Futuregrowth notes the publication of Directive PF No.8 on March 8, 2018 which we see as another key component in the drive to set clearer and more consistent rules to improve governance in our industry.
- The practice of “gifting” in the industry has perniciously created the potential for conflict or corruption by people acting in fiduciary capacities. Thus, we welcome the Pension Funds Regulator’s proactive approach to prevent potential corrupt activities in the pension fund industry.
- Futuregrowth has a long-standing history in managing pension fund monies and is supportive of the regulator’s issuing Directive PF No. 8, which re-emphasizes and strengthens the fiduciary role each stakeholder must play in protecting the pensions and life savings of all the citizens in our country.
- We note that Board Notice 58 of 2010 had earlier applied limits on gratuities (given or received) of R1,000 per-person-per-counterparty-per-annum, but only applied to Financial Service Providers (FSPs). Thus, the previous directives did not explicitly include pension fund trustees. While many industry participants chose to interpret the BN 58 as being overarching (for all fiduciaries) and applied the R1,000 limit widely, the regulatory gap was unfortunately exploitable by some parties (on all sides).
- The new Directive, PF No.8, makes it clear that all fiduciaries in the service of retirement funds are now subject to a gratuity limit. That limit appears to be R500 per-person-per-counterparty-per-annum. Further, the definition of “gratification” is sufficiently wide and inclusive so as to prohibit the giving of any material gift.
- Buttressing the Directive, we note that all fiduciaries now have a duty to report any breach to the Registrar.
- A very positive step is that the directive specifically carves-out an exception to allow retirement fund trustees/board members to be remunerated for their service by the sponsor of a retirement scheme.
- Further, the directive may serve to encourage retirement funds to allocate budgets to provide training for trustees for their service.
We note that it may be beneficial to allow service providers to provide and/or subsidize bona-fide, third-party, educational programs for retirement fund trustees to improve and support their fit and proper status. Such future exception, however, should be only for education, and be subject to appropriately constrained value limits.
- PF No. 8 has only just been released, and some of its elements are open to interpretation and will need clarification. But the broad thrust of the directive is very clear. We believe this notice, properly applied, will eliminate the practice of “gifting” within the industry.
- Our only real complaint with this circular is that it would have been preferable if it had been introduced several years ago. Secondarily, the gratification limits in BN 58 and PF No. 8 should be aligned (e.g. either R500 or R1000 per person, per counterparty, per year) so as to bring FSPs in line with other fiduciaries.
- We view the FSB as a partner in this drive and as such we are fully supportive in their endeavours and the implementation of such new controls and principles.