Is your Management Committee serving you appropriately?

Recent times has seen a significant shift of members from standalone funds to umbrella funds. It is imperative that members’ retirement benefits are protected at all times irrespective of the arrangement, therefore, the setup of a competent Management Committee (Manco) by an employer that looks after members’ interests is vital.

In the context of the South African retirement fund industry, a Manco is set up by employers participating in an umbrella retirement fund as opposed to a Board of Trustees as is the case of a standalone fund.

Although in an umbrella fund, there is still a Board of Trustees at the umbrella fund level, the Manco is appointed to take care of the employer’s own members’ interests; specifically, in terms of their own special rules (under the general rules) governing the operations of the umbrella fund.

The Manco is similar to a Board of Trustees in terms of their duties and responsibilities, although there are certain significant differences.

There is no shortage of argument on both sides for whether an umbrella or standalone fund is most beneficial for members, however, this largely depends on each employer and group of retirement fund members specifically – there is no blanket right or wrong answer!

The purpose of this article, however, is to discuss what the objectives of your Manco should be as an umbrella fund member and how they should be held accountable for the (or lack of) achievement of these objectives.

Although the Manco doesn’t necessarily have a responsibility to retirement fund members for which they can be held legally accountable, Manco representatives still do have the power to make various decisions that can materially negatively or positively affect outcomes for members. It is with this in mind, that members’ retirement and associated interests must always be considered in their entirety, responsibly and with utmost emphasis placed thereon.

“Ultimately, the objective of retirement funds should, above all else, be to provide members with a dignified retirement income, relative to their pre-retirement income.”

Simplistically, Manco representatives must:

Ensure that the selected umbrella fund is meeting the needs of members in respect of cost, investment performance and service delivery on an ongoing basis
Together with the umbrella fund Board of Trustees, the Manco must take all reasonable steps to ensure that the interests of all members are protected
Act with due care, diligence and in good faith
Act without any conflict of interest in respect of members and their beneficiaries
Take reasonable steps to ensure that contributions are paid timeously
Obtain expert advice where expertise is lacking especially considering the benefit design of their fund and the investment of their members fund values
Attend and prepare adequately for meetings in order for meaningful discussion to take place; and
Ensure that effective, relevant communication on matters of fund (and associated) benefits such as risk insurance is easily accessible to all members.

To ensure fair representation for stakeholders, the Manco typically consists of a 50/50 split between employer-appointed and member-elected representatives. It is imperative that as a member there is involvement in the nomination and election process of the member-elected representatives who will attend meetings in which decisions are made (even though some of these decisions still needed to be ratified by the umbrella fund Board of Trustees), speak, influence and act in the best interests of members.

Although members should always challenge any decisions or benefit structures and the costs thereof that they are dissatisfied with, it is the Manco’s responsibility (with the help of a professional, independent benefit consultant) to ensure that members are suitably well-informed to have the opportunity to do so.

As a member, being engaged with the election process is of utmost importance to give you the opportunity to take control of your own retirement and associated benefits and ultimately, make positive changes that are best for your long-term financial future as an individual.

ENDS