IT IS CRITICAL : PENSION FUND ADMINISTRATION · transfers, Rules, Amendments, Policies, Agreements, etc Statutory reporting (excluding Annual Financial Statements) such as Reserve

© The Institute of Retirement Funds Africa

IT IS CRITICAL : PENSION

FUND ADMINISTRATION



FUND ADMINISTRATION



FUND ADMINISTRATION

The Institute of Retirement Funds Africa

| Client Name | 00 July 2019© The Institute of Retirement Funds Africa

WHY THIS TOPIC – ANALYSING THE HERE

AND THE NOW

ULTIMATE PURPOSE OF A RETIREMENT FUND IS TO PROVIDE RETIREMENT AND RELATED BENEFITS TO MEMBERS AND

BENEFICIARIES OF SUCH MEMBERS

EMPLOYER

PAYROLL

- Salary/CTC

- Contributions

- Pay Fund/

Administrator

FUND

- Allocate

contributions to

members

-Total

contribution less

payroll costs/risk

- Pay providers

MEMBERFUNDASSET

MANAGER

- Member

Account/Share

of Fund/

Member Fund

Credit

SHOW ME THE

MONEY !!!!

- Match assets

- Member level

- less fund

operational

expenses

- Assets on fund

level

- Assets in

name of fund

- Fund returns

- Risk profile

and tolerance

ADMINISTRATION BROKEN DOWN

Day to day administration functions such as member record card maintenance, enquiries, underwriting updates, investment switches, etc.

Month-end and other regular processes such as Contribution Updates, Risk premiums, investments updates, renewals, Section 14’s etc.

Documentation and other Legal & Technical such as Section14 transfers, Rules, Amendments, Policies, Agreements, etc

Statutory reporting (excluding Annual Financial Statements) such as Reserve Bank Reporting, PAYE, SARS, etc.

Claims and all related functions

Accounting and auditing

Reporting and other such as benefit statements, meetings, etc.

Primary Presentation Title

The Institute of Retirement Funds Africa | Client Name | 00 July 2019© The Institute of Retirement Funds Africa

Arial Regular Sub-heading

ARE WE FAILING OUR MEMBERS

WHEN IT COMES TO ADMINISTERING THEIR MONEY?

• Maladministration court cases and lawsuits for millions of rands

• Pension Fund Adjudicator cases, reports and statistics

• Cancellation of funds and fund take-overs

• Terminated funds with remaining assets and years of outstanding statutory reporting

• Section 14 transfer delays

• Unclaimed Benefits

• Take-over disasters

• Financial statements

• Delay in benefit payments




WHY AND WHEN DID SOMETHING SIMPLE BECOME

SOMETHING COMPLEX?

AMINISTRATION SYSTEM

CHANGES

TAKE-OVER OF FUNDS

BUY-OUTS

LIFEGRO, SOUTHERN LIFE,

CAPITAL ALLIANCE,

INVESTEC EMPLOYEE

BENEFITS, SAGE LIFE,

GLENRAND MIB, STANDARD

& GENERAL, CBC,

GINSBERGS, AA LIFE, IGI

HOSKEN EMPLOYEE

BENEFTS…………

RFT….PRE THIS…PRE

THAT…POST THIS….POST

THAT

TAX THIS, BUT

DON’T TAX THAT

FICTICIOUS DATES OF

BIRTH

INCREASED

LEGISLATION

PENSION FUND ADMINISTRATION

The Institute of Retirement Funds Africa | Takalani Lukhaimane | 29 July 2019© The Institute of Retirement Funds Africa

A PERSPECTIVE FROM THE REGULATORTakalani Lukhaimane)

WHY THIS TOPIC – THE HERE AND NOW

QUALITY OF MEMBER DATA

• Impacts the success of a fund from allocating contributions to payment of benefits

• Boards of management have little insight into the quality of data held by an administrator

• Inadequate reporting on the quality of the data held by an administrator

• Perpetuates issues such as unclaimed benefits

FUNDAMENTALS

• Delays in the allocation of contributions

• Delays in benefit payments

• Preparation of financial statements

• Submission of section 14 transfers

ADHERING TO LEGISLATIVE REQUIREMENTS

• Regulation 33 of the Pension Funds Act

• Transfer of data from one administrator to another

• Whistle-blowing – section 13B(10) of the Pension Funds Act

RECORED KEEPING

• Section 13B(7A) of the Pension Funds Act – data belongs to the fund not the administrator

• Record keeping policy

• Multiple administrators with fund information

TRANSPARENCY AND DISCLOSURE

• Take-over challenges

• Migration of data challenges

• Fees – different classes of membership, special projects, termination of administration

UNCLAIMED BENEFITS

• Data is a challenge

• Access to the administrator by members

• Not a historical problem

MEMBERS

• Treating Customers Fairly

• Changing needs of members

• Communication to members

PENSION FUND ADMIN is simple yet complex

TAKE – OVER

• Pension Funds Act requires all information to be handed over to the new administrator

• New administrator only receiving opening member balances

• Section 13B(7A) and Section 7D(a) of the Pension Funds Act

• Fees associated with the take-on process with new administrator

• Compatibility of systems – providing information in a format capable of manipulation

TAKE – OVER

• Buy out of one administrator by another

• Transfer of administrator license

• Due diligence performed by the buyer

CRITICAL ELEMENTS TO CONSIDER

EMPLOY ADEQUATELY TRAINED STAFF AND ENSURE THAT THEY ARE PROPERLY SUPERVISED

• Knowledge of Pension Funds Act, Regulations and Circulars

• Accountability

• Impact of members

• Fees associated with the take-on process with new administrator

• Compatibility of systems – providing information in a format capable of manipulation

ADMINISTRATION SYSTEMS

• Training of staff

• Understanding of systems by staff – function based

• Compatibility of the systems

• Multiple systems and records

• Minimum function requirements for different types of retirement funds

• Level of manual intervention required to operate the system and generate reports – impacts accuracy of

data

BOARD OF TRUSTEES

• Understanding of administration

• Sufficient reports to make the right decisions

• Involvement in audit process and engagement with auditors

• Evaluation and monitoring of performance

• Administration and service level agreements

• Factors to consider as “early warning” signs

EARLY WARNING SIGNS

• Complaints – nature and severity

• Delays in the submission of administration reports

• Non-submission of financial statements

• Valuators comments on the state of fund data

• Unallocated contributions

• Delay in the submission of section 14

• Delays in benefit payments

ROLE OF THE REGULATOR

REGULATORY REQUIREMENTS

• Board Notice 24 of 2002

• Reports submitted to the regulator and the frequency thereof

• Regulatory returns to improve monitoring

• Treating Customers Fairly

REGULATORY INTERVENTIONS

• Conduct of Business – Insurers and Retirement Fund Administrators

• Offsite and onsite supervisory inspections

• Enforceable undertakings

• Customer redress

• Administrative penalties

The Current RealityMia Geringer

• Untested systems

• Limited system validations

• Timing delays between picking up an error and fixing the error

• No data migrations – no history on the systems

• DC Valuation can be a lot of work due to poor data

The Current Reality

• IT moved much faster in all other fields

• No one is spending money on innovation

• “Us” and “Them”

• Responsibility is lost

• ASSA: Where the actuary has reservations about the data provided for the valuation, these

should be noted. • Section 13B? – SLA

• Relying on Auditors

• ISAE3401: International Standard on Assurance Engagements

• Move to Umbrella

• Cost! Valuation exempt might decrease the cost?

Fund Expense

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Fees R’m

Actuarial fees Administration fees Audit fees Consultancy fees Expenses incurred in managing investments

Fund Expense

• “You get what you pay for”

• Passive vs Active Investment Management

• Long Term investment – but high withdrawals makes this a shorter term investment?

• Where is the Risk and where should the cost be: Steinhoff loss carried by Investment Managers or the Fund?

• Actuary and Auditors dependent on the data, and the quality of the systems

• Actual member return is dependent on the quality of the admin

PENSION FUND ADMINISTRATION

GOVERNMENT PENSION ADMINISTRATION

AGENCY



Krishen Sukdev

Chief Executive Officer

THE RELATIONSHIP

•

GEPF

PIC GPAA

THE GPAA MANDATE

• Established in terms of the Public Service Act (1994) with

effect from 1 April 2010.

• To render pensions administration and other relevant

services to the Government Employees Pension Fund

(GEPF) and the National Treasury (NT).

• In accordance with the administration and service level

agreements concluded by GPAA with the GEPF and the NT.

FUNDS ADMINISTERED

• Temporary Employees Pension Fund (TEPF)

• Associated Institutions Pension Fund (AIPF)

• Post-Retirement Medical Subsidies as provided for and

regulated by Public Service Co-ordinating Bargaining

Council (PSCBC)

• Military Pensions

• Injury on Duty payments

• Special Pensions

• Other Funds.

MEMBERSHIP OF FUND

•

Members 1 265 990

Pensioners 305 300

Spouses 160 572

Child / Orpans 1 917

TOTAL 1 733 779

GEPF TOTAL 1678 122

TEPF AND AIPF TOTAL 7578

MILITARY TOTAL 4387

OTHER FUNDS TOTAL 41 588

SPECIAL PENSIONS 1814

GRAND TOTAL 1 733 489

THE GPAA DEPENDENCIES

GPAA Environment (Legislation, Policies)

Systems (IT infrastructure, Digital Platforms and Dashboards)

Membership ( Nett Replacement Ratio, Literacy, indebtedness)

Departments (Education, SAPS, Health, etc.)

Third parties (Bank verification, Tax directives)

Data (Incomplete Data poses risks)

POTENTIAL IMPACT OF INEFFICIENCIES

Late Payment Of BenefitsIncorrect Benefit (If

incorrect data on process not followed)

Member Vulnerability

•



WHERE TO FROM HERE – HOW DO WE MAKE IT BETTER?

“By three methods we may learn wisdom: First, by reflection, which is noblest; second, by

imitation, which is easiest; and third by experience, which is the bitterest.”

Confucius

WHERE TO FROM HERE Takalani Lukhaimane

• Aligning systems with regulatory requirements

• Consultative and collaborative

• Ultimate stakeholder

• Organizational culture

• Understanding customer needs and designing processes that support the members

Can we change the future?(Mia Geringer)

• Pension industry should get industry inline with the rest of the technology world

• Not less but MORE actuarial involvement

• More innovation

• Better systems

• Lower data reserves

• Better value to the member

• How?

• Who’s responsibility is it ultimately?

• Asset management cost on absolute numbers - compare with Actuarial and Audit Fees.

• Admin in-house actuarial team

THE GPAA DEPENDENCIES(Krishen Sukdev)

GPAA Environment (Legislation, Policies)

Systems (IT infrastructure, Digital Platforms and Dashboards)

Membership ( Nett Replacement Ratio, Literacy, indebtedness)

Departments (Education, SAPS, Health, etc.)

Third parties (Bank verification, Tax directives)

Data (Incomplete Data poses risks)

POTENTIAL IMPACT OF INEFFICIENCIES

Late Payment Of BenefitsIncorrect Benefit (If

incorrect data on process not followed)

Member Vulnerability

•

41




EFFECTIVE ADMINISTRATION REPORTS

FINANCE AND FUND ADMINISTRATION REPORTING(Geraldine Fowler)

➢Accounting is

- (not always boring and confusing)

- the production of financial information

- provides checks and balances

- closes “loop holes”

- a risk management tool

- essential to running high quality administration of a fund

➢ The ability to understand financial information

- makes you more valuable as a board member

- makes you more valuable to fund members




EFFECTIVE ADMINISTRATION REPORTS

FINANCE AND FUND ADMINISTRATION REPORTING

…cont

➢A step in the right direction to greater efficiency – balanced accounts and effective administration

➢Annual Financial Statements

- is the starting point

- up to date financial records and balances ensures greater competence

- financial transactions are not financial accounts

➢Identify which few administration reports will tell you what you need to know e.g..

- Membership statistics

- Asset and liability match recons

- Cash flow statements (income and expense reports)

- Contribution reports

- Claims paid AND due

- Transfer in/out, incl pending transfers

MEASUREMENT PROVIDES STIMULATION FOR ACTION



WHERE TO FROM HERE – HOW DO WE MAKE IT BETTER?

“By three methods we may learn wisdom: First, by reflection, which is noblest; second, by

imitation, which is easiest; and third by experience, which is the bitterest.”

Confucius


IT IS CRITICAL : PENSION FUND ADMINISTRATION · transfers, Rules, Amendments, Policies, Agreements, etc Statutory reporting (excluding Annual Financial Statements) such as Reserve

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