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In this newsletter: Benchtest 01.2011, benefits for institutionalised fund members, pension and provident fund benefit statements... |
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Dear reader In this newsletter, we provide the Benchtest monthly performance survey for January 2011, a real life scenario setting out due care and diligence expected of trustees with regard to dependants where the member is incapable to care for them, insured benefits underwriting practice, good advice for pensioners and those contemplating retirement and more. Please feel free to comment: tell us what you value and how we can improve the content. Regards Tilman Friedrich Tilman Friedrich's Industry Forum BENCHTEST MONTHLY 01.2011 In January the average prudential balanced portfolio returned 0.57% (December 2.62%). Top performer is Allan Gray (2.29%), while Metropolitan (minus 0.62%) takes bottom spot. In very broad terms, Allan Gray had around 8% lower exposure to onshore equities and a 4% lower exposure to onshore bonds, with a compensating 11% higher exposure to offshore assets, relative to the average manager. Purely the weakening of the Rand in the course of January 2011 should have lifted Allan Gray’s performance relative to the average prudential balanced portfolio by around 1.1%. Global equity markets are still fairly valued, but are likely to produce pedestrian growth for the next 12 months and longer. While some global interest rates have already been raised they will remain at low levels for a while, to start picking up once consumer demand picks up meaningfully. This may though be retarded by political events in the Middle East, while high oil prices will accelerate inflation if the crisis persists for longer. For further analyses and our views, click here...
HOW SHOULD YOU DISPOSE OF BENEFITS WHEN THE FUND MEMBER IS INSTITUTIONALISED In this scenario a member of the fund was accepted for a disability income benefit on the grounds of a serious mental disorder by the fund’s insurer. The member was subsequently institutionalised without the fund having been aware. The disability benefit was suspended by the insurer after the member’s bank account was closed and no futher communication received from the member. Upon investigation and a visit to the member’s family, the fund became aware of the true situation and of the the fact that the member’s dependants were left desitute without any support from the member or the fund. Section 37 A of the Pension Funds Act directs that any benefit must be paid to the member and may not be reduced, transferred or otherwise ceded, pledged or hypothecated or be liable to be attached or subjected to any form of execution. Section 37 D further prohibits any deduction being made from a member’s benefit. In this scenario the benefit was the disbility income that had accumulated by the member since he was institutionalised. Since the member’s bank account was closed and due to his mental incapacity, he is not able to open another bank account. In order to assist the dependants of the member, the fund then contemplated to have a curator appointed by the court, to take care of the member and his dependants. The question arose whether the fund can make an advance payment to pay for legal costs to have a curator appointed and whether such a payment can be recovered from benefits due to be paid to the member. A study of the fund’s rules established that the “Powers and duties of the board of trustees” are defined as follows: “(a) to invest, lend, put out at interest, place on deposit, make advances of, or otherwise deal with all moneys of the fund upon such securities and in such manner as they may determine from time to time…” “(b) in general, to take such steps as shall, in its opinion, be in the interests of the fund;……. The powers, duties and authorities of the trustees set out in these rules shall in no way limit or usurp the generally accepted responsibilities of trustees.” Rule (a) thus provides for the fund advancing the costs, or otherwise deal with the moneys, the latter avenue being very vague and potentially risky. However, to ‘advance’ costs would imply a later recovery of the amount advanced from a person. In this case there is really only the member or his beneficiaries from whom such advance could be recovered. Section 37D of the Pension Funds Act deals with the reduction of benefits due to a member. This section is very specific and does not provide the means to recover such an advance payment from the member’s benefit. Once a curator has been appointed, it is within the curator’s powers though, to refund such an advance. The fund would however have no means to enforce such refund and would have to rely on the goodwill of the curator. Rule (b) provides fairly wide powers to the trustees, if the exercise of such power is congruent with their ‘generally accepted responsibilities’. The trustees in our view, have a responsibility to ascertain that the needs of members’ and their dependants are cared for. If a member is unable to take care of his own and/or his dependants’ needs, no fault can in our opinion be found with the trustees taking steps to re-institute care for members and dependants under such circumstances. This would imply the fund incurring the costs and that such costs cannot be recovered from the beneficiaries. The trustees would thus act within their powers if they resolved to carry the costs of having a curator appointed for this member, particularly in view of the fact that no one else assumed responsibility to take care of the member and his dependants, and in view of the fact that a benefit can only be paid to the member or his curator. The trustees may consider requesting the curator, once appointed, to refund these costs, although this would be totally within the curator’s discretion, taking into account the needs and interests of the dependants. Where trustees exercise their discretion as envisaged the rules would normally require the trustees to take a formal written resolution to this extent which must be signed by a quorum of trustees to be as valid as a decision taken at a properly constituted meeting. RETIREMENT FUNDS INSTITUTE OF NAMIBIA The RFIN January 2011 newsletter introduces its new CEO, comments on upcoming events and on what South Africans are doing wrong with their retirement savings. FROM THE MARKETPLACE Orbis Takes Steps on Performance Investors in Orbis global investment funds are likely to be frustrated with the returns generated by Orbis in the more recent past. It seems Orbis has realized that it needs to take serious steps to improve its performance. In this interview, as reported in Moneyweb, William Gray explains how Orbis will ‘up its game’ in Asia in order to address investors’ frustrations. INTERESTING MEDIA SNIPPETS Redefining retirement Are you still thinking of actually going on retirement when you reach retirement age? Internationally, wealthy workers are redefining retirement, as reported recently on a South African financial site. The Real Threat to Your Pension Most retirees nowadays prefer the living annuity where the pensioner can choose the level of his/her pension and adjust this from time to time. But how should you set the level of your pension? Clearly you want to live with dignity and want the pension level to support your life style. But is this sustainable? Read this article which was first published in Personal Finance magazine, a publication of Independent Newspapers. Copyright remains that of Personal Finance and Independent Newspapers. Big shake-up looms for SA pensions industry The South African National Treasury released a document recently spelling out its vision of the future of the pensions industry as reported in Fin24. Can Namibia draw any guidance for our own policy development for our pensions industry?
Charlotte Drayer's Admin Forum PENSION AND PROVIDENT FUND BENEFIT STATEMENTS Funds provide their members at least annually with benefit statements giving information in respect of:
It is important for the member to check that the static data is correct. Benefits depend on the correct static data and it is imperative that any errors are reported to the relevant human resource department in order to be corrected immediately. It is advisable to compare the member contributions shown on the benefit statement to those deducted according to the monthly pay-slip provided by the employer each year. Based on the contribution information and information provided on returns, it should be possible to do an approximate cross check of the fund credit. Any discrepancies should be taken up immediately with the relevant human resource department. If a benefit is only queried upon eventual payment, the onus is on the member to provide detailed information why the benefit is queried and this is difficult if a long period of time is involved. The benefit statement gives information about the benefits that the member can expect so that the member can plan for retirement, possible disability and, in the event of death, that the member’s family is adequately looked after.
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Tilman Friedrich is a qualified chartered accountant and a Namibian Certified Financial Planner™ practitioner, specialising in the pensions field. He is a member of the marketing committee of ICAN and a member of the legal and technical committee of RFIN. Tilman is co-founder, shareholder and managing director of Retirement Fund Solutions.
Charlotte Drayer holds the Higher Certificate in Retirement Fund Administration, conferred by the Insurance Institute of Southern Africa. She was one of the pioneers of the pension fund industry in Namibia, and is widely regarded as the most experienced and competent fund administrator in the country. She was the first member of staff on the Retirement Fund Solutions team and is now a shareholder and board member.