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GRAVY: Editorials: October 2019 / January 2020

GRAVY

Having spread like wildfire, the rumour that prescribed assets might be introduced has forced savings institutions to react in response to panic amongst members of retirement funds. The seminars and screeds, explaining why it’s a bad idea, serves simultaneously to ignite thoughts amongst the usual suspects that maybe it’s a good idea.

The continued silence of President Cyril Ramaphosa, on this and other critical matters, is unhelpful. He might rapidly drop from a last hope to a lost hope.

 

Not too long ago, in his state of the nation address, Ramaphosa announced to rapturous applause that Mineral Resources & Energy Minister Gwede Mantashe had just told him of a massive gas find off Mossel Bay. Nothing has been heard of it since.

Which perhaps puts it on a par with the supposed find of non-existent mineral “hazenile” whose supposed discovery, near the Congo (sic) Caves in the Western Cape, Mantashe had proudly announced to an international mining conference.

A vivid imagination won’t make the Mining Charter work any better either.

 

By accident and certainly not design, fired Old Mutual chief executive Peter Moyo might actually have rendered a worthwhile service.

His litigation has shown that the Labour Relations Act can help not only lower-paid employees to resolve job disputes but also assist executives earning megamillions to grab at the chance for the extraction (a polite term in the circumstances) of additional megamillions.

Since this is surely not what the Act intended, thank Moyo for the reason to amend it.

 

Around the world, leading asset managers must balance their roles as corporate stewards against pressure to reward and retain top staff. Setting an example, some chief executives have taken pay cuts.

Heading the list is BlackRock, the world’s largest asset manager. The pay of chief executive Larry Fink has declined by $4m over the previous year, down to a paltry $26,5m.

The redress of inequality is taken in baby steps, and a rather small baby at that.

 

The SA Social Security Agency has long been riddled with fraud, often in the form of claims by ghost beneficiaries. Whatever else is said against the maligned Cash Paymaster Services, much deserved, its systems to detect and counteract the frauds weren’t at all bad.

Hope like hell that the systems of the SA Post Office, which has taken over from CPS for the distribution of social grants, has systems at least as good. Or anyway better than its systems for delivering mail.

 

With National Health Insurance coming, like it or not, some enterprising property brokers are looking for sites in Botswana suitable for development by SA hospital groups. The idea is that, instead of medical tourism into SA, there’ll be SA medical tourism into Botswana.

True or not, you read it here first.

 

Bar-room conversation between Zimbabweans:

“We should speak only good of the dead.”

“Who’s dead?”

“Mugabe.”

“Good.”

 

A big problem in SA is how we’re being numbed into apathy.

A bigger problem is that nobody cares.

 

During the Ashes cricket series, an Australian batsman changed his voicemail message:

“You’ve reached Steve Smith. I’m not out.”

TRUSTEE TRAINING: Editorials: October 2019 / January 2020

Through the maze

In our previous edition (TT July-Sept), we posed a series of
“hard questions” around the much-vaunted need for retirement-fund trustees
to be properly trained. Batseta answers them.

This is the first part of the Q&A.
The second will be published in our next edition.

When the fund industry talks of “professionalisation”, for the courses being provided, what exactly is meant?

Professionalisation advances the knowledge and practices of the specific industry. Becoming a professional person is not the exclusive right of a certain class of persons who have obtained tertiary degrees. Through education and training (both once-off and continuing) all persons such as principal officers and trustees should find a route to professional registration and designation.

Core elements that form the foundation of professionalism include:

  • Presence of a registered professional body to recommend best practice in respect the of technical and ethical competence of members;
  • Appropriate and accredited qualifications linked to the profession;
  • Appropriate and accredited qualifications linked to the profession;
  • A professional designation administered by the professional body;
  • A continuous professional development (CPD) programme to maintain skills;
  • Awareness of a duty to society as a whole.

There are two occupational qualifications registered with the Quality Council for Trades & Occupations:

  • Professional Principal Executive Officer (NQF 7 –  150 credits);
  • Professional Principal Executive Officer: Retirement Fund Trustee (NQF 5 -120 credits).

The QCTO is the certification body for these qualifications. Once completed, the qualification cannot be revoked.

Although principal officers and trustees may have other academic qualifications, they still need to be trained on their roles and responsibilities. Development and implementation of an occupational-directed qualification achieves this.

Professional persons who are members of a professional body may seek professional registration with a view to obtain a professional designation. Eligible members may apply for a professional designation or title.

Linked to the title are a number of requirements i.e. that the member must complete the prescribed qualification and maintain his/her skills and competence by following a CPD programme. If a member fails to uphold the professional registration requirements, the professional body will revoke the designation.

Batseta is the only registered professional body for principal officers and trustees. It has registered three designations/titles with SAQA, i.e. the Associate Principal Executive Officer (APEO) and Chartered Principal Executive Officer (CPEO) designations for practising principal officers and a Licentiate Trustee (LT) designation for trustees.

Eligible principal officers and trustees may apply for professional registration. The occupational qualifications are linked to the professional registration. Principal officers and trustees who qualify will receive a professional designation or title. These fiduciaries must maintain their skills and competencies by following a CPD programme.

Are different levels of professionalisation applied in training? If so, what would be the highest and lowest levels for acceptance to serve on boards?

Principal officers and trustees must be ‘fit and proper’ i.e. they must have the necessary technical knowledge to do their work and they should behave ethically. Qualifications govern the skills and knowledge required for a specific job while designations govern the skills levels and the behavior of individuals within that profession.

Professional affiliation to a professional body is a key indicator that the professional acquired the necessary skills and competence and that he/she is committed to behave in an ethical way. The latter is governed by a code of conduct.

Principal officers interested in the APEO designation must complete the trustee toolkit of the Financial Sector Conduct Authority and associated assessments whereas the CPEO must complete assessments of the occupational qualification.

By following a step-up approach all designated principal officers are following a CPD programme at their level of skill and competence. APEOs have an opportunity to progress to a higher level of skill and competence should they wish.

Designated trustees must complete the trustee toolkit and additional learning modules to qualify for the LT designation. It ensures that no trustee is excluded from achieving professional registration and that the learning eventually leads to a formal qualification.

Professional registration aims to provide principal officers and trustees with a progressive career path, whilst maintaining their ‘fit and proper’ status.

What advantages are there or the individual in moving from the lowest to the highest?

In the case of the pension-fund industry, the qualifications and designations apply to different positions i.e. the principal officer and trustee. The toolkit is an underpinning requirement for the APEO and the Professional Principal Executive Officer qualification is an underpinning requirement for the CPEO designation. The toolkit and additional learning modules are the underpinning requirements for the LT qualification.

Principal officers who register for the CPEO designation will acquire a registered occupational qualification. Trustees who register for the LT designation will commence their journey to obtain the occupational qualification registered for trustees.

Principal officers and trustees will meet the ‘fit and proper’ requirements set out in the law. They are able to learn and progress at a pace appropriate for the professional level of engagement without compromising the set standards.

Any indications of the time and effort required to attain professionalisation at the different levels? Can this reasonably be expected of people in fulltime employment?

There are two routes to obtaining a qualification and then subsequent the designation.

First is through formal accredited training where an accredited Skills Development Provider (SDP) offers classroom training courses and prepares the candidate for a final assessment that will be conducted to determine the competence of the candidate. This route will take a candidate 18 to 24 months to complete.

Second is through Recognition of Prior Learning (RPL) where a candidate has a number of years’ industry experience in a specific capacity. Through RPL a candidate can achieve the qualification and designation in a fraction of the time. It will take a candidate six to twelve months to complete the RPL programme and final assessments.

The occupational qualification comprises three components: knowledge, practical and workplace. Most of the learning takes place in the workplace during trustee board and/or committee meetings and associated engagements.

The training methodology is geared towards adult training. Sufficient support is available from mentors, SDPs and Batseta as the registered examining body.

Is there some minimum educational requirement to embark on a course for professional qualification? What of say a shop steward who doesn’t have matric but is keen to become a trustee?

For the principal officer qualification, the entry requirement is any qualification equivalent to NQF 5 level. For the trustee qualification the entry requirement is any qualification at an NQF level 4.

Candidates who do not meet the entry requirements for the NQF level 5 can complete either any NQF 4 level qualification, or the Foundational Learning Certificate through the Independent Examinations Board, and the trustee toolkit online assessment as well as additional learning RPL modules prescribed by examiner Batseta.

Can members of a fund elect as a trustee a person who has no professional qualification? If so, is it a good or bad thing?

Members of a fund can certainly elect a trustee who has no professional qualification. There have been many such trustees elected in the past and who served well.

An occupational qualification such as the PPEO: RFT is designed to equip candidates to fulfill thei fiduciary duties subsequent to their appointment as a trustee.

Is it acceptable that sponsors of umbrella funds appoint trustees, such as an experienced actuary, who has little interest in the training on offer and wouldn’t qualify in terms of it?

Sponsors are likely to appoint independent trustees who are best qualified to serve. Many are professionals in their own right, registered with such bodies as the Actuarial Society or Institute of Chartered Accountants.

These professional people, who have obtained experience in the financial industry, could certainly serve well as trustees. However, professionals who’ve completed the trustee qualification may be in a better position to succeed when applying for a trusteeship at an umbrella fund.

Why should an aspirant or incumbent trustee embark on training at all? Would he or she expect higher remuneration the higher the professional qualification or otherwise be rewarded for training courses completed?

Trustees serve their fund. Members expect them to have their best interests at heart. As professional persons, those trustees must always keep themselves abreast of new developments, changes and trends in the industry.

The aim of professional people should be to improve their skills in order to deliver a professional service, not all the time to gain higher remuneration.

Obtaining the trustee qualification may result in improved career mobility and higher remuneration elsewhere. Trustees who have been disadvantaged will now have an opportunity to study.

JOB CREATION: Editorials: October 2019 / January 2020

PPP
at work

All good things for mid-size companies’ growth and
pension funds’ investments.

Against the negativity over unemployment and scepticism over the preparedness to counter it is the Jobs Fund, a solid testimony to groundwork in public-private partnership (PPP). There’s also a win-win for retirement funds as a channel to invest in the real economy, specifically for job creation.

Since it was established eight years ago by government, which set aside R9bn, two of the most prominent asset managers to have given it legs are 27four and Ashburton. Both have progress to report.

In a deal that will see the Jobs Fund contribute up to R200m in 27four’s Black Business Growth Fund, the government grant is expected to help the fund catalyse more than R5bn in capital for mid-size SA companies looking to grow. BBGF head Rory Ord estimates that 3 000 to 4 000 jobs will be created over the next seven years, and double this number over the fund’s life.

All the capital committed to the fund will be invested by six to eight black-owned asset management firms for private-equity transactions in 40 to 60 unlisted companies. “We have a proven job-creation channel in the form of mid-market private equity,” says Ord. “While pension funds have been slow to allocate capital, the Jobs Fund grant largely de-risks these investments.”

That the grant provides first-loss capital to the BBGF should encourage pension funds to invest with confidence, he believes. The fund pools the capital of investors, provides them with access to a number of managers as well as a broadly-diversified underlying investment portfolio, then manages the selection and monitoring process in the allocations of capital to black managers.

The selected mid-size companies would already have been assessed as sustainable but in need of capital to grow. They’d typically have an annual turnover of R100m to R500m. The investment goal is to triple their respective sizes over five to seven years, says Ord. After the Jobs Fund investment period is over – five years of investment and two years of post-investment monitoring – the BBGF will remain involved.

“Our fund life is actually 12 years,” he adds. “Much of our input will be strategic, such as assistance with identifying acquisition targets and accessing new markets. So far, many of these companies don’t have the levels of governance and systems to position themselves for growth.”

There are strict investment criteria. For example, a significant amount of funding must be employed into labour-intensive sectors such as manufacturing and fast-moving consumer goods. In addition, where companies are at present short on B-BBEE credentials, they’ll need to transform in terms of ownership, management and procurement.

Although compliance with the Financial Sector Code is still voluntary for retirement funds, they’d enjoy the bonanza of scorecard points depending on how their investments are made.

Success of the Jobs Fund is already demonstrable. Ashburton Investments is now into its second ‘Credit Enhanced Fund’.

Its first fund included investments in 12 innovative job-creating businesses. Against its target to create 9 635 jobs, it created 10 222 since inception in February 2015. The second fund, launched last July, includes five businesses with a target to create 4 200 new jobs.

“We count only permanent or sustainable jobs that can be verified and that qualify as ‘decent’ employment,” points out Ashburton head of specialised credit Heather Jackson.

DEATH BENEFITS: Editorials: October 2019 / January 2020

SCA gets it
wrong

Court’s interpretation of “dependants”, Karin Lehmann* believes,
creates greater confusion for trustees.

In its recent FundsatWork v Guarnieri judgment, the Supreme Court of Appeal misconstrued both the definition of “dependant” as well as s37C of the Pension Funds Act.

The facts were briefly that the fund’s trustees had allocated the greater share of a member’s death benefit to his aged mother. This was to the detriment of his estranged widow and children.

Unbeknown to the trustees, the mother had died four days before they exercised their discretion. By the time they learned of the mother’s death, the money had been disbursed to her and was no longer recoverable.

Although the equitability of the trustees’ allocation is questionable, the trustees were understandably reluctant to comply with the High Court order that they pay the equivalent sum to the deceased member’s widow and children; hence their appeal to the SCA.

The SCA’s view was that the validity of the trustees’ allocation turned on whether the mother was a dependant at the operative time for determining eligibility. This, it held, was when the trustees actually exercise their discretion rather than at the date of the member’s death.

The mother was thus not an eligible dependant. The SCA went even further, cryptically stating that the dependant “must still be a beneficiary” when payment is made.

Almost every aspect of the SCA’s judgment is troubling. Incomprehensibly it suggested that it will not impose an undue “practical burden” on trustees to ensure that facts — painstakingly collected over a period of months — are still true on the date of allocation and payment.

Life is not static. Circumstances change. If facts were instantly verifiable, trustees would not by law have been given 12 months to complete their investigation.

Of greater concern is the SCA’s understanding of “dependants” under s37C(1)(a). Rather than adopting the obvious interpretation, which is that this paragraph pertains to the member’s inter vivos dependants (in accordance with the Adjudicators’ interpretation), the SCA held that it applies to persons owed a posthumous duty of support. These are principally needy spouses and children.

The SCA concluded that the legislature’s “careful and deliberate” use of the present and past tenses in the definition indicated that the paragraph was aimed at protecting those to whom the member owes a present duty of support and that “present” is the date on which the trustees exercise their discretion.

In other words, use of the word “is” in the paragraph must be read literally by trustees. They must then ask themselves: “As we gather here today, who ‘is’ owed an existing duty of support i.e. one that has not been terminated by the member’s death?”

The SCA’s interpretation is flawed. Spouses and children are already, in every case, statutory dependants. It matters not whether they are amongst a member’s legal dependants or financial dependants or neither. They are, without more, dependants.

If the paragraph is aimed at spouses and children, it is redundant. Moreover, the current definition was adopted in 1989. This was before the 1990 Maintenance of Surviving Spouses Act created posthumous duties of support towards spouses.

The SCA’s interpretation of s37C(1)(a) is also incompatible with s37C(1)(c). The SCA accepts that a legal duty may arise after the member’s death, while concluding that an existing duty is extinguished by the member’s death.

A parent, sibling, grandchild or grandparent towards whom a duty is not yet owed — while the member is alive — may thus be an eligible future dependant. A parent and others, to whom the member whilst alive already owes a duty of support, automatically becomes ineligible on the member’s death.

The SCA thus includes contingent legal dependants but excludes existing legal dependants. This is at odds with its own observation that courts prefer “facts” to “prophecies”.

The judgment contains further errors. It equates a nominated beneficiary with a nominee, and thus misunderstands when s 37C(1)(a), (b) or (bA) applies. It conflates equitability with financial need.

It believes that if the relevant date for determining eligibility is the date of death, the facts relevant to an equitable allocation are similarly those that existed at the date of death. And, most extraordinarily, it states that s 37C does not “entirely override” a member’s wishes.

If the SCA can get so much so wrong, it is beyond time that s 37C be revised. ν

*Lehmann is a UCT law lecturer and a trustee actively involved in making s37C decisions.

Lehmann . . . peculiar decision

 

The SCA thus includes contingent legal dependants but excludes existing legal dependants. This is at odds with its own observation that courts prefer “facts” to “prophecies”.

FINANCIAL SERVICES: Editorials: October 2019 / January 2020

First-mover
advantage

Clever shifts at Forbes for appeal to clients and challenge to competitors.
Institutional core facilitates retail interventions.

Over time, long-established brands hold firm but their characteristics and connotations change with the operations that underlie them. So profound are the strategic changes at financial-services group Alexander Forbes that a clear demarcation can be drawn between the old and the new.

Since becoming chief executive last year, Dawie de Villiers has cut through swathes of legacy. The ground is being prepared for a tectonic shift in the approach to its institutional client base. In brief, it’s an extension of services to provide individual members of retirement funds with accessible advice.

What this essentially means is delving from the fund level, where Forbes has huge scale, to the member level. By encouraging members to preserve their savings and addressing their needs at relevant times, through personalised focus, it aims to engage them through evolving life stages to eventual retirement and beyond.

This might sound hoary, but it isn’t. Forbes has released capital to focus on person-to-person counselling. It will take several forms and won’t be cheap. The prize for Forbes, by effecting the intended gains for employers and employees, is in the retention and extension of business as the retirement-planning environment transforms.

“Being in the institutional business, we want to help the employees of institutional clients appreciate that they can best save through employer schemes,” says De Villiers. “We can only do this by having closer member-based interactions.”

The message to be driven home is that employees will be better off by remaining in employer schemes. There they’ll benefit from inclusion in corporate-fee arrangements as opposed to the typical retail prices were they to buy products independently.

S

uccess will rely on Forbes’ designated counsellors getting to employees — before they change jobs, are promoted or retire — to hear from them about benefit options. Since this skills set isn’t usually the speciality of employers’ human-resource departments, their best recommendation is often to call in an advisor who conveniently happens to be available in any case from the administrator of the company’s fund.

Critical for savings outcomes are wholesale prices, which reduce costs, and improved preservation, where compound interest works in members’ favour. Members shouldn’t be tempted into cashing their pots when they switch jobs, or buying another policy when they can stay in the employer’s scheme, if they want superior outcomes.

“The more we can assist members,” De Villiers believes, “the better for them, the employer and the country.” Also of course for Forbes. “Our benefit will be in the employer and ultimately the employees wanting to remain with us because they’ll have recognised the value of our counselling.”

This strategy is top-of-mind. He’s determined, he says, that “we get it right”.

As he sees it being rolled out, the Forbes advantage is that its machine is institutionally geared for employee benefits whereas others are numerically structured for retail in terms of primary services. The suggestion is that it’s more effective and appropriate to work top-down from funds than bottom-up from members.

Complement this refocus with the “capital light” model to concentrate on consulting, administration and investments for the logical linkages. Add to them the leadership of De Villiers and Forbes has not only a fresh face but also a fresh drive.

De Villiers . . . down to the members

PRODUCT OFFERS: Editorials: October 2019 / January 2020

Unintended
consequences

‘Rewards’ battle of giants over life policies might later extend to employee
benefits too. Sponsors of umbrella arrangements, take note.

Discovery could inadvertently have done competitor Liberty a huge favour by having initiated court proceedings to interdict Liberty from allegedly unlawful competition. The pre-trial brouhaha has created greater exposure for a Liberty product than its marketing department could possibly have dreamed.

More than this, it will take several months before the litigation eventually comes to trial. Then there’ll be an additional period before there’s a judgment and a further period, maybe years, before inevitable appeals are ultimately exhausted. Through all this time the Liberty Lifestyle Protector policy, with the “wellness bonus” to which Discovery takes such exception, will be so entrenched as perhaps impossible to untangle.

In essence, Discovery contends that Liberty has infringed the Discovery and Vitality trademarks. By this means, Liberty is implicitly benefiting from the “rewards” programme that Discovery claims as its own.

“The revised Liberty life insurance policy with the Wellness Bonus is designed around, and wholly dependent on, a wellness programme that Liberty does not itself offer,” argues Discovery Life chief executive Hylton Kallner. “Liberty does not have its own wellness programme that it can offer to the public in conjunction with the Liberty Lifestyle Protector insurance product to enable them to benefit from the Wellness Bonus.”

Liberty is opposing the application because, as chief executive Dave Munro indicated at the group’s presentation of interim results, it believes that Discovery is attempting not to prevent unlawful competition but to restrict lawful competition. He also insists that personal information about a client belongs to the client, not to a company.

Kallner . . . stop!

Since there’s no use by Liberty of a Discovery mark, elaborates Dave Jewell who manages Liberty retail solutions, there can be no confusion in the minds of clients. Amongst the series of questions asked in policy applications, membership of any health programme is merely one that’s linked to other health data such as exercise frequency. It’s for potential Liberty clients to disclose their Vitality status, if they want, and it will have a bearing on their Liberty cash-back bonus, if they want.

This battle over a life policy can spill into a full-scale war, engaging a multiplicity of life offices and others in the business of retirement funds, because Discovery has now entered the arena of employee benefits.

In elaborate promotional material, released at the recent Institute of Retirement Funds conference, Discovery boasts a “world first” by uniquely “incentivising and rewarding sound financial behaviours”. There are “shared-value rewards for people who save,” it says. At root are bonuses for loyalty.

Financial advisors will need carefully to scrutinise the terms and conditions, particularly the precise circumstances for “boosters of up to 15%”. Discovery will reward employees for “investing for longer” provided they transfer their retirement savings to it. They’ll also be rewarded if they manage their health and wellness through Vitality, and there are further rewards for investment in Discovery group risk.

Also, employers can pay zero fees for administration of retirement savings. To pay nothing for this service, all employers must do by end-December is use Discovery for their employees’ health needs and sign up with Discovery retirement funds.

There are at least two possible difficulties. One is that the biggest boosters seemingly extend primarily to the more expensive portfolios which, held in Discovery funds, might or not be amongst the better after-costs performers. Another is that, given affordability constraints on poorer members to preserve, boosters imply their disadvantage against the wealthier.

And then there is consistency with priorities of National Treasury for retirement-fund reform: simplicity and comparability of products, and portability between funds for members wanting to switch without penalty. On each, the purported Discovery game-changer could be liable for challenge.

As if the fanciful National Health Insurance didn’t already give Discovery enough to worry about.

Munro . . . no!

UNPAID BENEFITS: Editorials: October 2019 / January 2020

An alternative
proposal

Lawyer and actuary* discuss key principles in a matter of enduring contention
for retirement funds. As appeals loom at the SCA, rather have legislative
solution to complications in surplus apportionments.

Your cover story ‘Wake Up! Pay Up!’ suggested possible ways to address the material problem of unclaimed/unpaid benefits that the pensions industry currently faces (TT April-June). The editorial presented arguments for:

  • A “central fund” managed by the state, where this fund could hold a reserve for the unpaid benefits less than the full face value of the benefits;
  • The release of excess assets to perform “good works”.

The approach of releasing excess assets has already been attempted by some individual funds. It led to an ongoing dispute between these funds, the Registrar and the Minister of Finance regarding the legality, rationality and validity of Regulation 35(4).

This regulation effectively freezes unclaimed benefits due to former members who were included in surplus-distribution schemes, but who cannot be traced. There are essentially two different categories of unclaimed/unpaid former members.

In the first category, there are those who have withdrawn from funds in the ordinary course and who have not been paid their benefits. This includes the dependents of deceased members who have been awarded benefits, in terms of s37C of the Pension Funds Act, but who cannot be traced.

These members have not been paid the benefits due to them in terms of fund rules. The fund has a legal obligation to them. In accordance with PF circular 126, the Registrar compelled funds to amend their rules so as to preclude them from permitting the forfeiture of these members’ benefits.

In the second category, there are former members who’d been included in surplus-apportionment schemes because the funds had sufficient data to calculate the top-ups that would be paid to them. These former members included those who’d left the fund since 1980.

So it’s not surprising that the fund had little or no information about the whereabouts of members who’d left the fund years ago, and in many cases the fund did not even have ID numbers. Neither could the fund be assured that these former members were still alive at the time of the apportionment exercises.

This created a substantial increase in the number and value of unpaid benefits to members who’d already left their funds, prior to the relevant legislation, in terms of their rules. Without debating the “fairness” of the legislation which required surplus-apportionment schemes, it’s simply pointed out that there was a resulting increase in unpaid benefits. Obviously, it’s more difficult that benefits actually be paid to the second category than the first.

In respect of these former members who could not be traced, s15B provided that the amounts due to them could be placed in a contingency account “to satisfy (their) claims”. A contingency account is an account which shall be credited or debited with such amounts as determined by the fund’s board, on the advice of the valuator, to provide for a specific category of contingency.

The valuator, as an expert, is tasked with what value to place on this contingent liability. “Contingency” means something about which you are not sure of the final outcome; in a particular case, actually finding former members and paying them.

Based on this interpretation of the law it would have been possible for the valuator, in the years subsequent to the apportionment scheme, to reduce the contingent liability of the fund in respect of those former members. It would have been based on the likelihood of them having died before the surplus apportionment date, or the likelihood of them being traced, or of them ever coming forward to make a claim.

In the years post-apportionment (and provided that the fund had made every reasonable effort to trace former members), the prospect of those former members ever being found or making a claim diminishes substantially. For many funds, more than 10 years have passed since the approval of their apportionment schemes and they are nowhere near a full payout.

 

A reduction in the amount of the contingency reserve does not mean that the obligation to a former member has been extinguished or reduced. It simply means that the amount provided to meet the contingent liability to all former members has been reduced. If any former members come forward, they must still be paid.

Given that funds should be fully funded (the actuarial value of the assets should meet the actuarial value of the liabilities), it does mean that the assets that may formerly have been held to balance that liability may now exceed the liability. The amounts then released will be regarded as future surplus.

If regarded as future surplus, it could be distributed in terms of s15C to members and former members of that fund. If distributed in this manner, it will be released back into the economy in a substantially more beneficial manner than currently prevails.

Should the valuator undervalue the amount held in the contingency reserve, and more former members come forward or are traced than are anticipated, then it may mean that the fund is underfunded. This, of course, depends on numerous other factors such as asset performance compared to that assumed by the valuator, mortality assumed by the valuator and the like. In this event the fund will have to submit a scheme in terms of s18 to restore the fund to a financially sound condition.

These are normal processes in the valuation of funds’ liabilities. The valuator must make assumptions about the likelihood of future events. A particular example is that of suspended pensioners.

Where the suspension happened some time ago, valuators will normally hold a low or zero reserve against the possibility of the pensioner being reinstated. If the pensioner is reinstated, the fund must still pay the benefits even if no reserve has been held. This process is no different to what the funds in dispute with the regulator are trying to do in relation to the liability for unpaid benefits.

This is what ordinarily would have happened to the amounts allocated to former members. Former members would not be prejudiced by the valuator reducing the contingency reserve for these benefits. The fund is following a normal process. The economy would benefit by excess funds, being released as future surplus, being put to use.

This natural order of things was fundamentally upset by the Minister promulgating Reg 35(4). It provided that “monies may not be released from such contingency reserve accounts except as a result of payment to such former members or as a result of crediting the Guardians Fund or some other fund established by law to include such amounts”.

This meant that the valuator could never decrease the value of the amount allocated to the contingency reserve fund as he/she would have done in the ordinary course. Given the requirement of funds to be fully funded, this meant that assets to back that liability could never be released as future surplus.

Currently then, the full value of assets is held in funds to meet the full liability to untraced former members who’re unlikely ever to be traced or paid. That the assets are included in surplus-apportionment schemes is not useful to funds or the economy.

Thus some funds have challenged the legality, rationality and validity of Reg 35(4). Two of the cases have failed. Judges found that they did not have to consider the merits of the applications, due to non-compliance with time periods for objection, since the date Reg 35(4) was imposed. However, in both cases the judges went on to find that the regulation was in any event not invalid or illegal.

These judgments are not binding. In one other matter the court did rule on the merits. It found that Reg 35(4) was neither invalid nor illegal. Two of the matters are currently on appeal to the Supreme Court of Appeal.

The issue of providing for uncertain contingencies is more complicated than a straight accounting process, and not easily understood by lawyers. There is often a misunderstanding that the contingency reserve represents assets set aside by the fund. It actually represents an estimate of a liability, where an eventual payout is uncertain.

This is compounded by the language used in Reg 35(4) as monies are never, in fact, allocated to a contingency account. Contingency reserves have nothing to do with assets. The maintenance of a full liability to former members does not necessarily mean the fund will have the assets to meet the claim.

The actual experience of a fund due to a number of other reasons may differ from the estimate of the actuary. This does not mean that the obligation is extinguished or reduced.

Ultimately, a legislative and not a court-induced solution would be preferable. It is ironic that a “central fund” — which would be able to hold a reserve less than the full face value of unpaid benefits — is proposed while the regulator is preventing individual funds from doing just that.

There may well be a case for a central fund for the unpaid benefits of small funds. But why should larger funds not be able to make their own decisions? And pay out any resulting surplus funds in terms of s15C to their own members and former members?

The forced transfer of these unpaid benefit funds to a state-sponsored benefit fund, when particular funds are quite capable themselves of dealing with them, would represent a form of expropriation. It is far better that Reg 35(4) is scrapped, assets artificially held to meet a liability that is unlikely to ever materialise are released, and funds themselves put the assets to use as future surplus.

• Graham Damant is a partner at law firm Bowmans and Mike Walker, a fellow of the Actuarial Society of SA, has 30 years’ experience as an approved valuator to retirement funds.

COVER STORY: Editorials: October 2019 / January 2020

It couldn’t happen here

Or could it? Message from Zimbabwe for Magashule, Malema et al.
To remould the mandate of the SA Reserve Bank in their image
would be pure madness, not least for pensions.

Right now, the need for urgency in the

initiation and acceleration of mass programmes for consumer financial education cannot be sufficiently stressed. Aside from the continuing reasons, to encourage savings and guide selection of appropriate products, there’s another imperative. It’s derived from SA’s political hothouse.

Eerily evident is the rise of populism mischievously dressed as a respectable “leftist” alternative to the “neoliberalism” that embraces fiscal constraint. The loudness of the shouts, proportionate to the hollowness of the thoughts, dangerously gains popular appeal when the solution to the shortage of money is purported to be the printing of money.

This is proclaimed in vote-catching calls for nationalisation of the SA Reserve Bank or, put differently, for its constitutional independence from political accountability to be replaced by a regime of political popularity. At the forefront of resistance must be not only the Bank itself and the National Treasury, which need all the support they can get, but also the financial institutions which serve as custodians for millions of peoples’ savings.

So much the better if only those people, notably with over R4 trillion of their money held in retirement funds, were organised to speak for themselves. That they aren’t, and that many are none the wiser of impacts on their own interests, highlights systemi defects: first, that there is no organisation to mobilise a groundswell; second, that the low level of financial literacy is low-hanging fruit for the pickings of populism.

Make no mistake that the low level is pervasive. When a member-elected trustee of a R30bn retirement fund asks at a presentation why he should worry about inflation, worry. Then worry some more. Worry about where and how to start with financial education that will work.

Over recent years, SA’s inflation has been liveable towards the lower band of single digits. The bulwarks are the Bank and Treasury. Flip them to control by populists, arguing from factions within and at extremes of the ruling party, for the consequences to be entirely predictable.

A crystal ball is provided by the Zimbabwe commission of inquiry into insurance and pension values. Instituted by then president Robert Mugabe in 2007 and gazetted by current president Emmerson Mnangagwa last year, the report is a supreme example of the situation into which SA dare not be seduced.

Damned for Mugabe having eschewed austerity, then damned for Mnangagwa having introduced it too late, Zimbabwe is now engulfed in violent protests against the unaffordability of such basics as food and fuel. Like bankruptcy, inflation begins slowly and then

Currency debasement in action

balloons to the hyper-dimensions.

In Zimbabwe it’s led to a full-blown humanitarian calamity. Warnings in the collapse of a country can be no closer to SA than from across the Limpopo.

The 423-page report of the Zimbabwe commission, chaired by a retired judge, struggled to produce viable recommendations for remedy of the currency crisis at the heart of savings destruction. But mainly it shows how quickly and easily events can run out of control, even in financial institutions and professional bodies. And in the regulator too.

Bluntly, the value of pensions has been shot to pieces. Basically, it followed the creep of an inflation eventually so rampant as to be unmanageable.

The commission was set up, it records, “against a background of widespread public complaints over the perceived lack of transparency and the massive loss of value by policyholders and pension-fund members in the conversion of insurance and pension values from the ZW$ to the US$ at the inception of the multi-currency regime in 2009”.

This multi-currency system was intended to restore macro-economic stability. It failed. By the time of the system’s introduction, inflation had already hit a record of “over 231 million percent”.

This had taken place, the report points out in a bit that will resonate uncomfortably, when there was fiscal unsustainability due to:

  • Erosion of the tax base;
  • Debt overhang;
  • Widespread underemployment;
  • Informalisation of the economy, and
  • Endemic poverty.

All of which have subsequently worsened, populists take note.

Government did not demonetise ZW$ balances at the time of conversion. Neither did it provide policy guidance on how insurance and pension values would be affected. Neither, in the “free-for-all scenario” that developed, did it protect the rights and reasonable benefit expectations of policyholders and pension-fund members.

There were also failures on the part of the regulator to provide guidance and protect values. As if in mitigation, the report’s assessment was that at the time the Insurance & Pensions Commission suffered from skills deficiencies. Nonetheless, it was badly governed.

Private-sector industry and professional bodies fell down too, and worse. Evidence was found of collusive behaviour “through the associations which should generally have quasi-regulatory functions and advocating for prudent behaviour among their membership”.

Many members of the public held the view that the commission should have been established earlier to address their poverty, misery and loss of dignity. Even taking into account the reality of hyperinflation, said the report, it is inconceivable that all their insurance or pension contributions could be lost since a significant proportion had been invested in real assets prior to dollarisation and hyperinflation.

Some explanations from the report that reflect poorly on governance:

  • While incomplete and inconsistent asset data submissions to the commission could have been a genuine failure to maintain the data as required, the possibility of the motive to conceal incriminating evidence remains;
  • The pension industry lost asset value throughnon-remittance by employers of employees’ pension contributions;
  • In most of the larger insurance groups, shareholder assets were growing at much faster rates at the expense of pension and insurance funds’ assets;
  • Due to lack of appreciation of pension matters, pension funds’ trustee boards were not in control of the assets for which they’re stewards.

And there’s a real slammer against the insurance and pension industry: “The expenses paid out of premiums were too high, and in some cases exceeded the contributions received. The industry degenerated into a sinkhole. Policyholders and pension-fund members contributed to sustain the lavish lifestyles of the administrators without any return to the policyholders and pension-fund members.

“The regulator’s failure to reign in the industry expenses perpetuated the haemorrhaging, resulting in predatory expense structures averaging 81% of total premiums and contributions during the period from 2009 to 2014.”

Mugabe . . . poverty from populism

Amidst the range of comprehensive findings and recommendations, two pertinent conclusions in the commission’s words:

  • Notwithstanding the loss of value due to poor industry practices, wherein compensation will be expected from the private sector, the largest reason for the loss of value was the operating environment characterised by very high levels of inflation. There remains a large number of impoverished policyholders and pensioners who lost all their savings due to inflation;
  • Consumer education and activism play an important role in enhancing the accountability of the industry to the policyholders and contributors by empowering market players with relevant information and knowledge of financial products and services available, as well as promoting financial literacy.

In all, the report is a presentation of what happens when chaos reigns. With hyperinflation, the doors fling open for greed and exploitation. Who benefits and who suffers? Let the populists answer to the people, honestly if possible, or have confidence that the custodians of South Africans’ savings will do a better job of awakening them.

That’s the textbook for the defeat of doomsday.

Mnangagwa . . . jackboot returns

PRESCRIBED ASSETS

Scrutinising the commission report, the local Life Offices Association (which includes Old Mutual) listed additional issues to have caused value loss.

Top of its list – compiled by African Actuarial and Alexander Forbes — was that in the 1990s government had prescribed fixed-interest assets that had to be held by insurance and pension entities. These assets lost significant value as inflation gained momentum.

That the entities had also been prohibited from investing offshore or in foreign currencies further constrained diversification strategies. The prohibition forced the entities into overvalued assets unrelated to fundamentals.

Because government was committed to repay coupons and redemption proceeds on the prescribed bonds, the LOA took legal opinion on the liability of government to pay compensation. The opinion turned out to be that “everything” is left at the discretion of the president who’s neither bound by the findings and recommendations of the commission’s report nor to take any action on its receipt.

ILLUSTRATIVE EXAMPLES

Martha Mukamba joined the Zimbabwe Family Planning Pension Scheme, administered by ZB Life Assurance, in 1981.When she exited in 2012, after 31 years’ service, she received a once-off payment of US$186,39.

This amount was far lower than the equivalent of US$1 118 which comprised her total contributions for just one year in 1981 when the fund was still a defined-benefit scheme. In that year alone, the employer and employee contributions were equivalent to US$99,29 per month.

Lungu Yotham Morrison joined the Selfguard Preservation Fund, also administered by ZB Life, in 1995. At the time he injected ZW$1 947, then equivalent to US$230, into the fund.

Having participated in the fund for 14 years, on exit he received a once-off payment of US$0,83.

INEFFECTUAL TRUSTEES

From the report:

The hearings brought to the fore the fact that in some cases the boards of trustees did not have control over assets of the pension funds, thus exposing pensioners to unscrupulous employers and pension-fund administrators. Most of the trustees representing employees were allegedly manipulated by the employer representatives who normally chair the boards and exert their influence to the detriment of pension contributors.

Furthermore, most of the trustees were appointed from a worker-representative perspective without due regard to their knowledge of pension business and appropriate qualifications.

EMPOWERMENT TRANSACTIONS: Editorials: October 2019 / January 2020

Goalposts
moved

Minister Ebrahim Patel wants a rethink of B-BBEE.
He can start with a rethink of its commissioner.

Wrapped into the legislation for Broad-Based Black Economic Empowerment is the Financial Sector Code. Shudder at the prospect were any of its institutional signatories, which deal with pension funds, met with treatment similar to that recently targeted at blue-chip MTN.

A display of regulatory over-reach is the B-BBEE commission’s recommendations that follow its investigation into MTN’s R9,9bn Zakhele-Futhi scheme. Until the commission pronounced, Zakhele-Futhi was considered one of the best on offer.

The commission reckons the scheme doesn’t comply with objectives of the B-BBEE Act on the basis of various restrictions such as involvement in decision-making at the top level of the MTN group. These restrictions on members of the scheme, it contends, are at odds with ownership requirements set out in the codes of good practice. MTN is accused of fronting, potentially a criminal offence.

In an interview with Business Day earlier this year, MTN was one amongst dozens of companies to which B-BBEE commissioner Zodwa Ntuli referred. She said that the commission had written to “a large number of entities to inform them that their ownership structures constituted fronting”.

The findings have sent chills through an increasingly confused business community. Apparently in line with an official brochure that first emerged in April, the findings encapsulate the commission’s current interpretation of the codes.

Essentially, according to the brochure (which has no legal authority), in order to qualify under the Act the beneficiaries of a scheme must not only beclearly identifiable but must also be able to exercise voting rights. They must receive the same economic benefits, such as ordinary dividends, as all other shareholders.

 

These dividends would have to be additional to the prefs made available for funding of the MTN shares purchased at a discounted price. Further, in a move that finds no support under the Companies Act, the scheme beneficiaries must also be allowed to appoint a director to the MTN board.

Then too the B-BBEE commissioner wants not only the lifting of individual ownership restrictions but also a public apology from MTN and disciplinary action against employees who’d “defied” the commission’s initial advice. For senior executives, insult is added to injury by the requirement for specialised training and development of a compliance programme.

MTN has extensive experience in dealing with Africa’s most volatile regimes. Yet, just in case it didn’t appreciate the seriousness of it all in SA, the commission reminded one of the country’s largest employers that it “may” refer MTN and its directors to the police for criminal prosecution.

Six weeks later and there’s still no sign of a public apology. What will the commission do about that?

And what about the number of other entities which, according to Ntuli, are being investigated? Why the corporate silence? Has the prospect of criminal charges created a certain mind-numbing terror? Possibly thousands of transactions could be subject to investigation.

It’s suggested by a BEE consultant that the commission has everybody running scared: “Companies naturally shy away from confrontation with the authorities.” But the sooner the commission’s interpretation of the codes and Act are challenged in court, as with the mining charter, the sooner there will be clarity.

Ntuli . . . example made of MTN

The way matters stand, the commission’s actions look to be a declaration of war against many companies that have done their best to comply with the letter and spirit of the legislation. More than this, the actions potentially represent an assault on such established structures as Kagiso Trust, the Sactwu Investment Trust, the Batho Batho Trust and even the Cyril Ramaphosa Foundation.

Amongst the numerous allegedly suspect companies, there could well have been a certain amount of system gaming. While the commission goes about its investigations, it would be helpful for it to attempt a cost-benefit analysis of the codes’ implementation.

Since introduction in 2007, adherence has been made infinitely more complex by regulatory creep. Tougher regulations, compiled by bureaucrats who’ve never had to turn a profit but have a sharp eye for political plaudits, invite an upturn in gaming.

Ultimately, more loopholes will be sought and costs of verification will increase. Empowerment initiatives become riddled with rent-seeking opportunities while the goodwill and good benefits become distorted.

CURRENTS: Editorials: October 2019 / January 2020

Take another look

Too much noise. Too little attention to routines.
What’s best for retirement-fund members too infrequently revised.

Regulation 28 sits there, like a big clunk, cast in concrete and limiting the choices of savers to invest their own money. But they do have choices, fundamentally whether or not to join a retirement fund at all and whether to accept membership as a condition of employment.

Ostensibly positioned as the state’s instrument to nanny retirement funds into prudent diversification of portfolios, Reg 28 should be subject to more comprehensive reviews than the last time in 2011. Because some important circumstances have changed, and experiences have accumulated, it should change to accommodate them.

The hoariest restriction is on the asset allocation which places a 75% ceiling on exposure to equities. One size doesn’t fit all. While it’s prudent for savers nearing retirement to be invested in conservative portfolios, it’s imprudent for younger members of funds who have much longer pre-retirement investment horizons.

They needn’t be sheltered from perhaps 30 years of equities’ volatility. Over time, it evens out and equities historically outperform other asset classes. To prevent younger members from a 100% exposure to equities prejudicially constrains 25% of their portfolios from aggression during their kickstart years.

Then too, the demography of the JSE is changing. In 2011 it had over 400 listed companies. By July this year, the number had contracted to 357. And within this number the paucity of choices for retirement funds is further exacerbated in terms of market capitalisation and liquidity, not to mention pedestrian performances in a stuttering economy.

Favour goes to the shares of companies whose revenues are significantly earned abroad. This is the best that asset managers can do once they’ve already hit the 25% ceiling that Reg 28 allows. The ceiling itself squeezes funds into the tightly-concentrated JSE, restricting their broader geographic diversification that should be a hallmark of prudence.

But under the present Reg 28, asset-allocation prudence can go to 100% in cash and 100% in government bonds. The former is the sure way to lose against inflation. The latter is hazardous without government debt under control.

Bring on greater direction of funds’ cash flows into such alternatives as private equity and infrastructure projects that Reg 28 allows, it’s said. But the opportunities will need to be available, or created, and there’d still need to be balance in portfolio constructions.

Amidst the noise over prescribed assets that government doesn’t simply kill, the rand hedge-reliant JSE and the politically-battered levels of confidence, retirement funds could do with a signal that there’s a guardian angel in Pretoria who hasn’t forgotten about their members.

The regulatory clunk of concrete should be modernized so that members are encouraged to remain in their funds rather than divert to individual options which allow greater discretion.

Head for court

Cohen . . . battle continues

With the Financial Services Tribunal having thrown back the ball to Pension Funds Adjudicator Muvhango Lukhaimane, over the R40,5m award she’d made against actuary Viv Cohen in determining a complaint by the Amplats Group Provident Fund, she was left with a decision on what to do next (TT July-Sept).

It was never going to be easy. The tribunal had said that the jurisdictional process to reconsider a determination was a “mystery”, even to it. Lukhaimane’s initial response was to ask relevant parties for their proposals.

“After not receiving any further filings from the parties, we closed the Amplats complaint with a note to them that not all is lost,” she says. “The tribunal has shed some light on where liability lies and therefore they should proceed to recover the funds.”

It cannot end there. A hole remains in the assets of the Amplats fund. Somebody will have to pay; if not Cohen (unlikely, on a read of the tribunal’s finding), then perhaps an insurance policy (of the fund or for its trustees, depending on how the matter is resolved), or maybe even Sanlam as the fund’s administrator (so far exonerated).

The only course, it seems, is for the matter to proceed in the High Court. There a trial will have to start afresh, for all the parties to be heard, as if there had never been a determination by the adjudicator nor a decision by the tribunal.

To the extent that the tribunal had shed “some light”:

  • As Cohen had not performed a duty under the Pension Funds Act, the complaint by the fund against him did not fall under the jurisdiction of the adjudicator;
  • It was irregular for the adjudicator to have obtained evidence without due notice to the parties.

Now the “mystery” compounds:

  • If appeals against determinations by the adjudicator must still go to court, is the tribunal undermined in its purpose for cost-efficient redress?
  • If there isn’t a “complaint” to be reviewed by the court, as in this Amplats matter, then how is the issue before the court to be defined? Who’ll be suing whom, for what, if respective parties blame one another for the loss caused to the fund? And who’ll ultimately be liable for costs of the litigation that the tribunal was supposedly to have averted?

The only point not in dispute is the fact of the loss, yet to be finally quantified, whether by flaws in oversight or administration or combinations of both in different weightings. There’d need to be applicants and respondents — between the fund’s board, its individual trustees, Sanlam and Cohen – for the litigation even to start.

Out of court

The long-awaited trial in the R70m claim by the PEP Limited Provident Fund against the Financial Services Board, allegedly for negligence by the regulator having caused the loss to the fund (TT April-June), is being negotiated for settlement.

Disappointing will be confidentiality of the settlement terms. Then details will somehow have to be disguised from disclosure in the annual reports of both the fund and the Financial Sector Conduct Authority, successor to the FSB. This is hardly the purpose of annual reports.

Frustrating will be secrecy over negligence admissions, if any, by the regulator; neither their nature nor whether any monies paid in settlement are covered by insurance (which can affect FSCA levies). Also, the absence of a judgment makes a precedent impossible to establish.

Infuriating is the overall lack of information about the Trilinear debacle. Since it broke seven years ago, and was followed by certain arrests, there’s been nothing in the public domain about the progress of liquidations and recoveries or even of criminal prosecutions.

Change at the top

There’s to be a new chief executive at the Financial Sector Transformation Council. The contract of Isaac Ramputa, which runs until end-October, hasn’t been renewed.

Based on a revised job spec that’s been compiled, the search is on for his successor. Until an appointment is made, chief operating officer Busi Dlamini will act in his stead.

The role of the council is to oversee implementation of the gazetted Financial Sector Code. It commits the industry, from life offices to banking institutions, to B-BBEE transformational objectives in terms of specific criteria. An injection of excitement wouldn’t be out of place.

Ramputa, acknowledged as a skilled negotiator for having bridged disparate views of constituents as the council took up its role, is a seasoned trade unionist. Fortunately, he won’t be lost to the industry. Amongst other offices he’ll continue to hold are chairman of the ASISA Foundation and president of Batseta.

Ramputa . . . solid service

Transnet saga

That the Transnet pension funds aren’t supervised by the FSCA means that their members cannot seek interventions from the regulator. It’s for the funds’ trustees to act vigorously, where they should,  and for members to join in class actions, as they have in a matter that drags on (TT July-Sept ’16); most recently in yet another legal technicality that delays payments due to pensioners from their former employer since 2003.

Unrelated to this is a different scrap. As revealed by the amaBhungane centre for investigative journalism, it arises from a settlement by which Regiments Capital has agreed to pay the Transnet Second Defined Benefit Fund some R500m to compensate the fund for fees irregularly earned.

The allegation was that Regiments, appointed with influence of the Gupta family on the fund’s board, had “churned” bonds in the fund’s portfolio by buying them for itself and selling them back to itself at a lower price, taking profits on the difference at the fund’s expense.

It resonates with the front-running process for which stockbroker Greg Blank was sentenced to eight years’ imprisonment in 1992. Regiments, an authorised financial services provider, is regulated by the FSCA.

Next step in the scrap is how Regiments will pay. The proposal is that it transfers to the fund a batch of Capitec shares held in a vehicle, Coral Lagoon, significantly owned by Regiments.

But Capitec is fiercely resistant on grounds that, although uninvolved, the bank’s B-BBEE status will then be jeopardised. Capitec had issued 10m shares to Coral “with the sole purpose of creating an enduring B-BBEE transaction,” it said.

Now there’ll be argument on whether the transfer from Coral to the Transnet fund is permissible and, if it is, whether the fund is entitled to sell them. Alternatively, it could continue to hold them. In this case, presuming it can be shown that the Transnet fund’s board and members are overwhelmingly black, there’s no apparent reason for the B-BBEE stake in Capitec simply to shift from one empowerment vehicle to another.

However, it could open a can of worms over pension funds’ recognition as B-BBEE shareholders. Let the can be opened.

Namibia too

SA isn’t alone. From neighbour Nambia it’s reported that the Government Institutions Pension Fund, which handles the savings of public servants, has money missing. Julius Kandjeke, the auditor-general, puts the amount at N$600m (roughly the same in SA rand) but the GIPF has put it at N$386m.

Whatever the amount, prosecutor-general Martha Imalwa believes that the monies are irrecoverable because of insufficient evidence. The amounts are said to have been lost mainly through loans granted from 1995 to 2004 but not subsequently paid back. Beneficiaries of the loans, in the fund’s “development capital portfolio”, were allegedly politically-connected individuals.

“Someone should be held accountable,” Kandjeke is quoted as having said. Forceful stuff.

Good move

Members of retirement funds will now be able to secure longevity protection within a living annuity. This follows the FSCA announcement of an exemption from its criteria for living annuities in the default-investment strategy.

It’s welcomed by Just SA chief executive Deane Moore: “This exemption expands customer choice and will help to improve the financial outcomes of people in retirement.” 

Kandjeke . . . pensions gone