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PIERRE REINECK Employee Benefits Studio

PIERRE REINECK Employee Benefits Studio. Fund Governance: PF 130 in Practice for Trustees. Fund Governance: PF 130 in Practice for Trustees. Background

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PIERRE REINECK Employee Benefits Studio

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  1. PIERRE REINECKEmployee Benefits Studio Fund Governance: PF 130 in Practice for Trustees

  2. Fund Governance: PF 130 in Practice for Trustees Background These circulars constitute the Registrar’s interpretation or requirements in respect of various issues. Although the provisions set out in these circulars are adhered to by the industry they do not necessarily have any legal status as such and are not enforceable in any formal manner. The Manual on South African Retirement Funds and other Employee Benefits 2007 page 463

  3. Fund Governance: PF 130 in Practice for Trustees Background “The respondent [FSB] now alleges that the [PF] circular is no more than a guideline for a board and that a board is not bound thereby and that it has a discretion to either apply it or to ignore it.” The Chairman of the Board of the Sanlam Pensioenfonds v The Registrar of Pension Funds

  4. Fund Governance: PF 130 in Practice for Trustees Background The King Commission was appointed in 1992 by the Institute of Directors to make recommendations on the financial aspects of corporate governance. King Report on Corporate Governance was published in November 1994. (King I) 1999 Banks Act amended to provide for compliance officer function

  5. Fund Governance: PF 130 in Practice for Trustees Background March 2002 King II Report on Corporate Governancereleased 1 September 2003 compliance with King II Code a JSE listing requirement July 2007 Circular PF 130 issued by FSB

  6. Fund Governance: PF 130 in Practice for Trustees • Background • King II Code : Application of Code • “The Code applies to the following business enterprises: • All companies with securities listed on the JSE Securities Exchange South Africa. • Banks, financial and insurance entities as defined in the various legislation regulating the South African financial services sector. • …” In terms of the Financial Services Board Act and the Financial Institutions (Protection of Funds) Act a pension fund is a financial institution

  7. Fund Governance: PF 130 in Practice for Trustees Introduction Compliance; Governance and Risk are not interchangeable GOOD CORPORATE GOVERNANCE Risk Compliance Governance compliance ensures that components function harmoniously

  8. Fund Governance: PF 130 in Practice for Trustees • Pension Funds Act Regulation 30(2) (u) • The rules of a pension fund shall … provide for the following matters: • the policy of insurance effected to indemnify the pension fund against losses owing to the dishonesty or fraud of any of its officials or such other indemnification as the Registrar may allow 48

  9. How much Insurance does this house need?

  10. or this one

  11. Fund Governance: PF 130 in Practice for Trustees You would walk through the house Room by room Making notes of the risks & possible losses Adding up how much insurance would be need Assessing and minimising risk Considering cover and premium 44 45 46 47 29 71

  12. Fund Governance: PF 130 in Practice for Trustees In considering and assessing the risks facing the Fund, You would have in effect put together the basics of a risk management plan 29 44

  13. Fund Governance: PF 130 in Practice for Trustees Further consideration …….. If the fund was underinsured in a loss situation, who would be liable for the shortfall on member benefits?

  14. Fund Governance: PF 130 in Practice for Trustees 7C. Object of board The object of a board shall be to direct, control and oversee the operations of a fund in accordance with the applicable laws and the rules of the fund. HOW IS THE ‘direct, control and oversee’ CURRENTLY BEING ATTENDED TO BY THE TRUSTEES?

  15. Fund Governance: PF 130 in Practice for Trustees • GOVERNANCE BY THE BOARD • 13 - 34 • GOVERNANCE BY THE BOARD OF THE OPERATIONS OF THE FUND • 35 - 55

  16. Fund Governance: PF 130 in Practice for Trustees • 7C. Object of board • (2)(a) • take all reasonable steps to ensure that the interests of members in terms of the rules of the fund and the provisions of this Act are protected at all times,   • (b) act with due care, diligence and good faith; • (c) avoid conflicts of interest; • (d) act with impartiality in respect of all members and beneficiaries. 53 2 16 20 66 19 23 38.4 69 74.4 20

  17. Fund Governance: PF 130 in Practice for Trustees 7D. Duties of board (a) ensure that proper registers, books and records of the operations of the fund are kept, inclusive of proper minutes of all resolutions passed by the board; (b) ensure that proper control systems are employed by or on behalf of the board; 35 17.5 35 36 38 44 45 71

  18. Fund Governance: PF 130 in Practice for Trustees 7D. Duties of board (c) ensure that adequate and appropriate information is communicated to the members of the fund informing them of their rights, benefits and duties in terms of the rules of the fund; (d) take all reasonable steps to ensure that contributions are paid timeously to the fund in accordance with this Act; ( 11 59 63 35

  19. Fund Governance: PF 130 in Practice for Trustees 7D. Duties of board (e) obtain expert advice on matters where board members may lack sufficient expertise; (f) ensure that the rules and the operation and administration of the fund comply with this Act, the Financial Institutions (Protection of Funds) Act, 2001 (Act No. 28 of 2001), and all other applicable laws. 8 10.4 30 31 39 40 42 48 50 69 75 8 18.2 37 38.6

  20. Fund Governance: PF 130 in Practice for Trustees • Trustees must recognise that a compliance and governance function is necessary to identify, control and manage fund risks. • To reduce fund and trustee liability exposure. • To improve fund management for the benefit of stakeholders • Demonstrate that they are doing what the Act requires they do

  21. Fund Governance: PF 130 in Practice for Trustees What should fund trustees be doing? ? ? ? ? ? ? ? ?

  22. Fund Governance: PF 130 in Practice for Trustees Codron FSB 032005

  23. Fund Governance: PF 130 in Practice for Trustees • Commence with a risk management plan • Components • Risk management policy; • The identification of risks facing the fund; • The assessment of the impact of each such risk to the fund; • Examine the process or controls necessary to reduce the impact of key risks;

  24. Fund Governance: PF 130 in Practice for Trustees • Commence with a risk management plan • Cont… • The monitoring of the risk process or controls to ensure that they are appropriate; and • The communication of the fund’s risk management policy to stakeholders.

  25. Fund Governance: PF 130 in Practice for Trustees • The development of trustee practise and fund governance policies some suggestions; • Implementation of compliance policy & charter • Code of conduct 10.1 • Establish priorities • investment policy statement 51 • socially responsible investment policy 51.3 • a communication policy 59 • performance assessment policy for trustees10.433

  26. Fund Governance: PF 130 in Practice for Trustees • Suggestions cont ….. • trustees education and training policy 10.4 • a risk management policy 44 • a policy about frequency and reporting by the administrators and service providers 73 • policy on conflict of interest 74.4 • admin and benefits cost increase policy • HIV strategy policy

  27. Fund Governance: PF 130 in Practice for Trustees • Suggestions cont ….. • member investment training policy 63 • trustee discipline and dismissal policy 34 • round robin voting procedures policy • trustee gift policy • trustee remuneration / compensation policy • subcommittee terms of reference 27 • proxy voting policy 51.7

  28. Fund Governance: PF 130 in Practice for Trustees Retirement Fund Committee Terms of Reference Content Template Introduction and founding source Objectives Membership and Quorum Secretary Attendance at meetings Reporting Meetings and Proceedings Authority Duties of the Committee Disclosure Compliance with Legal and Regulatory Requirements Internal Control Ethics Remuneration

  29. Fund Governance: PF 130 in Practice for Trustees PF 130 par. 12 Any annexure(s) added to this circular should be regarded as providing guidelines for creating appropriate policies and as flexible documents which may be amended from time to time.

  30. Fund Governance: PF 130 in Practice for Trustees New demands on Trustees More work and more costs requires budgeting and planning for phased implementation

  31. Fund Governance: PF 130 in Practice for Trustees What should fund trustees be doing? Fit in or Fit out

  32. Fund Governance: PF 130 in Practice for Trustees “You cannot escape the responsibility of tomorrow by evading it today”. Abraham Lincoln

  33. Fund Governance: PF 130 in Practice for Trustees THANK YOU

  34. Fund Governance: PF 130 in Practice for Trustees

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