More than a little trust needed
It’s hard to overstate the importance of 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.