1. SPELLING OUT A STRATEGY FOR OBSERVING GOOD GOVERNANCE IN MANAGING RETIREMENT FUNDS
Kobus Hanekom
August 2013

2. 6 principles the UK experience the UK experience
designed to deliver good outcomes
governance framework
fit and proper management
effective monitoring
administration, processes and records
member communication
The UK Government recently introduced auto enrolment which makes it compulsory for employers to provide pension provision for their employees. In an attempt to guide employers to identify a good retirement fund they laid down six principles, Here they are.
What I find interesting is the angle that the UK authorities are taking. I like to go through them one by one, reflect on the position in South Africa and see if we can learn something from them

3. designed to deliver good outcomes
Simeka approach
the UK experience
schemes are designed to be durable, fair and deliver good outcomes for members
targeted benefits
horsepower
Consumption
default strategies
contribution rate
preservation
investment portfolio
annuitisation
General industry: In our legislation we use terms such as permanent, bona fide, fiduciary duties – and they probably amount to much the same thing. What we do not have is a focus on benefit outcomes (investment returns yes) and we do not have a generally accepted measure with which to do comparisons.
We ensure good outcomes with the following strategies.
Targeted benefit strategies – Every retirement fund should have a vision and a mission relating to the level of retirement benefits it aims to provide for its members. This is typically expressed as a net replacement ratio (NRR) or a percentage of final salary. An NRR capacity report will tell trustees what their current benefit structure is capable of producing over a period of 35 years based on the fund defaults. It determines the horsepower of the benefit structure. It also determines its fuel consumption or the cost of running it so that you can compare it with efficient funds.
Default strategies designed to take advantage of what we have learned from behavioural finance
The four most important default strategies are contribution flexibility, investment choice, preservation and annuitisation.

4. Simeka approach
the UK experience
governance framework
a comprehensive scheme governance framework is established at set-up, with clear accountabilities and responsibilities agreed and made transparent
fund governance and risk management plan (FGRMP)
duties and accountabilities
when and by whom

5. fit and proper management
Simeka approach
the UK experience
those who are accountable for scheme decisions activity understand their duties and are fit and proper to carry them out
enhanced PF130 documentation
minimum training done
FGRMP actively managed by principal officer (PO)
enhanced PO duties

6. Simeka approach the UK experience effective monitoring
schemes benefit from effective governance and monitoring through their full lifecycle
governance assurance
FGRMP
risk schedule
assessments of all officers, subcommittees and service providers
King III, CRISA, TCF
assessment of complaints and general fund activities

7. administration, processes and records
Simeka approach
administration, processes and records
the UK experience
schemes are well administered with timely, accurate and comprehensive processes and records
comply with SLA
fees competitive

8. Simeka approach
the UK experience
member communication
communication to members is designed and delivered to encourage member engagement so that they are able to make informed decisions about their retirement savings.
Information
Guidance and support
member information sessions and tools
Advice
financial advice to members on joining, termination and 5- 7 years before retirement
facilitated / offered by fund

9. Good governance is about process and structure …
Should we not be more prescriptive about
The outcomes we require from funds,
How these are monitored and managed, and
By whom?
A set of standard templates could also be developed by the Financial Services Board (FSB) to assist funds in understanding and applying best practice.

10. Thank You