We believe that the employer has and should have a keen interest in its retirement fund for various important reasons. Let’s just sketch a scenario where the employer is not represented and the trustees decide to remove all risk benefits, to only provide for retirement. Conversely, consider a scenario where retirement funding is depleted continuously as the result of ongoing increases in costs for risk benefits and/or fund management.

How would the employer view the situation where something happens to
one of the long serving employees and the fund offers no support to the member and/or his dependants, because risk benefits were removed? Or the employee reaches normal retirement age after 40 years’ service and the available retirement capital produces such an inferior pension that the pensioner is left destitute?  

Employers normally offer a remuneration package, including membership of its retirement fund. This package and all its components, has to be market related and competitive, to offer the employer an effective means of attracting and retaining scarce skills in a competitive labour market. A package without retirement provision is unlikely to be attractive for most prospective employees. Irresponsible or short sighted management of the fund poses a serious reputational risk for the employer that it will not be able to circumvent by not being represented on the board of trustees. Typically, the employees are likely to take a short-term perspective in managing the fund, while the employer has long-term objectives.

We are not aware of any employer sponsored fund that does not have employer representation on the board of trustees here in Namibia. Funds that tend to be managed without employer participation are union sponsored industry funds. As administrators, we have a distinct preference for funds where the employer is actively involved on the board of trustees and tend to stay clear of funds where this is not the case, as this has serious repercussions for the administrative efficiency.

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.