Benchmark trustee sees jump in retirement administration costs after FIM Bill becomes law
Barend le Grange, Head of Individual Member Support at Sanlam Employee Benefits, last week told the Benchmark Annual General Meeting that there is a distinct trend in retirement funds to switch to umbrella funds due to the complexity and cost to administrate a private retirement fund.
At the same time, he cautioned participating funds not to seek cost savings at the expense of their members.
The Benchmark Retirement Fund is administered by local pension fund administrators Retirement Fund Solutions (RFS), and has a board composed of independent non-executive trustees, and executive trustees nominated by RFS. It caters for a wide range of requirements ranging from individuals and employees of very small groups to SMEs and larger funds, who require a vehicle that adheres to local standards and regulations. The Fund also caters to retirees, and minor and adult dependents of members.
Günter Pfeifer, a Trustee of the Benchmark Retirement Fund, said that they are continuing to prepare for the Financial Institutions and Markets Bill, the so-called FIM Bill. According to Pfeifer, this Bill which regulates non-banking financial institutions, places burdensome conditions on retirement funds. “The requirements imposed by the new bill are substantial and it is likely that only very large retirement funds as well as umbrella funds will have the necessary scale to implement these requirements,” he said.
Pfeifer also issued a note of caution to guardians of minor dependants. The latest Administration of Estates Amendment Act will have an impact on minor members as their benefits will have to be paid via the Guardians Fund. There may be some payment delays from the Master’s Office to the guardians of these minors since payments by the Master are made quarterly, unlike Benchmark which makes payments monthly.
The Benchmark Retirement Fund grew its assets by N$200 million in 2018 to N$2.9 billion from the previous year’s N$2.7 billion. The fund has more than 11,500 members.
The fund said, despite the challenging operating environment and the proliferation of regulatory requirements, it continues to grow with new participating employers joining as well as with a growing number of members preserving their retirement capital in the fund or choosing to draw monthly pensions from the fund. In 2018, Benchmark catered for 961 annuitants who received N$54 million in annuities.
In terms of investments, 2018 was a challenging year due the poor performance of a large number of global and local asset classes. “Growth of pension fund investments is typically measured over periods of 5 to 10 years, where the long-term returns of investments usually outweigh the short-term impact of restrained growth and recessions,” stated Benchmark.