Beneficiary Funds & Trustees Duties - Principal Officers Association

Title- Now more than ever -Beneficiary Funds&Trustees Duties

TitleBCom University of the Witwatersrand Certified Financial Planning (CFP)Advanced Diploma in Financial Planning (University of the Orange Free State)Chairperson of the Financial Planning Institute’s Employee Benefits CommitteeMember of the FIA EXCOSits on the editorial board of the “Financial Planner”Jennifer is the MD of the Retirement Fund Division and has a wealth of employee benefitexperience and serves on several of the Industry Boards where she is able to give inputto the various authorities regarding policy issues.

What went wrong iro the Living Hands debacle?• Gaps inlegislation• Governed bythe Master ofthe High Courtiro TrustPropertyControl Act• No regulatorybody• Littlesupervision

More protection for BeneficiariesNew Beneficiary Funds wef 1 January 2009 –governed by PFA:• Taxation?• S13B licenseforadministrators• Rulesapproved byFSB

More protection for BeneficiariesNew Beneficiary Funds (Cont’d)• Access to the Adjudicator• Trustees need to comply withPF 130• Investments need to complywith Regulation 28• Submit Annual FinancialStatements to FSB

Living Hands losses would at the very least bemitigated had they been regulated via the PFA• Regulation 28: 5-10%investment in theemployer• Annually audited financialstatements• PF 130• Principal Officer andAuditors ‘whistle blowingpowers’

What is a Trustees role iro Beneficiary Funds?• Discharging their duty in terms of S37 C• Selecting and reviewing beneficiary funds

When are monies paid into a Beneficiary Fund?S37 C:Identify and trace dependantsEquitably distributeDecide on appropriate manner ofpayment

When do we pay monies into a Beneficiary Fund?1. Pay directly to the beneficiary• Unless the beneficiary can’t manage theirown affairs2. Common law practice to pay to legalguardian• Unless guardian isn’t capable of managingthe benefit

When do we pay monies into a Beneficiary Fund?Factors to consider:• Amount of benefit• Guardian’s financial literacy• Ability of the guardian toadminister the monies• Maintenance needs of thechild

When do we pay monies into a Beneficiary Fund?• No legally appointedguardian• Care giver• has a fiduciary dutytoward the beneficiary• No legal duty• Care giver maychange

Trustees duties - selecting a Beneficiary Fund• Trustees have afiduciary duty: act withdue care & diligence:− Those entrusted mustprudently managemonies− Ensure beneficiary hasongoing financialsupport

Trustees duties - selecting a Beneficiary Fund• PF 130 requires service provider policies• Policy to set out:− Governance− Operationalrequirements• Initial & ongoing reviews

Service provider policy – governance issuesGovernance issues• Details of the Trustees – independent trustees /sponsor• Ben FundTrustees- Code ofConduct• Conflictsof interest• PI insurance

Service provider policy – governance issuesGovernance issues (Cont’d)• Governance policies iroSP’s / independence?• Investment policystatement• Rebates or fees earnedby fund’s SP’s• Financial statements

Service Provider Policy – operational issuesOperational Issues• Fees• Standard and delivery on service levelagreements• Turn around times:− Responding to beneficiary’s queries− Paying out income / capital to beneficiaries• Facilities to liaise with beneficiaries:− Country wide offices?

Review• Trustees toinvestigatesoundness /appropriatenessof beneficiaryfund:− Inception− Periodic review

In a nut shell• Beneficiary fundsprovide more protection•Trustees duty− Decision as to paymentmethod− To ensure appropriatebeneficiary fundselected & continue tobe most appropriate toprotect beneficiariesinterests

Any Questions?