Not anyone can be a trusteeComment on this story
Cape Town - The fiduciary duty of trustees, strengthened by recent amendments to the Pension Funds Act, means it is not possible to appoint anyone as a trustee, the annual Institute of Retirement Funds Africa conference heard this week.
The Pension Funds Act was amended from February to require trustees to undergo training still to be prescribed by the Registrar of Pensions at the Financial Services Board (FSB).
The FSB is busy developing the required training, but Simphiwe Mdluli, the head of legal risk and compliance at Liberty Corporate, told the conference this week that although compulsory training for trustees was a good thing, it did not mean anyone from any walk of life could become a trustee.
It was no good training trustees who were incapable of accepting that training, of being able to oversee the role of service providers to a fund and of taking on personal liability for their decisions, Mdluli said.
Trustees who were not able to fulfil this role would be set up to fail, he said.
The responsibility of a trustee was a big one, as the trustees in the retirement funds industry controlled more than R2 trillion and a fund which was managing just 1 percent of those assets still had a huge responsibility, he said.
For this reason, although the law provides for 50 percent of a board of trustees of an employer-sponsored retirement fund should be elected by members, trustees cannot continue to be drawn from all walks of life.
Potential trustees must meet certain minimum requirements before they are eligible to be appointed.
Mdluli said trustees could appoint providers of services, such as asset managers, administrators or even legal advisers to assist them in running a fund, but the days of “hiding behind” these services providers were over.
Trustees needed to be capable of overseeing the services these providers performed, he said.
Some members did not know who the service providers to their retirement fund were.
It was difficult to think that such a member would be able to perform miracles once appointed to the board of trustees, he added.
All the legal requirements put in place to ensure that the board practices good governance would go to waste if trustees were not capable of functioning within them, Mdluli said.
The recent amendments to the Pension Funds Act made trustees responsible for reporting to the Registrar of Pension Funds any material matters that might prejudice the financial viability of fund and members, he said.
A trustee who did not understand what the provider was supposed to be doing and who did not understand the financial viability of a fund, could not fulfil this role, Mdluli said.
Trustees also had a common-law fiduciary duty to members and beneficiaries in respect of the accrued benefits, or the money accrued to provide the fund’s benefits, and to ensure the fund was responsibly managed and governed in accordance with the rules, Mdluli said.
Trustees need training to ensure they understand the rules of the fund, the governing and associated legislation governing their fund, have a basic understanding of financial statements, investments and actuarial principles.
Mdluli said a trustee could be held personally liable for the decisions of the board and should, therefore, understand the decisions taken by the board, or he or she could be set up for personal liability.
It was no defence in law for a trustee to say that it was not him or her who was responsible for an issue within a fund and to instead blame a provider the board appointed, he said.
Mdluli said trustees should therefore be able to act independently and should be able to prove that he or she voted against a resolution taken by the board that was in the trustee’s view not in the best interests of the members.
This trustee could then defend him or herself in court against that personal liability.
There was a tendency to think that plain language was a panacea to all, but a requirement that training be in plain language was not the answer to having just about everyone become a trustee, Mdluli said.
Potential trustees should meet certain minimum requirements to be able to receive training effectively, he added.
Mdluli said the board of trustees needed to comply with requirements set from time to time and to do this, the board needed to read. “Not everybody is able to read,” he said.
The day and time for trustee meetings to be “a tea party” were over. Trustees have a big responsibility, he said.
And if someone saved for 25 years and ended up with no savings as a result of poor management of the fund by the trustees, Mdluli said he would be happy to take them to jail himself.