Roles and responsibilities of Members of Pension Funds

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.
The Trustees
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.
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.
The Principal Officer
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 andany communication from the 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 Ttrustees 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 will include amongst others the following
activities (the list is not exhaustive):
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 will give that asset manager some instructions in a
policy on how the money should be invested.
The investment policy is a document that defines how a
pension funds’ assets should be invested. It is the Trustees duty
to develop this document. The investment policy should set
clear investment objectives for the pension fund.
The investment policy should at a minimum include the
following:
The overall performance objectives for the pension fund;
Specify the roles and responsibilities of the parties involved;
The type of assets the fund must invest; and
How performance will be measured.
The investment mandate
The investment mandate is the document that manages the
relationship and the specific duties of the investment manager
appointed by the Trustees to invest the Fund’s assets on its
behalf. In simple words, the investment mandate is a set of
instructions on how the investor want its funds invested.
The investment mandate should at a minimum include the
following:
How and when the investment manager will report back to the
fund. The asset manager is expected to report to the Trustees
on the performance of the Fund’s investments on a monthly or
quarterly basis or as often as required;
State the assets in which the Fund’s money is invested;
State in which countries the money is invested. This should
be in line with the applicable law such as the Regulation 28 in
Namibia; and
The fund’s performance benchmark. The performance
benchmark refers to the minimum expected investment
performance returns.
Fund Consultants
The fund may use the service of consultants to advise on
many things for example benefit consultants or investment
consultants. Fund consultants will normally recommend a
number of options to the Trustees for consideration. The
consultant’s duty is only to recommend and provide advice to
the Trustees, but the final decision remains with the Trustees of
the fund.
A benefit consultant will provide advice and support
regarding the various types of benefits the Fund can offer its
members. Similarly, the investment consultant will provide
advice and support regarding various ways 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.

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