Understanding the Roles of Pension Fund Officials
Members of Pension Funds need to understand the
duties of Pension Fund officials and how their
work impacts them. An understanding of the
responsibilities of different Fund Officers will allow members
to know what to expect from these officials and allow them to
exercise their rights as Pension Fund members.
The Pension Funds Act of 1956 the law that regulates pension
funds, defines an officer of the fund as any person appointed
to manage the affairs of the Fund. These will include Principal
Officers (PO’s), Trustees, agents such as benefit administrators,
investment managers, consultants and actuaries. Auditors do
not qualify as officers of the Fund as they provide an independent
opinion on the Fund.
Note: Auditors are not considered officials of the fund. Their role is to give an independent opinion on the fund’s financials.
Trustees: The Decision-Makers
Trustees are ultimately responsible for the management of the fund. Their main goal is to protect members’ contributions and ensure proper governance.
In terms of the Corporate Governance Code of Namibia (“NamCode”), the management of a pension fund rests with the Trustees. Trustees are the final decision makers in a pension fund. Because Trustees of a fund may not have the time, skills and knowledge to do all the work needed, they sometimes hire external service providers to do work on their behalf. The responsibility to ensure that such work is performed, however remains with the Trustees. How one can become a Trustee of a fund should be specified in the rules of the fund. The Board of Trustees should have a document that sets out the responsibilities of the trustees, known as the Trustees Code of Conduct. It is important to remember that the most important objective of Trustees is to protect the members’ pension contributions. Therefore, Trustees are expected to guide the operations of the fund through policy documents. These policy documents can include the policy on responsibilities of trustees, a policy to handle conflict of interest, a policy on how money should be invested, a policy on how the fund must communicate with its members, a policy to handle complaints by the members and a policy to deal with risks facing the fund. The Board of Trustees can create committees to carry out specific work of the fund. The committees would generally include the audit committee, the death benefits committee, and the investment committee.
Key Responsibilities summarized:
In terms of the Corporate Governance Code of Namibia (“NamCode”), the management of a pension fund rests with the Trustees. Trustees are the final decision makers in a pension fund. Because Trustees of a fund may not have the time, skills and knowledge to do all the work needed, they sometimes hire external service providers to do work on their behalf. The responsibility to ensure that such work is performed, however remains with the Trustees. How one can become a Trustee of a fund should be specified in the rules of the fund. The Board of Trustees should have a document that sets out the responsibilities of the trustees, known as the Trustees Code of Conduct. It is important to remember that the most important objective of Trustees is to protect the members’ pension contributions. Therefore, Trustees are expected to guide the operations of the fund through policy documents. These policy documents can include the policy on responsibilities of trustees, a policy to handle conflict of interest, a policy on how money should be invested, a policy on how the fund must communicate with its members, a policy to handle complaints by the members and a policy to deal with risks facing the fund. The Board of Trustees can create committees to carry out specific work of the fund. The committees would generally include the audit committee, the death benefits committee, and the investment committee.
Key Responsibilities summarized:
Statutory reporting
The Trustees should ensure that the fund complies with the
Pension Funds Act and the rules of the fund. The Pension Funds
Act requires that the Trustees should see to it that the fund
produces audited financial statements every year and submits
this to NAMFISA at least 6 months after its year-end.
Trustees are also required to ensure that actuarial valuation
reports are prepared at least once in every 3 years and have this
submitted to NAMFISA at least 12 months after the year-end.
Risk management
Trustees must also manage the risks facing the fund. Risk
management, is one of the most important responsibilities of
trustees. Trustees manage risks by finding out all the dangers
that could happen to the fund and the effect of it happening.
They then put in place measures to try and avoid the danger or
to reduce the effect.
Roles and responsibilities of Board Meetings
The Board of Trustees should have as many meetings as
possible to discuss issues of the fund. The NamCode advises
that Trustees should meet at least four times per year. Trustees
should keep a record of all meetings in minutes.
Fiduciary duty
Trustees must by law act in the best interest of the fund. It
does not matter whether a Trustee is elected by the members or
by the employer, the interest of the fund comes above the group
that elected or appointed the trustee.
Trustees should be professional and act with care, skills and
honesty. The Board of Trustees take decisions as a group on
behalf of the fund, but Trustees can be held responsible for
wrong doing individually.
Principal Officer (PO): The CEO of the Fund
Principal Officer and Key Role Players in Pension Fund Governance
Every fund should have a Principal Officer. The Principal Officer’s role is the same as the Chief Executive Officer (CEO) position of any company.
The Principal Officer is responsible for the day-to-day running and administration of the fund. The Principal Officer should also coordinate and manage relationships between the fund and everybody who deals with that fund.
This includes the members, the company employing the members (also known as the participating employer or sponsor), the regulator (NAMFISA), and the service providers such as the benefit administrator, the asset managers, the funds’ consultants, as well as the Auditors and Actuaries.
The Principle Officer is the spokesperson of the fund and any communication from NAMFISA is made through the Principal Officer.
Service providers
Pension funds are complicated to manage and the Board of Trustees has the final responsibility for the management of the fund.
Since Trustees may not have the technical skills and time to do all the activities and services required to effectively manage a pension fund, Trustees may outsource some or all of their tasks to different service providers.
The Trustees must make sure that all work that is supposed to be done by outside companies is done.
Benefit Administration services
Benefit administrators are companies that do processing and administration work on behalf of the pension funds. The work of benefit administrators includes, among others:
Advise on, developing or changing Fund rules;
Preparing of documents regarding requirements of the law;
Maintaining member and pensioner registers;
Receiving Contributions and making benefit payments;
Reporting back to the trustees;
Maintaining accounting records;
Liaising with the auditors and actuaries.
Asset managers
The main objective of the pension fund is to grow investments within the limits of the investment mandates (the agreement between the fund and the individual asset managers).
Trustees are not always able to manage the money in the pension fund. Therefore, the task of investing the member’s contributions is given to companies that invest on behalf of the fund.
The Trustees give asset managers instructions in an investment policy that defines how the fund’s assets should be invested.
The investment policy should include:
The overall performance objectives for the pension fund;
Roles and responsibilities of the parties involved;
The types of assets the fund must invest in;
How performance will be measured.
The investment mandate
The investment mandate is the document that manages the relationship and specific duties of the investment manager appointed by the Trustees.
In simple words, the investment mandate is a set of instructions on how the investor wants its funds invested.
The investment mandate should include:
How and when the investment manager will report back to the fund;
Assets in which the fund’s money is invested;
Countries where the money is invested, in line with laws like Regulation 28 in Namibia;
The fund’s performance benchmark (the minimum expected investment performance returns).
Fund Consultants
The fund may use consultants for advice on benefits and investments. Fund consultants normally recommend a number of options to the Trustees, but the final decision remains with the Trustees.
Benefit consultants advise and support regarding the types of benefits the Fund can offer members.
Investment consultants advise and support regarding how the Fund’s assets can be invested.
Reference:
Judy Gilmour. (8/11/2015). What it takes to be a principal officer of a pension fund. http://www.moneyweb.co.za/news/industry/what-it-takes-to-be-a-principal-officer-of-a-pensionfund/
Role of Trustee in Pension Fund. (9/11/2012). http://www.expertsmind.com/questions/optimal-portfolioselection-30111346.aspx
Namibia Stock Exchange. (2014). The NamCode. Institute of Directors Southern Africa. pp. 24–35. Officer is responsible for the day-to-day administration and acts as the fund’s main representative.
Every fund should have a Principal Officer. The Principal Officer’s role is the same as the Chief Executive Officer (CEO) position of any company.
The Principal Officer is responsible for the day-to-day running and administration of the fund. The Principal Officer should also coordinate and manage relationships between the fund and everybody who deals with that fund.
This includes the members, the company employing the members (also known as the participating employer or sponsor), the regulator (NAMFISA), and the service providers such as the benefit administrator, the asset managers, the funds’ consultants, as well as the Auditors and Actuaries.
The Principle Officer is the spokesperson of the fund and any communication from NAMFISA is made through the Principal Officer.
Service providers
Pension funds are complicated to manage and the Board of Trustees has the final responsibility for the management of the fund.
Since Trustees may not have the technical skills and time to do all the activities and services required to effectively manage a pension fund, Trustees may outsource some or all of their tasks to different service providers.
The Trustees must make sure that all work that is supposed to be done by outside companies is done.
Benefit Administration services
Benefit administrators are companies that do processing and administration work on behalf of the pension funds. The work of benefit administrators includes, among others:
Advise on, developing or changing Fund rules;
Preparing of documents regarding requirements of the law;
Maintaining member and pensioner registers;
Receiving Contributions and making benefit payments;
Reporting back to the trustees;
Maintaining accounting records;
Liaising with the auditors and actuaries.
Asset managers
The main objective of the pension fund is to grow investments within the limits of the investment mandates (the agreement between the fund and the individual asset managers).
Trustees are not always able to manage the money in the pension fund. Therefore, the task of investing the member’s contributions is given to companies that invest on behalf of the fund.
The Trustees give asset managers instructions in an investment policy that defines how the fund’s assets should be invested.
The investment policy should include:
The overall performance objectives for the pension fund;
Roles and responsibilities of the parties involved;
The types of assets the fund must invest in;
How performance will be measured.
The investment mandate
The investment mandate is the document that manages the relationship and specific duties of the investment manager appointed by the Trustees.
In simple words, the investment mandate is a set of instructions on how the investor wants its funds invested.
The investment mandate should include:
How and when the investment manager will report back to the fund;
Assets in which the fund’s money is invested;
Countries where the money is invested, in line with laws like Regulation 28 in Namibia;
The fund’s performance benchmark (the minimum expected investment performance returns).
Fund Consultants
The fund may use consultants for advice on benefits and investments. Fund consultants normally recommend a number of options to the Trustees, but the final decision remains with the Trustees.
Benefit consultants advise and support regarding the types of benefits the Fund can offer members.
Investment consultants advise and support regarding how the Fund’s assets can be invested.
Reference:
Judy Gilmour. (8/11/2015). What it takes to be a principal officer of a pension fund. http://www.moneyweb.co.za/news/industry/what-it-takes-to-be-a-principal-officer-of-a-pensionfund/
Role of Trustee in Pension Fund. (9/11/2012). http://www.expertsmind.com/questions/optimal-portfolioselection-30111346.aspx
Namibia Stock Exchange. (2014). The NamCode. Institute of Directors Southern Africa. pp. 24–35. Officer is responsible for the day-to-day administration and acts as the fund’s main representative.