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Trustees need to understand that conflicts of interest exist in circumstances where the interest of the trustee will place them in conflict with the interest of the fund. Such conflicts must be identified, declared and avoided by the trustee in order to fulfil their duties as set out in Section 7C of the Pension Funds Act.

Retirement fund trustees must be able to identify, declare and avoid conflicts of interest that arise from their role as fund trustees. The requirements and guidance to manage such conflicts are provided for by Financial Sector Conduct Authority (FSCA) PF Circular no.130 (PF 130) and the King IV Report on Corporate Governance for South Africa (King IV). Central to all of these is the duty placed on trustees under Section 7C of PF 130 to “avoid conflicts of interest”.

Identifying Conflicts

A trustee should gain a clear understanding of what constitutes a conflict of interest. As this is not an exact science, conflicts of interest in the retirement fund context can be understood as follows:

  • Conflicts typically arise in circumstances where the interests of the trustee will likely prevent them from acting in the best interests of the fund.
  • These circumstances, if not declared and avoided, are likely to create ethical and moral dilemmas that will be to the detriment of the fund.
  • Conflicts of interest can exist in circumstances effecting the trustee as well as persons related to the trustee.

Examples of where conflicts of interest could exist include:

  • A trustee earns undeclared income or benefits at the expense of the fund.
  • The wife/husband or close relative of a trustee has a contract for providing commercial services to the fund.
  • A trustee accepts gifts or benefits personally from the hospitality provided by service providers to the fund i.e. tickets to sporting events, business class flights etc.
  • Once understood, a trustee should interrogate the personal and related persons’ circumstances to identify potential conflicts of interest on a regular basis, and to declare such conflicts.

Declaring conflicts

Conflicts should be declared as soon as the trustee becomes aware of a conflict of interest. If a trustee is uncertain whether a circumstance constitutes a conflict of interest, the “Be safe, rather than sorry” approach should be used and the trustee should declare the potential conflict of interest.

Legally, and as part of good governance, conflicts should be declared by the trustee to the fund in writing and addressed to the chairperson of the fund. The trustee should explain in writing the nature, reasons and likely impact of the conflict.

A schedule of conflicts, per trustee, should be maintained by the fund and regularly updated and distributed to the board of trustees. Where necessary, it could also help to discuss identified circumstances of potential conflict with the fund’s legal counsel.

In instances where conflicts are not declared by a trustee, it opens up the trustee to legal risks, and the trustee could face being removed from their position, or face litigation in court.

It is also important that, in addition to the disclosure of actual conflicts of interests by trustees, perceived conflicts of interest might also exist. A perceived conflict of interest occurs where legally no conflict may in fact exist, however, the fund’s stakeholders, such as members or beneficiaries of the fund, may perceive that a conflict exists. As such, perceived conflicts could be to the detriment of the trustee and/or the fund’s reputation and should therefore be dealt with by the trustee and/or fund.

Avoiding conflicts

To avoid and/or manage a conflict of interest, a trustee can follow different approaches. The best approach will depend on the nature of the conflict. The following are examples of such approaches:

  • A trustee should excuse themselves from the fund discussions and decision-making processes pertaining to the conflict of interest that the trustee had declared to the fund.
  • A trustee can remove the conflict through exiting the circumstances which introduce the conflict (e.g. relationship and/or contract) that gives rise to the conflict.
  • Where necessary, a trustee should resign from their role – either as a trustee or the other role creating the conflict – where the conflict of interest cannot be appropriately managed or avoided.



What experts say: “Anyone who has anything to do with the management or administration of a pension fund will be aware of the duties imposed on the board of the fund by Section 7C of the Pension Funds Act…they will be aware of the duty which this section imposes to ‘avoid conflicts of interest.”

– TT June – August 2014



  1. Pension Funds Act:
  2. FSCA Circular PF 130:
  3. King IV:
  4. Mahoney, Practical Governance: Retirement Funds, p.181



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