Question 1. What is a trustee?

The Oxford Advanced Learner’s Dictionary of Current English defines a trustee as ‘a person who has charge of property in trust or of the business affairs of an institution’. So with regard to a retirement fund it is a member of the board that is in charge of the (business) affairs of the Fund.
To place this in perspective a director is defined in the same dictionary as ‘a person who manage the affairs of a business company’.

A trustee thus has similar responsibilities as a director of a company.

Question 2. What should the requirements for an independent trustee be?

Most importantly an independent trustee should be truly independent, not attached to any service provider in particular with regard to substantial shareholding, either way, or a service – or procurement agreement.

Secondly an independent trustee should have extensive experience in the retirement fund market preferably as a consultant. The independent trustee's experience should not be limited to a certain field related to the retirement fund market, i.e. investments only, he should rather be a generalist instead of a specialist. Should specialized advice be required the trustees should utilize the services of specialists.

The independent trustee should be able to understand and communicate with all the trustees and members of the fund. Experience in the trade union market would be a major advantage in the case of unionized funds.

Fourthly a formal qualification related to retirement funds should be part of the independent trustees' curriculum vitae.

If the authorities institute a requirement to register with the Financial Services Board as an independent trustee that should also be made a requirement.

Question 3. What are the duties of a trustee?

In terms of the Pension Funds Act the duties of retirement fund trustees are to –

Take all reasonable steps to ensure that the interest of members are protected
• Act with due care, diligence and good faith
• Avoid conflicts of interest
• Act with impartiality in respect of all members and beneficiaries
• Ensure that proper registers, books and records of all the operations of the fund are kept, inclusive of proper minutes of all resolutions passed by the board
• Ensure that proper control systems are employed by or on behalf of the board
• Ensure that adequate and appropriate information is communicated to the members of the fund informing them of their rights, benefits and duties in terms of the rules of the fund
• Take all reasonable steps to ensure that contributions are paid timeously to the fund in accordance with the Act
• Obtain expert advice on matters where board members may lack sufficient expertise
• Ensure that the rules and the operation and administration of the fund comply with the relevant legislation

Many of the duties outlined in the Act are common law fiduciary duties. that is basically repeated in the Pension Funds Act. This does not mean that other common law fiduciary duties do not apply or are of less importance than those mentioned in the Act. Trustees should also be aware of the other common law duties.

The Mouton Committee report summarized as follows; -
“To act with due care: The standard of care required is greater than that of the reasonable person. The duty is to act with diligence.

To ensure the above standard of care when matters relevant to the fund’s administration and management are being considered, trustees should follow a carefully worked out agenda that will reinforce the discipline required.

The trustees must keep the members fully acquainted with matters relevant to their status such as changes to benefit structures, legislation and their rights and obligations thereto.”

It is important to note that the courts have interpreted the requirement to act with due care as taking greater care than a person will with his own affairs.

Mouton continue; “To act in good faith: There are no degrees of good faith. This is important since any judgment of a trustee’s action will be based on an unqualified standard of good faith, e.g. a breach of good faith, no matter how minor, means that a trustee’s action is mala fides or in bad faith. There are no degrees of good faith, only good faith or mala fides.”

Although Mouton correctly states that there are no degrees of good faith it has many times been said that trustees must observe utmost good faith in relation to the fund. Acting utmost good faith, as distinct from good faith, means the trustees must put the interests of the fund above the interests of anyone else (including the members, the employer) and above their own interests. To act in good faith means to act honestly and to exercise discretion for the purpose that the discretion was given.

Mouton concludes; “To hold assets for the benefit of the fund and its members: A trustee must be satisfied that only a member and their beneficiaries benefit from a fund’s assets. Thus a trustee must ensure that any person regarded by them as a beneficiary is indeed a beneficiary and correctly entitled to benefits….”

This is but a short description of the duties of a trustee. Trustees should attend formal training sessions in order to familiarize them with the many duties that they have.

Question 4. What are the risks of being a trustee?

In terms of the common law a trustee could be liable in his or her personal capacity for any loss or damage caused as a result of his or her improper conduct. Trustees maybe held liable jointly and severely for any loss suffered by the fund due to the actions or omissions of the trustees if they have acted in an improper manner. An improper manner can include that they failed to act with due care and diligence or acted mala fides.

In terms of the Financial Institutions (Protection of Funds) Act, a penalty of 15 years imprisonment can be imposed on conviction of each criminal offence mentioned in the Act.

The pension funds adjudicator, has warned in many determinations that trustees will be held liable in their personal capacity if it could be proven that they acted in an improper manner. The adjudicator remarked that trustees of retirement funds who fail the members they are supposed to represent will be made to personally pay the price if members suffer financial losses. The good governance of a fund depends on an "arms-length relationship between the employer and the board of trustees". The trustees should run the fund for the benefit of all members, and manage the fund in a transparent manner.

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