Balancing rewards and responsibilities for retirement fund trustees

Retirement fund trustees in South Africa carry the enormous responsibility of being the guardians of members' futures. They can be held accountable if things go wrong and most receive little or no reward and are insufficiently equipped for this onerous task.

Trustee arrangements allow retirement funds to be looked after by people required by law to take account of the interests of the retirement fund members or beneficiaries. Trustees are tasked with ensuring contributions are timeously collected, benefits paid and assets invested. And where the trustees may lack certain expertise, the onus is on them to obtain the necessary advice.

The Pension Funds Act does not specify criteria for eligibility to be a trustee, nor does it confine board membership to fund members. The determining factor is the funds rules, subject to the Pension Funds Act stipulation that every funds board must consist of at least four trustees, at least half of whom have been elected by the members.

Pension fund legislation is increasingly complex and trustee boards face penalties if their decision making is poor.

Recent determinations by the Pension Funds Adjudicator make it clear that trustees will be held liable in their personal capacity if it is proven they acted improperly. The recently released Financial Services Board circular PF130 requires trustees to develop and maintain a working knowledge of risk management, investment strategy, benefit structures, as well as legal, actuarial, regulatory and compliance issues.

Unsurprisingly, many retirement fund trustees -- most of whom are part-time and receive no remuneration -- are having second thoughts about selflessly serving their community. Despite being able to call in experts when necessary, it is the trustees who remain responsible for all decisions.

Although trustees are indemnified by the fund, which typically has fidelity and professional insurance cover, they are not covered if deemed to have been grossly or wilfully negligent in fulfilling their duties.

Trustees must have a full understanding of their powers and duties and of their increasingly arduous fiduciary and statutory obligations. And this can only be achieved by the funds introducing formal training and induction policies.

Less than 18% of funds in SA have formal training policies and the average trustee receives 15.5 hours of "training" a year. Clearly, not enough is being done to balance the increasing risks associated with trusteeship against the potential rewards, which are currently few.