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Is your management committee serving you appropriately?

This is what the committee’s objectives should be and how they should be held accountable.

In the context of the South African retirement fund industry, referring to the term ‘management committee’ (Manco), focuses on the committee responsible for an employer’s participation in an umbrella retirement fund.

Although there’s still a board of trustees at the umbrella fund level, the Manco is appointed to take care of the employer’s own members’ interests.

Much like the debate between passively- and actively-managed funds, there is no shortage of argument on both sides for whether an umbrella or standalone fund is most beneficial for members. The purpose of this article, however, is not for me to offer my opinion on either side of the umbrella vs standalone fund debate.

Rather, the purpose is to discuss what the objectives of your Manco representatives should be and how they should be held accountable for the (lack of) achievement of these objectives – if that’s the case.

Although the Manco doesn’t necessarily have a responsibility to retirement fund members for which they can be held legally accountable, some umbrella funds include the duties of Manco representatives in their SLA [service level agreement].

Manco representatives do have the power to make various decisions (in terms of the employer’s participation in the umbrella fund), that can materially negatively or positively affect outcomes for members. It is with this in mind, that members’ retirement and associated interests must always be considered in their entirety, responsibly and with utmost emphasis placed thereon.

In my recent article summarising the King IV principles as they relate to the retirement fund industry, I explained my belief that:

“Ultimately, the objective of retirement funds should, above all else, be to provide its members with a dignified retirement income, relative to their pre-retirement income. So, while governance is important from the perspective of protecting member interests, any governance guidelines introduced, should not in any way, lead to a reduction of potential annuity income during retirement.”

King IV tends to refer specifically to ‘board of trustees’ and whether King IV is actually intended to extend its governance principles outlined for boards of trustees to Mancos, is not absolutely clear to me. However, I still believe that my sentiment above should hold true in assessing the responsibilities of Manco representatives.

King IV aside, simplistically, I believe that Manco representatives must:

  • Take all reasonable steps to ensure that the interests of all members are protected, together with the umbrella fund board of trustees;
  • Act with due care, diligence and in good faith;
  • Act without any conflict of interest in respect of members and their beneficiaries;
  • Take reasonable steps to ensure that contributions are paid timeously;
  • Obtain expert advice where expertise is lacking (in some instances, obtaining independent advice may be warranted. After all, when last did you question the consulting advice of your appointed provider?). Particularly where the Manco takes the decision to opt out of the fund’s default investment portfolio, the Manco should always be able to demonstrate that it regularly assesses the investment decisions and the appropriateness thereof being in the best interests of members;
  • Attend and prepare adequately for meetings in order for meaningful discussion to take place; and
  • Ensure that effective, relevant communication on matters of fund (and associated) benefits such as risk insurance is easily accessible to all members. Furthermore, there must be controls in place to ensure that members are actually receiving and engaging with the communication.

Although there is no legal requirement for the makeup of the Manco, it is generally regarded as best practice that there be equal representation between employer-appointed and member-elected representatives.

It is imperative that, as a member in an umbrella fund, you participate in the nomination and election process of the member-elected representatives who will attend meetings in which decisions are made which influence your retirement outcome.

Although all members of an umbrella fund always have the right to challenge and question how their umbrella fund works, it is the Manco’s responsibility (perhaps with the help of an effective independent benefit consultant) to ensure that members are suitably well-informed.

I reiterate – as a member of an umbrella fund, you should be engaged with the election process as it gives you the opportunity to take control of your own retirement and any associated benefits.


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