The FSCA launches the new Trustee Training Toolkit for retirement fund board members

by Thando Mbono | 5,Nov,2023 | FSCA, Industry Updates, Q4 2023

Thando Mbono, Manager of Fund Governance and Trustee Conduct, FSCA

A working paper published by the Organisation for Economic Co-operation and Development (OECD) a few years ago revealed that, when benchmarked against the OECD countries, South Africa compared favourably regarding member representation on the boards of retirement funds.

South Africa was shown to be one of the few countries which has a mandatory fifty per cent member representation on boards of retirement funds, with some countries requiring less (UK) or no member representation at all (Ireland).

Unlike countries like Australia, where individuals are required to be professionally qualified to be eligible for appointment to the board of a fund, board members in South Africa are required to meet fit and proper requirements of competence and personal integrity but do not require professional qualifications. This is consistent with international best practice.

To this end, approximately a decade ago, the Financial Services Board (precursor to the FSCA) rolled out the first online Trustee Training Toolkit (TTK) for board members of retirement funds. The completion of the initial TTK was voluntary for many years under the Pension Funds Act. However, that TTK was quite elementary in its scope and coverage, even though it represented a useful start.

On 10 July 2020, Conduct Standard 4 of 2020: Minimum Skills and Training Requirements (Conduct Standard 4) was gazetted, which made the completion of the TTK compulsory for retirement fund board members under the Pension Funds Act. In addition, Conduct Standard 4 provided that the FSCA may add further modules to the TTK, which would then also become compulsory for board members to complete.

The FSCA has now developed a new TTK, comprising 22 modules.  The new TTK is more comprehensive in its scope and coverage. It is compulsory for all board members to complete the new TTK irrespective of whether they completed the initial TTK.   This is pursuant to the legislative requirements that board members must must attain such levels of skills and training as may be prescribed by the FSCA.

On 26 September 2023, the FSCA launched the first 11 modules of the new TTK. Board members appointed on or before 26 September 2023 have six months within which to complete these modules. All new board members from 26 September 2023 onwards must complete the first 11 modules of the TTK, within six months from their date of appointment or election.

In developing the TTK, the FSCA has taken cognisance of the diverse backgrounds, demographics and varying retirement fund experience of board members. Accordingly, extreme care has been taken to produce the learning material at a level which will be accessible and “easy to understand” for all board members. To this end, plain language has been used to deliver the content, which is not overwhelming in its terms and focuses on the outcomes to be achieved.

In order to ensure a well rounded training experience, the FSCA has made a careful selection of relevant modules tailored to facilitate an easy training process through e-learning. This comprises a variety of learning methods, activities and graphics, which are used to cater for different learning styles.

Formative assessments play an important role throughout the learning process in tracking trustees’ progress and in addressing learning gaps before the trustee can proceed to the next concept.

Principle 3 of Circular PF 130: Good Governance of Retirement Funds recommends that, at the expense of the fund, board members, upon appointment or election should receive rigorous and comprehensive training on governance of retirement funds to ensure that they exercise their fiduciary duties efficiently and effectively, pursuant to sections 7C and 7D of the PFA. However, the FSCA is alive to the fact that not all retirement funds have sufficient resources in the way of training and education budgets for board members. The TTK is accordingly an intervention by the FSCA aimed at equipping trustees with the necessary basic skills and knowledge at no cost. Further, such other training interventions as may be made available by retirement funds are additional (and may be an important addition) to and not a substitute for the TTK.

Benefits of completing the TTK

Whilst section 7D(1)(e) of the PFA allows board members to seek expert advice where they lack sufficient knowledge, board members are ultimately accountable for the governance of the fund and all duties under the PFA and other relevant legislation, which accountability may include personal liability for board members. The TTK thus places a strong emphasis on fund governance, which is designed to empower board members to discharge their duties.

Accordingly, after completing the TTK, board members ought to be in a better position to assess and evaluate the quality of advice given to them by external experts. To this end, the TTK includes modules such as Governance, Contributions, Investments, Types of Benefits, Minimum Benefits, Protection of Benefits, Rules, Death Benefits and Effect of Divorce and Maintenance Orders.

Monitoring and enforcement

As mentioned, completion of the TTK is compulsory for board members. The FSCA will monitor its completion and take regulatory action where there is lack of compliance. Some of the ways the FSCA will monitor compliance are:

  • Reports generated by the TTK.
  • The Governance Return incorporated in the Omni Conduct of Business Return.
  • On-site inspections.

The FSCA will take appropriate regulatory action should board members fail to complete the TTK timeously or at all. It is, however, anticipated that this will not be necessary as the new TTK not only provides comprehensive training but it is also designed to be great fun for the user.  The FSCA is also aware that board members take their fiduciary duties very seriously shown by the high level of compliance in respect of completing the first TTK.  The expectation is that the completion of the new TTK will be no different and that there will be higher rates of completion leading to better outcomes for members, funds and the retirement industry.

Thando Mbono
Manager of Fund Governance and Trustee Conduct at FSCA | + posts