should undergo professional training from facilitators who have the necessary professional qualifications and experience in all areas of Retirement Fund Management. This training will raise the Trustees’ knowledge to the appropriate level to fulfil their responsibilities.

The areas of study include:

• Objectives of retirement funds for their members
• Psychological aspects of retirement
• Introduction to all the Participants of a Fund
• Fund benefit design & costing
• Role and responsibilities of the Principal Officer
• Administration of the Fund
• Outsourcing skills in areas which Trustees may not have experience
• Asset management concepts
• Member investment choice
• Asset management strategy
• Asset management fees & performance assessment
• Assessing performance of all Service Providers
• Financial evaluation and reporting
• Audit and risk management

 

Stakeholders of Retirement Funds have a right to demand that Trustees are able to demonstrate proficiency in addressing and understanding these key components of Fund management.

How can Fundela help?

Fundela is an independent educational organisation focusing specifically on Retirement Funding. Fundela offers a Trustee Education Training Course that covers all aspects of Fund management and provides Trustees with the knowledge and understanding to execute their fiduciary duties.

This programme caters for the entire spectrum of Trustees, from those who have recently been appointed with little or no knowledge of managing Retirement Funds through to those who need the most sophisticated level of knowledge required in this field. A self-assessment approach is adopted to identify their needs.

Fundela’s Trustee Training Course presents a range of material pertinent to the Trustee role. Small groups, with a maximum 20 delegates, attend lectures and presentations, interact with facilitators, participate in workshops and are exposed to actual case studies. This four day course is conducted one day per week for four weeks.

What are the Benefits of participating in such a course?

All stakeholders will secure numerous benefits as a result of their Trustees’ participation in the course.  The most important end result: skilled Trustees, who are capable of managing their Retirement Fund with a far higher appreciation of the risks involved and a better understanding of how to manage these risks.

Other specific benefits of the course are:

• The course is designed for “learning by interacting” with facilitators who are financial services industry professionals, several of whom are currently serving as Retirement Fund Trustees;
• Training is done over a four week period, allowing delegates to fully digest the course;
• The impact of time out of the office is limited;
• Cross-pollination of views is encouraged through participative group sessions.

Presentations from 15 October 2007 at the Wanderers

The Introduction to Fundela, by Steve Handler
The Rationale for PF130 by Jonathan Mort
The Implementation of PF130 by Jeremy Andrew