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The role of a Trustee

20 Sep 2016

Listen to the Kaya FM interview on The role of a Trustee here

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The benefits that an employer offers their employees vary from business to business, with degrees of complexity. One of these benefits an employer may offer can include a retirement fund. These retirement funds are intended to assist employees save money for their retirement.  This money is invested and managed by an investment manager for a period of time and, ultimately, an employee receives money to retire comfortably - if they've saved enough. In this process, one of the most important stakeholders to emerge is called a trustee.

What is a trustee?

According to the Financial Services Board (FSB), a trustee can be defined as "A member of at least four individuals that holds or manages and invests assets for the benefit of retirement fund members." In essence, a trustee is a person who looks after an employee's retirement money and looks after their financial interests. This group of people ensures that the monies entrusted to a retirement fund are well looked after and that their interests are always considered. As Liberty Corporate's Head of Umbrella Fund Solutions*, Arno Loots wryly notes "Trustees look after your money. Their main aim is to look after the end member – the people saving for retirement."

The role of a trustee can be broken down into these functions:

  1. Manage retirement funds and compliance with the requirements that apply to these funds.
  2. Acting in the best interest of the members of a fund at all times.
  3. Make sure that members are aware of the roles of trustees.
  4. Behave in a responsible and prudent manner that benefits the member of a fund, not for personal gain.
  5. Governance and stakeholder relationships. Making sure that the fund is managed in a transparent and fair manner.
  6. Research, explore and execute different investment strategies and policies that will bring in the best returns for members of a fund.

As the FSB definition indicates, a trustee is a member of a minimum of four individuals. This grouping of at least four or more individuals is referred to as a board of trustees and together they manage the retirement fund. A  Principal officer, will act as the main liaison amongst the stakeholders of a fund and has certain executive powers within the board.

Who can be a trustee?

There is no formal qualifications needed to be a trustee, however the skills and strong competencies in accounting, actuarial, investment and legal are needed for a board of trustees to operate optimally. The rules of a fund can also disqualify a person for having a criminal record or a history of misusing funds, committing fraud or theft. The highest standards of probity and judgement are crucial to being a good trustee. A good knowledge of the following is beneficial too:

  • The Pension funds act
  • Income tax act

Some funds allow the fund members to elect some of the trustees, where the rest are appointed by the board. However, for umbrella funds (where members from different employers pool their money to be administered by a single fund), it is usually left to the solutions provider, e.g. Liberty Corporate Umbrella Fund solutions, to appoint professional, experienced trustees. 

How to get in touch with a trustee?

Companies also appoint representatives who act as a link between an employer and their trustees. The HR department usually has this information and should be an employee's first port of call with any queries regarding their fund. Employees can also visit their fund's website and view their trustees online. If an employee is unhappy with their trustees, they can raise it with their company representative or fund adviser (whose details should be accessible from their HR department). Employees should always remember that trustees act in their interests and manage their money. Trustees are ultimately accountable to their fund members. As Loots says, "…trustees look after your money and your interests. The money is yours."

*Liberty Corporate's Umbrella fund is one the biggest umbrella funds in South Africa by member size.

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Liberty Group Limited (Reg. no 1957/002788/06) is a licensed Insurer and an Authorised Financial Services Provider (no 2409).