For most people, their pension fund is their biggest savings and will make up the majority of their income on retirement. Yet most people spend very little, if any, time making sure their pension is properly invested and providing decent returns.
There is no point in discovering at the age of 50 that a pension plan was badly invested and has left you high and dry. Take control of life savings by, firstly, insisting that your broker provides you with regular updates and advice. In the case of an in-house pension fund, this duty tends to be taken on by the trustees, but if your company is part of an umbrella fund, in other words, it is administered as part of a larger pension fund, your company will be serviced by an independent broker. It is vital to ensure that the trustees invest wisely and, in the case of the broker, that you receive regular and appropriate advice.
As a member of a pension or provident fund, you have the right to expect a certain level of communication either from the trustees or the broker. Both trustees and brokers receive a fee, which is deducted off your contributions, so make sure you are getting value for money.
Your broker should be meeting with you at least once a year to review your individual needs and report back to the group on the fund’s performance.
According to Hugh Hacking, marketing manager at Old Mutual Corporate, an intermediary has several duties.
He/she is responsible for providing advice and then processing the options at the time of the annual reviews of risk cover and related fees.
Where there is member investment choice, in other words a range of investment portfolios to choose from, it is advisable for the employer to arrange for the intermediary to assist the member in the most appropriate choice.
Being independent, the broker must ensure that the structure of the fund selected is appropriate for the company as this can have an impact on costs.
He/she needs to provide information and advice regarding legislative changes affecting the fund.
The intermediary is also there to assist the employer with administrative responsibilities and provide support at pension fund meetings.
Apart from keeping you abreast of your investment, the intermediary must also advise the member about the most appropriate options upon withdrawal, retirement and/or disability. He/she must also assist in the processing of claims should a member withdraw from the fund, die or become disabled.
While brokers provide you with advice, they are not responsible for the actual investment. This is the responsibility of the trustees. An in-house fund will have appointed its own trustees, which could include qualified employees from the company. An umbrella fund has trustees appointed by the management company. Trustees are the people who can be sued if they invest your money recklessly.
According to Hacking, trustees are responsible for the financial management and administration of the fund and their duties include managing the fund in an efficient and transparent way, choosing the best investment managers and investments, and communicating regularly with members.
Checklist
How does your fund measure up to the checklist?
- Do you receive regular communication/statements from your trustees?
- Do you have all the info necessary to choose the right option for you?
- Do you know what all the charges on your fund are?
- Can you easily access information?
- Are you comfortable that the trustees are competent to deal with your savings?