More than a lit­tle trust needed

It’s hard to over­state the im­por­tance of trustees

Finweek English Edition - - Focus on retirement fund trustees -

WHO WOULD WANT to be a re­tire­ment fund trustee? It’s a dif­fi­cult, in­creas­ingly re­spon­si­ble and of­ten thank­less task, largely per­formed by peo­ple who have full-time jobs and there­fore not that much spare time.

And mem­ber-elected and com­pa­nyap­pointed trustees aren’t even paid for their ser­vices.

Yet it’s hard to over­state the im­por­tance of trustees. They look af­ter bil­lions of rand of re­tire­ment fund money, for many mem­bers prob­a­bly the only source of in­come they will have on reach­ing re­tire­ment. Th­ese funds have to be care­fully nur­tured and grown by trustees, through mak­ing con­sid­ered de­ci­sions on, for in­stance, who should ad­min­is­ter the fund and who should look af­ter the as­sets.

But as with any im­por­tant role, there are al­ways go­ing to be po­ten­tial prob­lems and con­flicts. One, voiced by Na­tional Trea­sury in its pa­per on Re­tire­ment Fund Re­form, is the ap­par­ent “pals for trustees” syn­drome. Al­low­ing 50% of trustees to be elected by fund mem­bers and 50% to be ap­pointed by the com­pany was a step down the road to more democ­racy in run­ning re­tire­ment funds.

But, Trea­sury notes: “ . . . many trustees fail to ap­pre­ci­ate that they owe their pri­mary (fidu­ciary) duty to the fund as a whole and not to the “con­stituency” (em­ployer, in-ser­vice mem­bers, union or pen­sion­ers) who ap­pointed or elected them.”

This is go­ing to have to be over­come, as is the still preva­lent un­of­fi­cial hi­er­ar­chy that tends to form on some boards, for ex­am­ple when a ju­nior com­pany mem­ber may have to de­bate fund is­sues with his or her boss.

Trustees need to learn that ev­ery­one is equal on the board and has the same in­put into run­ning the fund. And draft leg­is­la­tion in place now could make them jointly li­able as well should things go wrong.

Sev­eral more is­sues are touched on in the fol­low­ing pages – the messy sur­plus ap­por­tion­ment leg­is­la­tion, the dire need for trustee train­ing, where fi­nan­cial mar­kets might be go­ing (the odds aren’t good), new dan­gers with re­tire­ment an­nu­ities and the need for pro­fes­sional, in­de­pen­dent trustees.

It’s a hard job but some­body has to do it. Hats off to those trustees who do it so well.

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