Issue: September-November 2011


Life made easier

For principal officers and trustees, that is. The POA has produced templates that will immeasurably help them to review and compare service providers. CHRIS BRITS of NMG Benefits and IAN HAIGH of Old Mutual Corporate explain their value.

Both circular PF 130 from the Financial Services Board and the King III reports call for a regular check and review process on service providers. However, many pension funds are uncertain or reluctant on going out to tender for services.

Why is this? Are trustees concerned about the perceived cost implications of such an undertaking? Or do they not know what to ask service providers in a tender process?

During the most recent winter conference of the Principal Officers Association (POA) the audience, comprising mainly principal officers and trustees, was polled on a few questions:

What prevents you reviewing your administrator? Response
  a) Good relationship with current provider 39%
  b) Not aware of alternatives 5%
  c) Too cumbersome to change 26%
  d) Don't know how to compare them to each other 15%
  e) We think it may be costly to change 15%
When did you last review your service providers?  
  a) Within last six months 25%
  b) Within the last year 23%
  c) Within the last three years 29%
  d) Within the last five years 2%
  e) We have not yet reviewed our service providers 21%

Clearly, a need exists to assist fund trustees to address this issue. However, there has also been a problem in that no clear guidelines or tools have existed to assist trustees with this process. Until now.

To date, trustees or their consultants wanting to review the service providers have generally done so by compiling a questionnaire that should be completed by the service provider. In most cases, these questionnaires are compiled from different sources often leading to many duplicate questions – perhaps just phrased differently, or questions that are either outdated or technically invalid.

This practice has not been conducive to a proper analysis or comparison of the different service providers. It’s also often a frustrating and extremely costly task to perform by the tendering service providers in that it requires the attention of several of their top resources being occupied at huge cost in a process fraught with inequities, duplication and irrelevant comparisons.

The need for trustees to improve the tender processes is evident.

Following collaboration by several service providers – with assistance of many top fund administrators as well as consulting, actuarial, risk and investment professionals -- a solution has been developed that will assist trustees when tendering.

Haigh and Brits . . . practical service

Standardised tender templates have been developed to provide trustees with a set of well-researched questionnaires on various services to be tendered for. When trustees are looking to change service providers, these templates provide them with the questions they should be asking. They are an invaluable tool in guiding trustees and principal officers on the specific aspects they should look at when comparing service providers.

The first set of templates was completed and publicly released during the POA conference in June. It focuses on tenders for administration and umbrella-fund services. These documents are available on the POA website. Subsequent releases will cover services such as consulting, actuarial and investments.

The templates follow a modular approach and cater for a variety of services. The following modules were work-shopped at the POA conference and subsequently placed on the POA website for all in the industry to use:

Module A concentrates on examining the service provider as a corporate entity. The module is written in such a way as to be used for all types of tenders, irrespective of the specific service required. It therefore forms the first part of any future tender.

Module B focuses on retirement fund administration, especially the administrative system, accounting and so on. Principal officers and trustees can now identify these critical aspects and so compare different providers with one another using the same basis.

Module C focuses on umbrella funds. It questions structure, flexibility, the trustees, communication and governance issues. This module should be used in conjunction with Module B.

Further modules are being developed for consulting, actuarial and investment consulting. They’ll be released in coming months and updated on the POA website.

Users of these templates are encouraged to use them in full, without any alterations, as they will be version-controlled. Should there be any additional questions needed to cater for a particular fund or circumstance, it is recommended that these be included separately in the tender brief.

Comments and suggested additions to the templates can be sent to Christo Snyman at Comments will be collated and introduced at the annual review / updating of the templates. The tender templates can be found on the POA website