The Financial Services Board (FSB) is circulating proposals for a major overhaul of retirement fund rules which will give members a far greater say in the running of the funds.
The changes are based on amendments to the Pension Funds Act approved by Parliament over the past year.
In terms of the Act, rules will have to be changed to establish boards of trustees with each board having at least four members of whom at least 50 percent must be elected by members.
The only exceptions are for umbrella funds and retirement annuity funds.
The FSB proposals state the rules must stipulate a number of things including:
* The number of board members;
* The election procedures for member trustees and how the non-member trustees will be elected or appointed;
* The duration of office for trustees;
* Voting rights and quorums at meetings;
* Procedures to break deadlocks;
* Procedures for the removal of board members;
* The payment of trustees.
In addition to the mandatory stipulations, the FSB has recommended the rules also include:
* Whether it is necessary for member-elected board members to be members of the fund;
* The procedures for nominating member-elected members;
* Notice of elections;
* An indication of how many member-elected board members should represent active members, deferred members or pensioner members, with the FSB recommending each constituency be given a proportionate number;
* Who should be permitted to be a board member, based on guidelines in the Companies Act;
* The formal and informal training that board members should receive to carry out their legal responsibilities;
* The continuity of the board by ensuring that not all members come up for re-election at the same time;
* The election and term of office of the chairperson and whether the chairperson should have a casting vote;
* On what matters a unanimous vote would be required; when a special quorum would be required; and when an ordinary quorum would be required;
* How the board should report to members and the levels of disclosure they should adhere to;
* Whether the board should appoint administrators and professional advisers, how they should be appointed and how they should be monitored; and
* How to deal with conflicts of interest.
The FSB proposals also state that changes to rules should take account of a number of other issues including:
* Preventing members serving in perpetuity, with a maximum of five years if they are not specifically re-elected;
* No board member should be given extra weighting and no faction should have undue power to sway board decisions;
* Quorums should be structured in such a way that the member-elected and non-member elected members are equally represented; and
* The casting vote mechanism should be used as a deadlock-breaking mechanism and not as a power-retaining mechanism. Ideally the chairperson should a rotated on an annual basis.
The proposals also deal with applications for exemption from the amendments to the Pension Funds Act.