Edition: Sep - Nov 2014


It is nearly five years since beneficiary funds were introduced by government into the South African retirement fund industry, as a safe and regulated savings vehicle in which to manage minor dependents’ assets. Trustees, aware of the potential risks of paying out lump sum benefits to guardians or caregivers, are starting to realise the advantages of beneficiary funds and many retirement funds have by now appointed a beneficiary fund service provider.

The growth in this niched industry has been rapid, currently valued at an estimated R7 billion. Beneficiary funds are classified as pension fund organizations in the Pension Funds Act and, similar to retirement funds, face the same challenges of costs and consolidation. Consolidation is likely to be the theme of the future and this is reinforced by the thinking of the Financial Services Board and National Treasury around size, simplicity, and most importantly lower costs for members.

It is in this light that Fairheads has aligned itself with government's thinking, recognising that the road forward requires more innovation, creativity, and simplicity than ever before. An example of this is the Fairheads Umbrella Beneficiary Fund which, with over R1 billion of assets under administration, is one of the industry's first beneficiary superfunds. This fund meets the highest standards of governance, trusteeship and administration, while significant economies of scale enable a sharing of costs among the membership of 12 400 minor dependents.

High calibre board of trustee

The chairperson of the fund is Robyn Cowie, Fairheads legal director with 22 years' experience. The Principal Officer, Karen Quinlan, is a fully independent professional principal officer and qualified lawyer. Tashia Jithoo, a leading pension funds attorney, is the Independent Trustee, with Fairheads CEO Richard Krepelka and Financial Director Marilyn Brown being the remaining sponsor trustees. In line with best practice, the fund is moving towards an equal representation of independent and sponsor trustees.

The fund is subjected to an annual audit by independent auditors KPMG and has a comprehensive suite of board approved policies, covering among other things complaints and member and trustee communication which meet the requirements of all applicable legislation.

Institutional asset management fees

As a superfund, Fairheads Umbrella Beneficiary Fund is able to negotiate with the top investment managers to achieve institutional investment fees on behalf of its members. Fairheads Benefit Services, the administrator of the fund, is wholly independent, leaving the fund trustees to select best of breed fund managers, Allan Gray, Prescient, Coronation and Stanlib. The fund has a unique asset allocation model through which members are assigned to a particular "life stage" depending on their age, the size of the benefit and the monthly income paid to the guardian.

Communication strategy

Fairheads Umbrella Beneficiary Fund has a communication strategy developed at the board level, in line with PF130 and focusing strongly on member communication. Accessibility in this industry is key as many of the guardians and caregivers with whom the fund engages live in remote areas and are financially illiterate, therefore requiring a service strategy unique to the industry. This strategy includes SMS communication, a client contact centre offering inward and outbound service in all official languages (plus Portuguese) and our extensive annual guardian roadshows.

Superfunds the way to go

It is the superfund structure and economies of scale that allow us to implement these unique communication solutions at an affordable cost to members, as well as the costs associated with professional trusteeship, principal officer, audit fees and the like.

Fairheads Umbrella Beneficiary Fund has a long tradition of highly personalised service based on caring trusteeship, excellent administration and a conservative, tailored approach to investment management.

For more information please contact me at david@fairheads.com

Fairheads Benefit Services is Southern Africa's largest independent administrator of beneficiary funds and umbrella trusts.