EVOLUTION OF BENEFICIARY FUNDS AND CHALLENGES AROUND THE AGE OF
Majority &ALIGNMENT OF BFs TO RETIREMENT REFORM
Slide 2
TRUSTEE PERSPECTIVE NOW YOU HAVE ARRIVE 18 YEARS(Children Act
s38) MAJORITY DILENMA
Slide 3
TO PAY OR NOT TO PAY TO THE MAJORS? GETTING CONSENT TO PAY
LATER 21YRS WHAT CONDITIONS/TEST TO BE MET FOR THE TRUSTEES TO
PAY
Slide 4
TO OR NOT TO PAY ?CONTINUED
Slide 5
HIGH COST OF PLACING BENEFICIARY MONIES WITH BFS ROLE OF PF
TRUSTEES ONCE THE BENEFICIARIES MONIES IS WITH BFs
Slide 6
Alignment of BFs with Current Retirement reforms ?
Slide 7
THANKYOU ANY QUESTIONS
Slide 8
Evolution of Beneficiary Funds: Challenges around age of
majority and how beneficiary funds can align with Retirement Reform
From a consultants perspective
Slide 9
Reform!? Governance Treating customers fairly Total cost
disclosure Lump sum verses income 4 key points as part of
Retirement Reform
Slide 10
Current role of consultant Evaluate a beneficiary fund provider
Assists with Section 37C allocations Administrator / consultant
completes beneficiary fund applications Sometimes assists with
queries from guardians / beneficiaries Considering retirement
reform is this enough?
Slide 11
Reputation Administration PassionCost Communication
InvestmentsTracing Proposed due diligence
Slide 12
Reputation Evaluate service provider Re-evaluate service
provider Get good, reliable, dependable and trustworthy advice
Slide 13
Administration Record keeping Reporting ability
Slide 14
Tracing Proactive vs reactive
Slide 15
Cost Full disclosure Appropriate
Slide 16
Communication Methods Comprehensive All stakeholders Regular
Problem solving Guiding beneficiaries at majority age!
Slide 17
Investments Appropriate Income, lump sum or trustee enduring
power at majority age? Guidance to beneficiaries
Slide 18
Passion
Slide 19
Post reform role of consultant Evaluate a beneficiary fund
provider Assists with Section 37C allocations Administrator /
consultant completes beneficiary fund applications Sometimes
assists with queries from guardians / beneficiaries Regular report
backs to the board Comprehensive communication between all
stakeholders Re-evaluate provider Is there a greater role for the
retirement fund trustee and their consultants?
Slide 20
Evolution of Beneficiary Funds: Challenges around age of
majority and how beneficiary funds can align with Retirement
Reform
Preservation & Annuitisation Urgent need to stop the
leakage Restriction of lump sum payments on exit Death benefits not
treated the same If it is not acceptable to pay a lump sum to a
retiree, why is it acceptable to pay a lump sum to a minor
dependant (or their guardian)? Taken further, why is it acceptable
to pay minor members their lump sum benefit upon attainment of age
of majority
Slide 23
Improved Trusteeship Trustees owe a fiduciary duty to members
In terms of S37C, they must apply their minds to what is in the
best interest of the minor dependant Fund trustees cannot apply a
default position for the disposal of death benefits Financial
competence and level of responsibility on the part of the guardian
is important, but not the only criteria Beneficiary fund service
providers owe an obligation to retirement fund trustees to report
back on the well being of minor members introduced
Slide 24
Costs Beneficiary funds are not the same as retirement funds
Retirement funds are geared towards the contribution phase of
retirement and are generally distributed through the employer or
union Beneficiary funds are geared towards high transactional
drawdown phase Distribution channels need to cater for these high
volumes and member choice Staff to member ratios must be
significantly higher in order to assess large volumes of
claims
Slide 25
Costs Difficult to compare the cost of various service
providers Development of a Comparison Rate Model for beneficiary
funds Consider all in costs based on a standard set of assumptions
Aim is not to reveal the cheapest provider, but to allow trustees
with a tool to accurately compare costs so that they can focus on
the really important considerations for a beneficiary fund
Accessibility Investment approach Member communication
Slide 26
Comparison Rate Model Information relating to the fees and
charges for a range of beneficiary fund providers obtained from an
independent source 1 Standard set of assumptions applied All
investment returns paid out in the form of capital distributions,
regular income of fund costs Fund terminated at age 18 1 Arde, A.
Beneficiary Funds: look at costs. 2014/09/27.
http://www.iol.co.za/business/personal-finance/news/beneficiary-funds-look-at-costs-1.1756670#.VLjIxEeUe2whttp://www.iol.co.za/business/personal-finance/news/beneficiary-funds-look-at-
costs-1.1756670#.VLjIxEeUe2w. The fees and costs provided in this
article were used by Fairheads to derive the Comparison Rate for
each service provider.
Slide 27
Regulatory Information This presentation has been compiled to
provide factual information on the product offered and does not
constitute advice. A copy of this presentation is available from
Fairheads upon request. Fairheads is a Financial Services Provider
authorised under the Financial Advisory and Intermediary Services
Act 37 of 2002 (FSP18428) and section 13B Admin under the Pension
Funds Act No 24 of 1956. Business Address: 15 th Floor, 2 Long
Street, Cape Town, 8001 | PO Box 4392, Cape Town, 8000 Tel:+27 21
410-7800 | E-mail:[email protected] |
Website:www.fairheads.com Questions Thank You
