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Before this question can be answered, the trustees need to take a step back and consider a few basic premises.

The first question to be answered is whether the fund focuses on the individual or on the group. The answer to this question has particular relevance to the following fund features:

  • Market linked daily interest versus regular bonus allocation;
  • Widest investment portfolio choice versus standard fund portfolios;
  • Flexible benefit choice versus standard annual category choice;
  • Frequent salary changes versus annual increases;

To find an answer, one needs to understand what is important to the members, and what is important to the trustees, who carry the ultimate responsibility for the choices offered and the folly of the members?

Members’ needs

Members’ needs will differ depending on the arrangement offered by the fund. If the fund focuses on individual choice and flexibility, members’ need will require -

  • technology driven fund administration,
  • online, in time access to the system,
  • online transacting and switching capability.

If the fund focuses on group interests, members needs will require -

  • process driven fund administration,
  • timely communication,
  • timely processing of benefit payments,
  • reliability and accuracy of data,
  • and the fund must be kept abreast of developments.

Trustees' needs

Trustees’ needs were identified in a survey carried out in Namibia a few years ago, where the following factors received highest ratings:

Characteristics of a prominent financial institution -

  • Efficient, quick service;
  • Personal service with visits to client offices;
  • Stability of the institution.

Characteristics of successful service -

  • Regular reviews and feedback;
  • Constant communication.

Fund management now needs to define its objectives, with regard to -

  • a preference for individual member choice;
  • a preference for the group interests.

Where a fund prefers to focus on group interests, trustees need to ascertain that their fund administrator has the proven capabilities to excel on the following key deliverables:

  • Turnaround times
  • Data integrity
  • Communication
  • Active fund management
  • Information needs
    - Timely information
    - Comprehensive information
    - Reliable and accurate information

The alternative of focusing on the individual requires the following capabilities of the fund administrator:

  • high levels of technological sophistication,
  • greatest flexibility and
  • widest possible choice.

High levels of sophistication and flexibility clearly imply high costs. As pointed out above, the trustees, the fund and ultimately the employer will carry the risk attaching to choice, flexibility and sophistication.

Typically one can expect the management costs for the ultimate level of choice and sophistication to be a multiple of those applicable to a group focused arrangement. If one were to take it to these levels, the question begs to be asked whether members should not rather make their own private arrangements thereby removing the risk from the trustees, the fund and ultimately the employer and paying for what is demanded.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.

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