Issue: Mar/May 2011
Back to Basics 1


Not all trustees, especially the member-elected, are easy to reach. Samantha Davidson, of Shepstone & Wylie Attorneys, cautions against them being ignored.

It’s estimated that the 7 000-odd active SA retirement funds require the appointment and election of approximately 28 000 trustees. Possibly the most important requirement of a trustee is the ability to act with integrity, so my B Com, LL B degrees and 10 years’ experience as a pension lawyer do not automatically make me a better trustee than a manual labourer with no formal qualifications.

Trustees are drawn from all walks of life. Their personal circumstances differ considerably. To communicate with trustees who lack access to postal delivery services, fax machines and emails is a challenge deserving particular attention.

While FSB circular PF130 recommends that each fund has a communication policy for the disclosure of fund information to members and beneficiaries, it is silent on communication with trustees. There is no law or industry-wide standard applicable to trustee communication. This is required in a range of circumstances, including the making of decisions as a fund’s board of management, trustee training and ongoing education, and exposure to media and products that may be applicable to funds.

Our law and the regulator are silent on the frequency and format of trustee communication (whether in person, by way of written exchange, telephonic or electronic). PF130 confirms that trustees should trust each other and be worthy of trust in return. Communication is a vital component in building such trust.

Decisions, decisions

Even in this electronic era, there’s still much to be said for meetings in person when decisions are to be made. But the frequency of scheduled trustee meetings varies significantly from fund to fund, and not all decisions can be delayed until the next planned meeting.

Most fund rules provide for round-robin resolutions. It often falls to the fund administrator to determine how best to communicate with trustees in this regard. It might be more appropriate for the trustees themselves to consider this issue, since they are the ones most acutely aware of limitations they face.


Davidson . . . challenges in diversity

For example, several member-elected trustees with whom I deal are employed in the agricultural sector or in production environments with no direct access to fax or email facilities. Communication by post to a residential address is not feasible for those who occupy hostel accommodation or more temporary urban shelter when working shifts, and return to their rural homesteads infrequently.

Although cellphone coverage has increased dramatically, trustees do not always have access or the ability to use the software and facilities required for adequate communication. Perhaps trustee communication and decision-making processes should be an agenda item at trustee meetings.

Training demands

Good governance and PF130 require that, as soon as possible after they are appointed, new trustees receive comprehensive training on pensions law, common law, customary law, regulations, registered rules of the fund, codes of conduct and policies that apply to the fund as well as governance principles.

They must also be continuously educated so that they acquire and maintain an up-to-date understanding of risk management, investment risks and strategies, benefit structures, legal issues, regulatory and compliance requirements, taxation, actuarial and reform issues.

Under PF130, costs of such training are to be borne by the fund. In deciding on how the appropriate trustee training and education are to be achieved, the fund’s board must undertake a cost/benefit analysis, weighing up the skill and independence of the trainer/s with the cost (bearing in mind that many service providers offer free trustee training, possibly because this gives them direct access to the fund’s decision-makers).

To help, the FSB is introducing a free e-learning retirement-funds training tool to assist trustees fulfill their fiduciary responsibilities. The programmes would be delivered by computer or other electronic device, such as a mobile phone, because e-learning is far more cost-effective than training in person.

At this stage there does not appear to be an intention to oblige trustees to participate in the e-learning programmes. Nevertheless, while many trustees might want to enter the programmes, the practical difficulties some might face in accessing them can’t be ignored. In these circumstances, fund boards cannot rely only on the FSB e-learning initiative to provide appropriate trustee training.

In our diverse country, with a diversity of funds and board members, communication with trustees remains to be thoroughly addressed.