The National Pensions Act, 2008 (Act 766) as amended defines a trustee as an individual or company appointed to carry out the purpose of a trust in accordance with the provisions of the trust instrument and general principles of trust law. A trustee is appointed to hold in trust, assets of a pension scheme for the benefits of its members in accordance with the trust deeds and scheme rules.
The introduction of the 3-Tier Pension Scheme by the National Pensions Act 2008 (Act 766) as amended has put trustees at the centre of the management of pension schemes in the country.
Unlike in the past where Social Security and National Insurance Trust (SSNIT) is the sole manager of the public pension scheme, the introduction of Act 766 as a result of the pension reform in the country has de-monopolised the management of the public pension scheme. The law has made it compulsory for every pension scheme that is expected to provide retirement and related any benefits to its members to be managed by trustees licensed by National Pensions Regulatory Authority (NPRA), a body established by Act 766 to oversee the administration of all pension schemes in the country.
A trustee, whether an individual person or a company acts separately from the employer and is responsible for proper running of the scheme, protection and safeguarding the scheme assets for the benefits of its members and other beneficiaries.
In order to protect and safeguard the scheme and its assets, trustees are expected to perform certain key roles under the pensions law in administering a pension scheme. These roles are very important to the management, survival and growth of the scheme. Some of these roles and responsibilities are discussed as follows;
Collection of Contributions
One key role of trustees is to ensure that every member pays his/her contributions into the scheme. This is very important to the survival and growth of the scheme. Any pension scheme in which the contributors fail to pay or delay in paying their contributions is likely to face problems which may lead to failure of the scheme in the long run. Contributions are, the backbone of any pension scheme and as such it is the responsibility of the trustee to monitor and ensure that, the right contributions are paid by the contributors and on time.
They have the duty to report to the Authority, contributors who fails to pay their contributions. In most cases trustees may find it difficult to report especially the employer. Failure to report the employer may give an impression that the trustee is conniving with the employer in delaying or refusing to pay the contributions. Trustees therefore have the responsibility to ensure that, employers pay the right contributions according to payment schedule for the scheme to meet its objectives.
Appointments of Service Providers
Trustees are the only body that the pension’s law permits to appoint service providers such as pension fund managers, pension fund custodian and third party administrators in the management of pension schemes. Been very much aware of the instances that may occur in the appointment of the service providers which may pose a threat to the safety of the scheme, the Pensions Act enjoins trustees to ensure that, the service provider is independent of every individual or company who is associated or have interest in the scheme. The trustee must ensure that, the service provider has no relationship of any kind with any of the members of the Board of trustees, the sponsored employer or any company, an officer or a relation of the trustee or the employer.
The trustee can request the investment advisor and other service providers appointed to disclose any issues of conflict of interest that would or has arisen as a result of their appointment. They must also make sure that any management contract with service providers has the necessary clauses required by the guidelines issued by the Authority.
Finally, it is the responsibility of the trustee to ensure that the appointment of any service provider with respect to the management of pensions schemes are done in good faith and with the interest of members to ensure the safety of the scheme and its funds for the benefit of scheme members.
Investment of Pension Funds and Assets
The Pension Fund Manager is appointed to give professional investment advice to the trustee as to the best investment strategy to adopt for good returns. Although the fund manager has the expertise, it does not necessary mean that, every advice they give is compiled without scrutiny. Trustees are responsible for the investment of the scheme funds and as such it is their duty to scrutinise the advice and make sure that the right investment decisions are made, and are in the interest of members. Trustees have the responsibility to ensure that these investments advice are in accordance with the investment policy of the scheme and are within the permitted investment of the Pensions Act and the investment guidelines issued by the Pensions Authority.
The law mandates the trustee to maintain Statement of Investment Policy (SIP) which is a statement of investment principles governing decisions of investments of scheme funds. The statements should indicate investment objectives of the fund, the kinds of securities and assets the funds may be invested in, including possible risks of implementing the investment policy. These documents should inform the scheme members and other stakeholders as to the prudent investment practices undertaken by the trustees.
In some Employer Sponsored Schemes (ESS), the employer or the controller of the employer sometimes exerts pressure on the trustees as to where to invest the funds. Whatever the case may be, the trustee would be held responsible and would have to answer queries on operations of the scheme. Trustees are expected to be firm and assertive in dealing with the employer or the sponsor in matters regarding investments in order to safeguard the scheme assets in the interest of members.
Establishment of Internal Control Procedures and Systems
The National Pensions Act, 2008 (Act 766) as amended requires trustees to establish internal control procedures and objectives for each scheme under its management. The objectives of these internal control measures are to ensure that, every activity carried out in the course of managing a scheme is in conformity with the law and the guidelines issued by the Authority and ultimately to ensure the safety of the scheme funds.
The control objective is also to ensure that, the assets of the scheme are separated from that of the sponsored employer, trustees and other service providers and any other persons or institutions appointed to provide services for the scheme.
These control measures include, effective monitoring and supervision of investment activities, assets and liabilities of the scheme, so as to be able to establish at any point in time the true nature of the scheme assets. The trustee is also required to ensure effective records keeping so that statements and reports produced on the activities of the scheme are accurate and give a true nature of businesses of the scheme.
Provision of up-to-date information
Trustees of pension schemes are obliged under the law to provide up- to- date and adequate information on the operations of the scheme to members and other stakeholders to in ensure transparency in the management and safety of the pension fund.
Such information include; scheme rules which contains general description of the scheme such as terms, fees and other charges payable under the scheme, detailed procedures of managing the scheme funds and details of contact person.
One major information that trustees are expected to provide to scheme members is contribution statements. The statements should indicate accrued contributions and the periods of which contributions have not been paid. Contributors must demand these statements to ensure that, their contributions are up to date and timely honoured.
It is the duty of the trustee to ensure that these and other important reports such as the scheme annual report, investment report, auditor’s report and other accounting records and information on the administration of the scheme are prepared and made available to the scheme members, the Authority and other institutions for effective monitoring and safeguarding of the scheme funds.
Separation of Pension Scheme Asset
A trustee according to the Occupational Pensions Scheme regulations, must ensure that the assets of the scheme are recorded appropriately and separated from the assets of the employer and the trustees’ personal properties. The assets of the scheme must be administered as trust property and should be applied or invested for the purposes of the scheme in the interest of members. The trustee must ensure that, this is applied strictly for effective monitoring and supervision to enable the scheme to meet its primary objective. Trustees must not allow employers to mix the contributions of workers with finances of the employer.
Although safeguarding the scheme assets is the duty of all stakeholders including the Pensions Authority, trustees are first to be held liable in the mismanagement of the scheme assets.
Anyone who takes up the mantle of trusteeship must know that people’s future lives has been entrusted in his/her hands and therefore must have the moral courage aside their required fiduciary duties to manage the scheme with interest of members at foremost in every decision taken.
By Frank Anderson