The FIMA (Act 2 of 2021) was promulgated in Government Gazette no. 7645 on 1 October 2021. The Minister of Finance has not yet set a date for it to become effective. It has hibernated ever since, but following last year’s elections, we will see action on it again in 2025, once the new Minister of Finance has found her feet. NAMFISA, however, has not been idle, spending a lot of time revising and issuing FIMA standards and regulations. In the next few issues of this newsletter, we will present the latest status on the standards and regulations and provide a brief overview.

 
This summarises the main provisions of draft standards and regulations under the FIM Act and implications for retirement funds.

Standards Chapter 5: Retirement Funds

RF.S.5.10 The conditions on which a defined contribution fund may be exempted from the requirement of regular investigations by a valuator

The statement applies to defined contribution funds who want to apply for exemption from regular investigations by a valuator.

Summary:

·         The standard sets out the requirements for exemption from actuarial valuations for defined contribution funds:

o    the total assets of the fund must be equal to or exceed the total of the members’ individual accounts, the expense reserve, and any undistributed investment returns for the three preceding years;

o    retirement benefits must be fully secured by an insurance policy;

o    any benefit other than the member’s individual account must be fully secured by an insurance policy;

o    no reserves other than an expense reserve may be maintained, and any excess assets are required to be fully distributed annually to the members.

·         An application for exemption must be made to NAMFISA and must be accompanied by certain documents.

What to do:

·         If a fund wants to be valuation exempt, its rules must mirror the above requirements for valuation exemption.

RF.S.5.13 Requirements of a communication strategy

This Standard applies to –

(a)          all funds;

(b)          retirement income providers that have contracts in force relating to the payment of retirement income in respect of retirement benefits arising out of transfers of money or investments from funds upon the retirement of members or inactive members;

(c)          members of the board of funds; and

(d)          service providers to funds and retirement income providers to the extent that their responsibilities involve communications with:

(i)            boards and principal officers of, or other service providers to, funds;

(ii)         retirement income providers; and

(iii)       active, inactive, and retired members having funds held or invested by funds or retirement income providers.

Summary:

·         The standard outlines the requirements for a communication strategy to be adopted by the board of a retirement fund.

·         It emphasises the need for clear, simple, and non-technical communication language.

·         The communication strategy must cover various types of communications, including those with members, employers, sponsors, and regulatory authorities.

·         The communication strategy should ensure regular, detailed information flow regarding benefits and contributions, fund performance, and legislative changes and must include measures to minimise untraceable members.

·         It also mandates secure electronic access to information for members and regular assessments of the communication function.

·         Additionally, the communication strategy must ensure that promotional materials are factual and that members are fully informed about their rights and any applicable charges or penalties.

What to do:

·         Funds and fund service providers will need to review their communication strategy with parties to the fund to ensure that the strategy meets the guidelines in the standard.

·         Funds and fund service providers who do not yet have a communication strategy concerning their dealings with parties to the fund need to prepare a communication strategy.

RF.S.5.15 Requirements for the annual report of a fund to NAMFISA

This Standard applies to -

(a)      funds;

(b)        members of the boards of trustees of funds;

(c)        principal officers of funds and

(d)        service providers for funds to the extent that their responsibilities require them to support principal officers and boards of funds regarding matters disclosed in the fund's annual report to NAMFISA and in the preparation of the report.

Summary:

·         The standard defines the requirements for the annual report of a retirement fund to NAMFISA.

·         It specifies that the board of the fund must prepare the annual report within six months after the end of the fund’s financial year.

·         The annual report must include, as a minimum, in so far as not already included in the annual financial statement of the fund, summaries of board activities, legal actions to which the fund was a party, amendments to fund rules, fund policies that are in force and changes to those policies, key financial data and changes in the fund’s membership.

·         The report must also detail the fund's administrative activities, special events, key risks, and mitigating actions and contain a list of all service level agreements with details of their review periods.

·         For defined contribution funds, the report should also disclose the investment policy, including investment options available to members and annual rates of return on the fund’s investments.

·         For defined benefit funds, the report must also include annual rates of return for the most recent five years, the results of the most recent financial soundness investigation, and any developments affecting the fund's solvency.

What to do:

·         The requirements of this standard must be included in the fund’s communication strategy.

·         Trustees should identify the information required to comply with this standard other than the information already included in the annual financial statements.

·         The service level agreements with relevant service providers must be revised to reflect the responsibilities of the service providers concerning this standard, including the information required from service providers, together with turnaround times to support the standard's requirements.