Too often the younger we are the less we think about the distant future – our retirement years. Thankfully by belonging to your retirement fund you are taking important steps in creating the retirement you deserve.

When do I become a member?

The South African Revenue Service (SARS) says that any person employed by a company offering a retirement fund MUST become a member of that fund.

You automatically become a member of a fund as a condition of employment if you fulfill the eligibility requirements as set out in the fund rules.

Usually the two main requirements are that you be:

  • A permanent, full-time employee.
  • Below normal retirement age as set out in the rules of the fund.

Membership of your employer’s fund is part of your employment contract. According to current legislation, you cannot leave the fund while working for your employer. This means that you can’t take your money out of the fund while you are still employed by the company.

Defined contribution vs. defined benefit funds

Your pension or provident fund may be either a defined contribution or defined benefit fund.

Defined contribution funds Defined benefit funds
  • The benefit you get when you retire depends on how much money you and your employer have paid into the fund, as well as how the fund's investments have performed.
  • Your retirement benefit is made up of:
    • All your contributions
    • All the company’s contributions towards your retirement benefit
    • Any amounts transferred into the fund from a previous fund
    • Any interest earned on these amounts.
  • You will get a pension based on your years of service and your salary at retirement.
  • Your contribution to the fund is a fixed percentage of your salary.
  • Your employer’s contribution is not a fixed percentage and is calculated with a formula. This formula is based on the pension amount you should receive on retirement.

Fund details

Every fund has a:

  • Name
  • Financial Services (FSB) number
  • Fund number issued by the South African Revenue Service (SARS).

How is the fund managed?

Board of trustees

Your fund is managed by a board of trustees who make sure that your interests, as a member, are properly protected.

Trustee responsibilities

The trustees have a duty to:

  • Manage the fund according to the rules of the fund as well as pension fund and tax laws.
  • Take all reasonable steps to make sure your interests are always protected.
  • Act with due care, diligence and in good faith.
  • Avoid conflicts of interest.
  • Act with fairness for all members and beneficiaries.
  • Make sure proper control systems are in place.
  • Make sure you get appropriate and adequate communication.
  • Take reasonable steps to make sure contributions are paid on time.
  • Get expert advice where they lack expertise.
  • Make sure the operation and administration of the fund complies with all relevant laws.

How are trustees appointed?

A board of trustees is made up of employer-appointed and member-elected trustees. This means that while the employer appoints trustees, you as a member choose at least half of the fund’s trustees.

You have a direct say in how your fund is managed through the trustees you elect.

Fund rules

Every retirement fund is governed according to its own particular set of rules. The rules of different retirement funds must:

  • Comply with the law
  • Be registered by the Registrar of Pension Funds
  • Be approved by the Commissioner for the South African Revenue Service (SARS).

If there are any conflicts between fund communication (such as a member booklet you get) and the fund’s rules, the rules will always apply. In the event of a dispute arising, the dispute resolution mechanism in the rules of the fund will apply.

You can view the rules of the fund, the financial statements and most recent financial returns at the fund’s registered address.

A fund’s principal officer

The Pension Funds Act says that every fund should have a principal officer and describes what the principal officer’s duties are.

The principal officer:

  • Is the fund’s official contact person with the Financial Services Board (FSB), which is the official body that makes sure every fund is run according to its rules and the Pension Funds Act
  • Signs all documents for the fund
  • Makes sure the fund complies with all pension-related laws.

A fund’s advisers

The trustees must remain up to date with the latest retirement industry developments and use expert advice to make sure they are managing your retirement money in the best way possible. They appoint industry experts to help them with the management of your fund.

Usually a fund’s advisers include actuaries and consultants, administrators, auditors, bankers and investment managers.

Actuaries and consultants: These are the mathematical and financial experts who perform the necessary calculations required by a retirement fund, such as benefit calculations, and who also make sure that a fund is in a sound financial position. They also advise the trustees on the management of the fund.

Administrators: A fund’s administrators handle all the day-to-day administrative duties of a fund. They make sure contributions are received on time, benefits are paid out, new members are registered, and so on.

Auditors: The auditors examine a fund’s financial statements once a year to make sure a fund’s financial situation is above board and that the information reported in the financial statements is correct and accurate.

Bankers: This is the bank where a fund keeps its accounts - from which, and into which, fund money is paid.

Investment managers: These are the specialists who, together with the trustees, put together a fund’s investment strategy and then put that strategy into practice.