Retirement funds must get to grips with a new set of disclosure requirements.
Here’s help for trustees.
The amended Financial Sector Code (FSC), gazetted and now effective, is at present a voluntary dispensation for compliance by retirement funds. This is because many aspects of the B-B BEE requirements cannot be relevant to them.
For example, the funds have little or no influence over their membership demographics. Neither do they usually have a large number of employees. But they do make decisions, amongst other things, on the appointments of private-sector service providers.
Nonetheless, because the funds hold over R4 trillion in members’ savings, the Financial Sector Transformation Council (FSTC) points out that they play a vital role in transformation itself. Accordingly, funds will be measured against particular metrics such as procurement and member education.
Says the Codes of Good Practice at s9(1): “The B-B BEE annual reporting by retirement funds should include a narrative on the B-B BEE score achieved and future plans for improving the score. The (FSTC) will measure transformation on an annual basis. This may include relying on surveys that are available in the public domain. If sufficient disclosure by pension funds does not materialise, then consideration will be given to revising this dispensation.”
The FSC document is not the easiest of reads and the schedule on retirement funds isn’t either. To help trustees through the detail, TT requested that certain terminologies be clarified. Trevor Chandler, special advisor to the Association of Savings & Investment SA (ASISA) and the FSTC, was happy to oblige.
TT: For compliance, what is the approximate dividing line between “large retirement funds” and funds not considered sufficiently large?
Chandler: We include the top 100 funds measured by assets. The definition includes all types of funds including umbrellas but excluding retirement annuities.
Where does “management control” reside in a fund? Presuming it to be in a fund’s board, then how does it reconcile with the right of members to elect up to 50% of board members e.g. if no trustees elected by members are black, or if there are no black candidates for election? Will the fund be penalised for not being adequately transformed and, if so, how will it be penalised?
Management control vests mainly with the board, but also with the principal officer and other employed executives in the few instances that this exists. Funds are penalised only through the allocation of fewer points on the management-control scorecard. You’re correct that the fund does not have control of the people that either the member or the employer puts forward. Principal officers will need to sensitise trade unions, employers and others to this dynamic.