Retirement Fund Trustee Training
Working together for a skilled tomorrow
Contents
Introduction
Summary of the research findings
Distribution of funds by economic sector
Population group
Trustee type
Province
Trustee formal education
Trustee experience
Experience vs. formal education
Training for retirement fund trustees
Legal aspects and legislation
Benefits offered and membership
Ser vice providers
Investment management
Financial aspects
Dealing with surplus and legislation related to surplus
Interpreting financial statements
Retirement fund governance
Unit standards
Training providers
The steering committee members involved in guiding the
groundbreaking project
Retirement Fund Trustee training was identified at the Growth and Development Summit (GDS) in 2003 as a
specific and urgent priority for skills development. INSETA, as the Education and Training authority
for skills development in the insurance sector was tasked to address this urgent skills need.
Traditionally, Retirement Fund Trustee Training has been provided by service providers, which has largely been
based on the existing investment products in which the service providers have a vested interest, thus indicating
a lack in independent service provision regarding training.
Trustees may also have not realised the urgency or importance of the need for quality training. INSETA in 2004
initiated a project to identify the registered retirement funds and the profile of their trustees. The
project had to:
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•
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Compile a list of all current registered retirement funds.
Identify each fund’s economic sector.
Identify who the fund administrators are, per fund.
Determine the physical location of both fund administrators and trustees per fund (Employer- and
employee- nominated).
Identify each Trustee’s level of formal education and training.
Identify the level and extent of Trustee specific training that each trustee has received.
Identify each Trustee’s years of experience as a trustee.
Using a 30% sample of identified trustees (which fulfilled the national demographic profile), quantify these
trustees’ self-identified training needs.
The end goal is to ensure that those individuals who have been thrust into the role of trusteeship as a result of
changes in legislation are empowered with the requisite information and skills to carry out their
duties. For this training initiative to succeed, Trustees must take up the training offered. The majority of the
Trustees are not aware of the responsibilities that come with this role and the knowledge required
to mitigate any risks of personal liability.
To date, INSETA has held consultations with various stakeholders to conceptualise the training
requirements, conducted a Trustee Training quantification and skills survey, developed unit standards
to address the skills requirements and appointed training providers to provide training to Trustees.
INSETA is now launching the results of the research and the
unit standards required for the basic formal training of Trustees.
This project has involved all other sectors in South Africa therefore all other SETAs would be
encouraged to promote the training of Retirement Fund Trustees in their own sectors.
Summary of the research findings
A nationwide data collection effort through advertising and awareness campaigns focused on the
retirement fund community was conducted, with the support of stakeholders’ organisations.
Data was mainly collected from Retirement Fund Administrators, Retirement Fund Skills Development
Facilitators and directly from the Retirement Fund Trustees.
The data collected with respect to the Retirement Funds and the Retirement Fund Trustees is
comprehensive, although regular fluctuations in the industry may have altered the profile. The number
of registered retirement funds in the South African Retirement Fund Industry was taken to be 12,750
pension and provident funds and some 800 umbrella funds.
The data collected was also used to determine the size of the retirement fund trustee population which is
estimated to be approx 54,000 with more than half residing in the Gauteng province. Sufficient trustee
data was collected to make meaningful analyses and inferences at a confidence level exceeding 90%.
The data collected resulted in a sample containing over 500 retirement funds and 1,400 trustee responses as at
12 June 2006.
The results were in line with intuitive thinking insofar as trends are concerned. Trustees with a higher formal
education tended to have higher levels of trustee related knowledge, as did trustees with experience in trustee
related activities. Both factors (education level & experience) were observed to have a strong influence on
trustee knowledge.
The ultimate aim of this project is to equip trustees with the tools they require to carry out their duties effectively.
It was therefore important to distinguish between the professional and experienced trustees who do not require
further training; and trustees who may have not had an opportunity to receive comprehensive training on or off
the job in their experience as trustees. The final results indicate the proportion of trustees that have a certain
level of training, but also go further to indicate the proportion of trustees requiring levels of
training given their current level. These proportions take into account the trustees not requiring any further
training.
An analysis of trustee training needs revealed that the majority required an intermediate level of training,
although, in some cases, this may have been less than their skill levels. This would indicate a need for
refresher training and the importance of focussing training on all areas at the correct levels.
The following graphs show where the Trustees are placed, the sectoral breakdown, the population groups and
education and experience that Trustees currently have.
Distribution of funds by economic sector
Financial & Accounting Services 3.77%
Chemical Industry 2.17%
Construction Industry 4.42%
Education, Training & Development Practices 3.29%
Food & Beverage Manufacturing Industries 4.15%
Information Systems, Electronics & Telecommunications Technology Industries 3.61%
Local Government, Water & Related Services 2.19%
Media, Advertising, Publishing, Printing & Packaging Services 4.32%
Manufacturing, Engineering & Related Services 14.60%
Primary Agricultural Industries 2.81%
Secondary Agricultural Industries 0.76%
Tourism & Hospitality Industries 3.47%
Wholesale & Retail Industries 9.11%
Banking Services 0.82%
Clothing, Textiles, Footw ear & Leather Industries 3.52%
Diplomacy, Intelligence, Defence, Trade & Industry Services 0.06%
Energy Industry 0.17%
Forest Industry 0.84%
Insurance Services 9.38%
Health & Welfare Services 4.34%
Mining Industries 2.57%
Police, Private Security, Legal & Correctional Services 1.36%
Public Services 1.01%
Services Industries 12.66%
Transport Industries 4.60%
This graph shows the significant prevalence of trustees in the white population group. The next most significant
group is the black population group with the other groups forming marginal contributions to the numbers.
Population group
0
200
400
600
800
1000
1200
Frequency
Black
Coloured
Indian
White
Other
This graph shows the approximate even split of employer (2) and employee (3) nominated trustees. The other
groups, made up by pensioner (1), independent (4) and other (5) trustees, show very small proportions of the
graph. Over 80% of trustees are either employee or employer nominated.
Trustee type
1 Pensioner Trustee
2 Employer-appointed
Trustee
3 Member-elected
Trustee
4 Independent Trustee
5 Other Trustee
The table below shows the large bias of fund location towards Gauteng. These trends are closely followed by
administrator locations.
Province
Geographic distribution of funds
Province
GAUTENG
MPUMALANGA
LIMPOPO
NORTH WEST
KWAZULU-NATAL
EASTERN CAPE
WESTERN CAPE
NORTHERN CAPE
FREE STATE
Number of funds
61.86 %
2.14 %
0.64 %
1.02 %
11.67 %
4.76 %
15.87 %
0.59 %
1.45 %
Geographic distribution of
fund administrators
Province
administrators
EASTERN CAPE
FREE STATE
GAUTENG
KWAZULU-NATAL
MPUMALANGA
NORTH WEST
WESTERN CAPE
No. of
4
2
137
12
3
3
33
Trustee formal education
0
Less than Matric
Certificate (NQF < 4)
200
400
600
800
Frequency
Matric Certificate (NQF
= 4)
Undergraduate degree
/ Diploma (NQF = 5)
Postgraduate degree
(NQF > 5)
This graph shows that most of the trustees that have responded are well educated (4). This result is perhaps not
surprising as one would expect that the majority of the employer-nominated trustees are most likely financially
literate individuals such as the Chief Financial Officer or Chief Operating Officer or even the Human Resources
head. Similarly the member elected trustees are likely to be those individuals within the company that are seen
to have the acumen, although they may not hold important positions as the employer nominated trustees.
Trustee experience
0
100
200
300
400
500
600
700
800
Frequency
no experience
0-2 years
2-5 years
5 or more years
Almost a mirror image of the formal education graph, experience also shows that more experienced trustees
responded to the survey when compared with inexperienced trustees. This suggests that we may need to
investigate the independence of formal education and experience. If they are heavily correlated, it is possible to
drop one of the two factors from the analysis as they act in similar directions on the results
Experience vs formal education
Expereince
0
1
2
100
200
300
400
500
Formal
Education
3
1
2
4
3
4
This table suggests the positive correlation between experience and formal education. With increasing
experience, we note the increase in formal education. It is interesting to note that the differential between
trustees’ formal education increases as trustee experience increases.
Training for Retirement Fund Trustees
The training that has been developed will concentrate on Retirement Funds and Trustees, covering the
structure of a retirement fund, different fund types, industry role-players, benefits payable and trustees’
duties and responsibilities. Training on Fund Documents and Death Benefits covers fund regulation,
trustee meetings, financial statements and the distribution of death benefits.
Trustee training, as per the research findings, is required in the following areas, with the graphs below
showing the respective current levels of training in these areas:
•
•
•
•
•
•
•
•
Legal aspects
Benefits and membership
Service providers
Investment management
Financial aspects
Dealing with surpluses
Interpreting financial statements
Governance
Legal aspects and legislation
Level of
understanding
Little
Total
21.8%
Average
11.4%
35.1%
High
18.7%
11.2%
This category tested the Trustees’ level of understanding of the Pension Fund and Retirement Legislation in SA.
Benefits offering and membership
Level of
understanding
Little
Total
15.9%
Average
7.7%
26.9%
High
25.3%
21.7%
This asked for the level of understanding and ability to differentiate between various funds.
Service providers
Level of
understanding
Little
Total
14.4%
Average
7.2%
23.6%
High
27.6%
24.4%
This category tested Trustees knowledge of service providers' and service providers’ responsibilities.
Investment management
Level of
understanding
Little
Total
15.8%
Average
8.8%
25.2%
High
25.2%
22.4%
This category asked for the Trustees’ level of understanding of investment conditions and performance of funds in
the SA market.
Financial aspects
Level of
understanding
Little
Total
18.8%
Average
10.2%
26.1%
High
24.3%
17.5%
Here, Trustees’ understanding of their role in administering financial aspects of a Retirement Fund was tested.
Dealing with surplus and legislation related surplus
Level of
understanding
Little
Total
21.3%
Average
12.5%
28.2%
High
22.8%
12.1%
This asked for the understanding and ability of the Trustees of the concept of retirement fund surplus/deficit and
how to set a formal surplus distribution strategy.
Interpreting financial statements
Level of
understanding
Little
Total
15.5%
Average
8.1%
22.4%
High
21.1%
29.8%
This asked for the Trustees ability to read and understand the financial statements of Retirement Funds.
Retirement fund governance
Level of
understanding
Little
Total
16.7%
Average
7.0%
23.5%
High
27.2%
22.9%
This tested the understanding of Trustees of Retirement Funds governance.
Unit standards
The four unit standards that have been developed specifically and approved by SAQA (South African
Qualifications Authority) for Retirement Fund Trustees are the following and cover:
U Std
IDTitle
Unit Standard
Level
Learning
Subfield
Body (SGB)
Standards
Generating
Field
123416
Demonstrate knowledge & understanding of the
individual’s basic rights & responsibilities under
a retirement fund
1
Finance, Economics &
Accounting
SGB Insurance &
Investment
Field 03
Business,
Commerce &
Management
Studies
1
123417
Demonstrate ability to use & interpret texts that
apply to the role & responsibilities of Trustees of
retirement funds
3
Finance, Economics &
Accounting
SGB Insurance &
Investment
Field 03
Business,
Commerce &
Management
Studies
3
123420
Demonstrate knowledge & understanding of the
role & responsibilities of Trustees of retirement
funds
3
Finance, Economics &
Accounting
SGB Insurance &
Investment
Field 03
Business,
Commerce &
Management
Studies
2
123419
Demonstrate knowledge & understanding the
duties of Trustees of retirement funds with
regard to death benefit
3
Finance, Economics &
Accounting
SGB Insurance &
Investment
Field 03
Business,
Commerce &
Management
Studies
2
NQF
Credits
After training, Trustees will be required to undergo formal assessments, including a:
• Portfolio of Evidence
• Research Assignment and
• Knowledge test
Competent learners will receive certificates of competence from INSETA and are awarded nationally recognised
credits towards the relevant unit standards.
Training providers
Deloitte Johannie Bayman
012 482 0184
Ekurhuleni East College Osborne Neluvhalani
011 736 4400
INTEC School of Insurance Petro Taljaard
021 417 6766
Investment Consulting & Trustee Services David Weil
011 656 1160
Investment Wise Joanne Miller
021 422 2701
The INSETA steering committee members involved in guiding this groundbreaking
project were:
Jan Mahlangu
COSATU
Lungile Thabo Twalo
ENDELEO Investment cc
Dennis George
FEDUSA
Olivia Davids
FSB
Wilma Mokupo
FSB
Charles Wells
INSETA
Glen Edwards
INSETA
Phakama Nkosi
INSETA
Busi Madlala
PricewaterhouseCoopers
Isaac Ramputa
Alistair Duminy
SASBO
Trust Ad Training
The full research report can be found on www.inseta.org.za