Issue: June/July 2006
Giving your Fund the Edge
Head of pension-backed lending at Standard Bank
Fund loan facilities have become a major differentiator as funds compete for members.
Funds offer loans to members in different ways: some lend directly themselves, some use fund administrators to operate loan books using the fund’s assets while others furnish loan guarantees to third parties who lend to members.
Direct Fund Lending
National Treasury’s 2004 Discussion Paper on Pension Fund Reform expressed the view that retirement funds had neither the competency nor the mandate to operate loan books. “Using fund assets to ﬁnance loans is untenable,” says Clive Robinson, head of Pension Backed Lending at Standard Bank. “How can trustees balance getting the best possible investment returns, which means high interest rates, with the need to keep loans affordable for members?”
“Also, don’t underestimate the administrative risk to the fund,” Clive warned. “Who loses if the loan agreement is defective in any way?”
Fund Guaranteed Lending
Clearly, furnishing loan guarantees to an established home loan provider like Standard Bank is the best option. Fund assets are not tied up in member loans, a third party bears the administrative risk, and the fund can switch loan provider without affecting other services.
All types of fund related lending struggle with ensuring that the loan proceeds are used for housing purposes. “There is no 100% solution,” Clive said, “and our view is that the lender should share this responsibility with the trustees.” Standard Bank is working hard on cost effective solutions that will end abuse of fund guaranteed loans.
The Right Loan Scheme Partner
Members have no choice of lender once the fund has selected its loan provider and trustees must ensure that the loan provider is bound by legislation governing consumer credit and not only the Pensions Fund Act.
Ideally, the lender should also provide credit on the open market and afford members the same rights as other consumers who can shop around. “There are just too many parties out there offering or managing housing loan books who do not subscribe to the laid down consumer protection requirements.” Clive said.
With 15 years experience in fund guaranteed lending, Standard Bank will structure a loan scheme that integrates with your fund’s beneﬁt and investment strategy. “We understand the pension fund industry very well, we are committed to affordable housing ﬁnance, we continuously improve our product, and invest a great deal administration and customer service,” Clive concluded.
For more details contact Standard Bank Pension Backed Lending at (011) 636 5258 or firstname.lastname@example.org.