Issue: March 2013 / May 2013
Editorials

FIRST WORD

The IRF should RIP

Trustees need a representative voice. They deserve better than the so-called Institute of Retirement Funds.

There’s a yawning chasm in the retirement-funds landscape.It’s for a body that represents trustees of retirement funds, that offers a forum for discussion amongst trustees and that speaks for their interests as trustees.

The need for such a body is so self-evident that it needn’t be argued. That trustees are pivotal to the functioning of retirement funds, and hence to the welfare of their members, seeps into every nook of the regulatory system. To all intents and purposes, however, a representative body is non-existent.

Purportedly, it’s the Institute of Retirement Funds. Practically, the IRF is missing in action. When comments were invited last year on such vital policy documents as the draft Financial Laws General Amendment Bill and the Financial Sector Charter, to mention only two, the IRF was hardly loquacious. Whether it’s yet got its head around the series of discussion papers for retirement reform, more recently put out by National Treasury, remains to be seen.

The IRF relies overwhelmingly on service providers for money and expertise. It has neither the membership nor leadership, neither the credibility nor cohesion, to satisfy the representative goals that are supposed to justify its existence.

Demonstrably, there’s a need for a body that can effectively promote these goals. For trustees are distinct from the service providers they engage, and must be independent of them.

No matter how well meaning the service providers are, trustees should have their own perspectives whose expression can integrate with others along the retirement-fund supply chain. The chain is weak where National Treasury and the Financial Services Board tug at the one end, service providers at the other, and there’s no link of trustees between them.

What sets trustees apart is their role as custodians of retirement funds and the responsibilities that are uniquely theirs. These they’re beholden to exercise in the interests of the fund alone, irrespective of whether they’ve been nominated or elected. Subordinate to nobody, they aren’t merely a link in the chain.

They’re an embodiment of the national demographic. Drawn from all walks of life, reflecting the widest range of experience and sophistication, they’re at the apex of the retirement-fund pyramid.

Yet, of trustees’ own volition, as an industry organisation they’re voiceless. When their collective voice should be loudest of all, it’s silent. Is it because they lack the confidence that comes with competence? Or because an appropriate forum hasn’t been created?Or because they’re content to be nannied?

Whichever, their reliance on others to speak for them – such as service providers, sometimes boxing from their own corners and sometimes altruistically – perpetuates a void in views for policy formulation. Amongst the array of vested interests, it’s ultimately the trustees who should be driving through them.

This is the role that the IRF was intended to play. If ever it did, it doesn’t any longer. Its day has passed. The time has arrived for it to be superseded.

As matters stand, the IRF is dominated by service providers in key areas of operation. Independence cannot be a term in its glossary. Even its current president is himself a service provider, not a trustee. Remove the resources of service providers and it would be impossible for the IRF to function.

In reality, there’s little more that the IRF does than hold an annual conference. This is its primary revenue source, thanks to service providers. Without the conference, there’d be no funding to maintain the IRF secretariat and without the secretariat there’d be nobody to organise its conference.

And the conference itself has lost its exclusivity on the industry calendar. These days it competes with myriad others, from the Principal Officers Association to the Pension Lawyers Association to ASISA whose members are invariably in the funding forefront.

Not only is there a paucity of speakers to address fresh topics from the IRF platform, but its conference now has a reputation for service providers exhibiting to one another and their sponsored trustees being seen more at the parties than the plenaries.

Over the years, the IRF has had its share of ructions. It was a signatory to the Financial Sector Charter, accepted in 2004 as a voluntary code, but was conspicuous by its absence from participation in drafting the Charter recently gazetted. It had an active Legal & Technical committee, but comments on draft regulations are now overwhelmingly from pension lawyers, consultants et al in their own capacities.

A few years back the IRF was the target of a Cosatu-inspired transformation, to represent trustees only, but the attempt fell down on politicking and funding. More recently, a new board was elected ostensibly with the grandiose vision to make it “the pension-fund industry’s representative voice, and to be proactive with the authorities” (TT Dec ’11-Feb ’12). Nothing has come of it. As a cursory glance at its website testifies, the IRF today looks more dysfunctional than ever.

LAST RITES

Coincidentally, after this article was written, IRF members were called to a special general meeting. Apart from routine formalities on conversion to a non-profit company, they were to be asked for a vote of no confidence in the current management board and to have it immediately removed from office “due to lack of corporate governance and non-compliance with the IRF constitution”.

Amongst the board members recently to have resigned is GEPF principal officer John Oliphant. President of the IRF is ZamaniLetjane, managing director of Akani Retirement Fund Administrators which has itself been under investigation in Swaziland (TT Dec’12-Feb ’13).

Backers of the motion outlined what they described as the IRF’s “current status”:

  • 11 board members have resigned;
  • 13 board positions are vacant;
  • No communication to members;
  • Lack of member representation;
  • Annual general meetings of 2011 and 2012, as well as other meetings, held without a quorum;
  • Current chair elected with four votes;
  • Strategy session held by only five board members;
  • Chief executive and financial officer suspended on full pay for four months but not disciplined for allegations of substantive financial mismanagement;
  • Lacks confidence of FSB, National Treasury, industry associations and stakeholders.

Having got off to a stormy start, with Letjane in the chair, the special general meeting had to be adjourned because it lacked a quorum.

So bury the darned corpse and start afresh. Respective role players have respective interests, yet they’re joined at the hip by a mutual interest. It’s to strengthen the industry by the participation of trustees in a recognised entity. Between the savings institutions, the employer organisations and the trade union federations, it’s to be assumed that there’s an abundance of intellectual creativity and financial resource to catalysea trustee body that will work.

All the better to call in National Treasury and the FSB as well. After all, they’re explicit in wanting to enhance trusteeship. Far be it for anybody to deny them.

Allan Greenblo,

Editorial Director.