A survey was recently conducted by PricewaterhouseCoopers (PWC). The survey focused on Trustees’ activities and remuneration; Trustees’ education; and Principal Officers and their remuneration. New survey topics covered chairpersons and sub-committees as well as regulatory matters and retirement reform.
Key findings: Trustees and their remuneration
- The average Trustee board has eight members.
- Specialist funds have two professional Trustees on average.
- 28% of Trustees do not act on any sub-committees, while 34% act on two sub-committees.
- The proportion of professional Trustees to total Trustees remained at 11% overall. This increased to 23% (as opposed to 34% in the 2012 survey) for the specialist funds and dropped to 5% (as opposed to 2% in the 2012 survey) for the standalone funds.
- Proportion of respondent funds that remunerated Trustees: 11% remunerated all Trustees, 39% remunerated some Trustees and 50% did not remunerate any trustees.
- For 90% of boards, Trustee turnover is not unduly rapid – 59% of Trustees serve for 3-5 years and a further 31% for over five years.
- The median average annual remuneration band for professional Trustees is R10 000-R50 000 pa for service on the main board as well as on sub-committees.
- 90% of funds do not link remuneration to Trustees’ performance.
Key findings: Trustee education
- 94% of professional Trustees have more than five years’ experience and 53% have more than 10 years’ experience.
- 91% of professional Trustees have a degree or postgraduate qualification.
- 70% of member-elected Trustees have a degree or postgraduate qualification.
- 75% of funds have assessed Trustees’ training needs in the past two years (as opposed to 66% in the 2012 survey).
- Trustees spent an average of 17 hours per year on training and attending industry events (compared to 27 hours in the 2012 survey). This decline may be due to factors such as less major industry changes (eg Regulation 28) and increases in the costs of industry rendering them less affordable.
*This pattern remains virtually unchanged from the 2012 survey
Key findings: profile of the typical fund Chairperson
Fund chairpersons typically:
- Spend 4-8 days on fund matters annually
- Spend 30% more time on fund matters than other trustees
- Serve on at least one and often two, or more, board sub-committees
- Are usually better remunerated chairing a standalone fund rather than a specialist fund
- Are supported by a Principal Officer who earns at least ten times more than the Chairperson (but this may include earnings from other funds that the Principal Officer works for)
- Is supported by two professional Trustees if on a specialist fund, but only one on a standalone fund
- Have a 80% chance of having a professional trustee serve with them on a sub-committee if such a sub-committee exists.
- Are responsible for about R400 million in fund assets as their basic prorata share (with each of their fellow Trustees) of joint and several liability.
Key findings: Principal Officers and their remuneration
- 72% have 10 or more years’ experience.
- 84% have a degree or postgraduate degree.
- 53% have a postgraduate degree.
- The median remuneration band for principal officers across all funds was R350 000 – R600 000, but for large funds this was R600 000-R1 000 000.
- 31% were remunerated more than R1,000,000 by large funds.
- Principal officers’ attendance of training and industry events takes up + 34 hours or one man week per year on average for small and medium funds, but + two man weeks for large funds.
- The average time spent on fund matters by principal officers is 15-23 hours per month for small and medium funds and 56 hours for large funds.
What is the basis of Principal Officers’ remuneration?
No remuneration, 37%
Fixed monthly or annual fee, 31%
Hourly rate for time spent on fund affairs (including trustee meetings), 15%
In employment of employer / sponsor (hence remunerated by employer / sponsor), 11%
Fixed fee for attendance per meeting, 1%
How many average hours per month do Principal Officers dedicate to the fund?*
Beneficiary funds, 8
Preservation funds, 23
Retirement Annuity funds, 27
Standalone funds – defined benefit, 38
Standalone funds – defined contribution, 32
Standalone funds – hybrid, 39
Umbrella funds – Type A (open to all participating employers), 34
Umbrella funds – Type B (closed group of related participating employers), 75
Unclaimed Benefit funds, 54
Standalone funds – small, 1
Standalone funds – medium, 52
Standalone funds – large, 356
*The broad pattern is similar to that seen in the 2012 survey, but there are also some significant changes in time spent compared to 2012.
Regulatory matters and retirement reform
- 79% of respondents indicated that compliance with regulatory changes such as Regulation 28 and retirement reform would result in additional cost for members (compared to 73% in the 2012 survey).
- 76% of respondents believe there is scope for simplification and cost reduction in their funds (compared to 68% in the 2012 survey).
- The most favoured cost reduction measures identified were:
- To make use of passive investment strategies.
- To move risk benefits outside the fund / remove or reduce member investment choice.
- To move from a standalone fund to an umbrella fund.