IN SHORT: Trustees of a retirement fund are tasked with numerous complex responsibilities to manage, grow, and protect the fund’s capital, which can amount to billions of rands. To effectively fulfill these duties, they need the right financial institution by their side.
Retirement fund trustees fulfil various responsibilities to manage, grow and safeguard the fund’s capital.
The fund’s administration also falls within the ambit of these responsibilities. This ranges from collecting contributions and paying benefits to banking, analytics and reporting.
Various financial institutions offer these services to trustees. The onus is on the trustees to appoint one that meets the fund’s needs. This requires due diligence by the trustees whereby the possible candidates’ services and track records are scrutinised.
So, what should trustees look out for when bringing such an institution on board? Here are key considerations for finding the right partner.
- Do they offer transactional banking services? This refers to the banking needs of the pension fund. The financial institution must provide the infrastructure and services that support the day-to-day operations and transactions associated with the investments of a retirement fund. It should be able to do wire and EFT transfers between banks in different countries and currencies and produce real-time notifications of receipts.
- Do they offer custodian services? A custodian is a financial institution that safeguards assets ̶ it’s basically like a vault for your fund’s investments. A custodian also provides services such as collecting dividends or interest payments, informing the trustees about corporate actions (such as takeovers or share splitting), administering any voting at a company’s annual general meeting, and reclaiming dividend taxes for exempt investors.
- Do they offer various investment opportunities? One of the core responsibilities of the trustees is to grow the fund’s capital by investing it. By now you know that your retirement fund spreads its risk by investing in a variety of assets. Make sure the financial institution has various options to choose from, across different asset classes, such as money-market and equity funds, fixed-income securities (debt instruments) and funds that invest in Africa and further offshore.
- Do they offer monitoring, reporting and analytics? Your retirement fund’s investment decision making is structured around a specific mandate that is executed by an investment manager. Trustees must be able to measure how their investment portfolio is performing and whether the investment choices adhere to their mandate. Environmental, social and governance (ESG) reporting is becoming increasingly important. Does the financial institution offer a platform that analyses and presents ESG performance? The institution should also be able to provide holistic monitoring and reporting of the fund against legislation such as the Pension Funds Act to ensure compliance.
- Do they offer employee solutions? Many administrative institutions also seek to tailor their offerings to meet the fund’s specific needs. This may include tailored solutions offered to staff members, addressing aspects of personal finance. An example of this is the functionality to make changes to their underlying investment portfolio by implementing switches between funds.
- Do they have a proven track record? The institution must have a demonstrable track record, proving its ability to provide a quality and sound service. This can be evidenced by the years of experience, technological advancement, service levels, size and number of funds historically serviced, and the range of quality investment options provided.
Further reading
Sources
FANews: Banks to play bigger role in pension administration as demand for independent reporting and lower costs increases; Jazzing up retirement administration systems
Global Trade Review: RMB creates treasury and trade solutions arm
Moneyweb: Regulation 28 of the Pension Funds Act: Your questions answered; The rise of ESG investing
Reuters: Global pension funds eye currencies for additional returns