ISASA Independent Schools Association of Southern Africa

Transcription

1 ISASA Independent Schools Association of Southern Africa THE INDEPENDENT SCHOOLS ASSOCIATION OF SOUTHERN AFRICA PENSION SCHEME AND PROVIDENT FUND LEARNING PLANNING LIVING 2015 REPORT BY THE BOARD OF TRUSTEES

2 HIGHLIGHTS TOTAL ASSETS R4 BILLION TOTAL MEMBERSHIP OF FUND WEBSITE VISITS (last 2 years) TROPHY WON: UMBRELLA CATEGORY FOR COMMUNICATION AT IRFA CONFERENCE MOBILE APP DEVELOPMENT - PROVIDING ACCESS TO FUND INFO VIA MOBILE PHONES R369 MILLION PAID OUT IN BENEFITS TO MEMBERS AND PENSIONERS

3 LEARNING PLANNING LIVING TABLE OF CONTENTS INTRODUCTION FUND OVERVIEW MANAGEMENT AND CONTROL OF THE FUND REVIEW OF THE YEAR S ACTIVITIES 4.1 MEMBERSHIP 4.2 BENEFITS PAID INVESTMENTS 5.1 PENSION SCHEME (PART I) 5.2 PENSION SCHEME (PART II) AND PROVIDENT FUND PENSION INCREASES GENERAL 7.1 NOMINATION OF BENEFICIARIES 7.2 PRESERVATION OF BENEFITS 7.3 ADVICE TO MEMBERS 7.4 RETIREMENT REFORM 7.5 OLD MUTUAL FUND SELECT ANNUITY PAGE 04 PAGE 04 PAGE 04 PAGE 06 PAGE 08 PAGE 11 PAGE 12 PAGE 13 PAGE 14 PAGE 15

4 1. INTRODUCTION The Trustees of the ISASA Pension Scheme and Provident Fund (`the Funds ) have pleasure in presenting their report for the financial year ended 28 February This report provides you with an overview of the activities, management, administration and financial status of the Fund during the past financial year. 2. FUND OVERVIEW (and translated into isixhosa and isizulu) to explain the various information fields contained on the statements. The Funds communication efforts were recognised as the best in the industry and the Funds won the Umbrella Fund Category Trophy for Stakeholder Communication: Communication Strategy, at the annual Institute of Retirement Funds Africa s Conference during July The Funds competed with other large umbrella funds in the industry and also received a Special Mention award for communication to minority groups. For the year under review 110 schools participated in the Funds with a total membership including pensioners of 9600 as at 28 February The investments of the Funds have continued to grow in line with the benchmark inflation targets set in the Funds Investment Policy Statements and are reviewed on a quarterly basis to ensure the best possible growth for members. A pension increase of 4.7% was awarded with effect from 1 September Since 2012 the Board of Trustees has focused on improving member and pensioner communication and regularly conducts research to ensure that communication is relevant and appropriate to enhancing members knowledge levels regarding retirement funding. In response to feedback received from Bursars, members and pensioners of the Fund it was decided to develop a mobile App that would allow members and pensioners access to fund information via their mobile phones. The Fund will launch the App during September Research also showed an increased demand for retirement planning sessions and face to face education of members regarding their fund benefits. The Funds benefit statements were also reviewed during the year to ensure maximum comprehension and in addition Benefit Statement Posters were created Actuarial valuations for the Funds were performed as at 28 February 2014 and the Valuator reported that the Funds were in a sound financial position. The next statutory valuation is due as at 28 February The audit for the year ended 28 February 2015 has been finalised and the financial statements for the Funds were submitted to the FSB during August MANAGEMENT AND CONTROL OF THE FUND The Funds are managed by a Board of Trustees and administered by Old Mutual. The Board of Trustees of the Funds is constituted in terms of the Funds Rules and the Pension Funds Act No 24 of 1956 (as amended). The current Board consists of five regional Memberelected Trustees, one Pensioner- elected Trustee, and five Employer-appointed Trustees which include a SAHISA representative, a SABISA representative, and three ISASAappointed Trustees. An independent Chairperson is also elected by the Board. There is also an Alternate Memberelected Trustee, to act in the absence of each of the Member-elected Trustees. PAGE 04

5 PAGE 05 LEARNING PLANNING LIVING THE BOARD OF TRUSTEES CURRENTLY CONSISTS OF THE FOLLOWING MEMBERS: Rob Lloyd Chairman & Independent Howard Rodd Trustee ISASA Investment Consultant Andre Pienaar Trustee ISASA Actuary Jamie Inglis Trustee ISASA Investment Consultant Michael Acutt Trustee SABISA Bursar Selwyn Marx Trustee SAHISA Head Johnny Smith Trustee Member Central Region Di van Heerden Trustee Member Eastern Cape Region Sue Greer Trustee Member Kwa-Zulu Natal Region Marlene Du Plessis Trustee Member North East Region Jan de Waal Trustee Member Western Cape Region Mike Bandey Trustee Pensioner Retired Deputy Head Varinia Eddie Alternate Member Central Region Juanella Brittle Alternate Member Eastern Cape Region Bob Reynolds Alternate Member Kwa-Zulu Natal Region David Tshishivhiri Alternate Member North East Region Sean Henchie Alternate Member Western Cape Region Chris Erasmus Alternate SAHISA Western Cape Region John Lobban attends Trustee Meetings by invitation in an ex-officio capacity, as Director: Membership and Operations of ISASA. The Board of Trustees has a fiduciary duty to act in good faith, with due diligence and care, to avoid conflicts of interests and act with impartiality in respect of all its members, being ultimately accountable and responsible for the performance and affairs of the Fund. PRINCIPAL OFFICER JOHN ROLLASON (INDEPENDENT) The Principal Officer is the executive representative of the Funds, and official contact person for the Financial Services Board. The Principal Officer has the same fiduciary responsibilities to the Fund as those pertaining to the Trustees. John was appointed on 1 April 2015 to replace Kevin Prinsloo who resigned. SUB-COMMITTEES The Funds are run with a sub-committee structure reporting to the full Board. The following sub-committees are in place: 1. Audit and Administration sub-committee; 2. Investment Sub-Committee; 3. Communication & Marketing Sub-Committee

6 1. AUDIT AND ADMINISTRATION SUB-COMMITTEE The Audit and Administration Sub-Committee, formed in 2003, meets on a quarterly basis. It consists of five members, Johnny Smith (Chairman), Michael Acutt, Andre Pienaar and Rob Lloyd. The Principal Officer, John Rollason also attends. The Actuary and representatives from the administrator attend the meetings as observers. Representatives from the auditors attend once a year to present the financial accounts. ADMINISTRATORS AUDITORS ACTUARIES Old Mutual Deloitte & Touche OMAC Actuaries & Consultants 2. INVESTMENT SUB-COMMITTEE The Investment Sub-Committee, formed in 2007, meets on a quarterly basis. It consists of four members, Howard Rodd (Chairman), James Inglis, Selwyn Marx, Rob Lloyd and the Principal Officer, John Rollason, also attends. The Actuary attends the meetings as an observer. 3. COMMUNICATION & MARKETING SUB-COMMITTEE INVESTMENT MANAGERS FUND CONSULTANTS INSURED DEATH/ DISABILITY BENEFITS Investment Solutions Limited and Old Mutual Old Mutual Actuaries & Consultants Old Mutual and Momentum The Communication and Marketing Sub-Committee, formed in 2011, meets on a quarterly basis. This group consists of five members, Sue Greer (Chairperson), Mike Bandey, Di van Heerden, Selwyn Marx and John Rollason. To assist the Trustees with the management and control of the Funds, the following appointments were in place for the year under review: COMMUNICATION Retirement Wise CONSULTANT The Board continues to closely monitor all service providers and the level of service received by the members. They strive to ensure that issues arising are timeously and effectively resolved. 4. REVIEW OF THE YEAR S ACTIVITIES 4.1 MEMBERSHIP PARTICIPATING SCHOOLS As at 28 February 2015 there were 110 participating schools in the Pension Scheme and Provident Fund. MEMBERSHIP OF THE PENSION SCHEME AND PROVIDENT FUND As at 28 February 2015 the membership of the Funds, including pensioners and disability income members, is detailed on the following page. PAGE 06

7 PAGE 07 LEARNING PLANNING LIVING PENSION SCHEME PART 1 & PART 11 MEMBERSHIP PART I (Defined Benefit) PART II (Defined Contributions) 1500 PROVIDENT FUND MEMBERSHIP PENSIONER MEMBERS Pensioners Spouses 600 Children

8 4.2 BENEFITS PAID Benefits paid during the year were: No. of Members Lump Sums Part I Part II Provident Fund Part I (R) Amount Paid in Benefits Part II (R) Provident Fund (R) Retirement Death Withdrawal Disability Surplus Involuntary Retrenchment Unclaimed Benefits Divorce Orders Paid to Pensioners TOTAL INVESTMENTS The accumulated funds of the Pension Scheme and Provident Fund up to 28 February 2015, were as follows: Pension Scheme - Part I & Part ll Provident Fund Total Funds as at 1/3/ Plus contributions Minus benefits Transfers Terminations Plus / minus investment returns TOTAL FUNDS as at 28/2/ Global and local markets continue to be characterised by high volatility and as a consequence of these fragilities, a continuing conservative approach to investment scenarios is essential. The Trustees continue to feel that it would be unwise for members to react impulsively to the current financial turmoil. In particular, the Trustees would advise against defined contribution members making large scale switches to their investments. The Life Staging Model introduced during 2008 is designed to mitigate the risk of the impact of poor investment markets in the critical period before a member retires. The Trustees also strongly recommend that all members who will be retiring or leaving the Fund in the near future seek professional advice to ensure that their ongoing investments are appropriately structured. PAGE 08

9 PAGE 09 LEARNING PLANNING LIVING 5.1 PENSION SCHEME (PART I) The investment of the Pension Scheme (Part I) allows each participating employer a choice of investing 100% in the Old Mutual Stable Growth Portfolio (AGP) or a combination of 50% in the AGP and 50% in the Investment Solutions Performer Portfolio (ISPP). Pensioner assets are invested in the Old Mutual Absolute Stable Growth Portfolio (AGP). OLD MUTUAL ABSOLUTE STABLE GROWTH PORTFOLIO The Absolute Stable Growth Portfolio is a balanced, smoothed bonus portfolio, whereby assets are invested in a mix of asset classes (domestic and global shares, bonds, property and cash), and a monthly bonus is declared in order to smooth out the daily fluctuations in the performance of the asset classes. As at 31 July 2015, the performance of the Absolute Stable Growth Portfolio was: Period AGP Stable 2007 series Inflation (Headline) 1 year 17.0% 4.7% 3 years 17.8% 5.8% 5 years 14.6% 5.5% INVESTMENT SOLUTIONS PERFORMER PORTFOLIO The Performer Portfolio is a diversified and market related portfolio spread across a number of recognised asset management companies. Investment Solutions selects and combines a number of different asset managers each of whom invests in a mix of asset classes (domestic and global shares, bonds, property and cash). Since it is a market related portfolio, the value of the portfolio fluctuates daily, in accordance with the daily changes in the various asset classes. As at 31 July 2015, the performance of the Investment Solutions Performer Portfolio was: Performer 1 Year 3 Years 5 Years Actual 9.40% 18.27% 16.65% Benchmark 8.78% 16.94% 15.84%

10 5.2 PENSION SCHEME (PART II) AND PROVIDENT FUND The investment strategy of the above Funds was changed with effect from 1 September 2008, to provide members with a Life Stage portfolio range, called the Trustees Portfolio. In this portfolio, members are automatically moved through a range of portfolios as they grow older, allowing their exposure to more risky, volatile portfolios to be gradually reduced in the 7 years prior to their normal retirement date. In addition, members who do not wish to follow the Life Stage model have the flexibility of selecting their own portfolio from a range of six portfolios offered by the Trustees. The return earned by each of these six portfolios is indicated below. As at 31 July 2015 the performances of the Life Stage portfolios were: Portfolio 1 Year 3 Years 5 Years High Growth High / Medium Growth Medium Growth Medium / Conservative Conservative Growth Banker Actual 9.24% 17.37% 15.65% Benchmark 11.83% 18.22% 16.84% Actual 8.46% 15.06% 14.05% Benchmark 10.61% 15.63% 14.90% Actual 8.68% 13.74% 13.05% Benchmark 10.18% 13.86% 13.50% Actual 8.87% 11.82% 11.62% Benchmark 9.37% 11.61% 11.62% Actual 8.81% 10.50% 10.62% Benchmark 8.65% 9.83% 10.16% Actual 6.91% 6.65% 6.78% Benchmark 5.47% 5.05% 5.20% The Trustee Portfolio (Life Stage) is structured in the following manner: Years to Normal Retirement Date High Growth Trustee Portfolio Percentage of Fund Credit Allocated to Portfolio High / Medium Growth Medium Growth Medium/ Conservative Growth Conservative Growth More than 7 years 100 % 7 to 6 years 50 % 50 % 6 to 5 years 100 % 5 to 4 years 50 % 50 % 4 to 3 years 100 % 3 to 2 years 50 % 50 % 2 to 1 years 50 % 50 % Less than 1 year 100 % PAGE 10

11 PAGE 11 LEARNING PLANNING LIVING 6. PENSION INCREASES At their meeting on 26 August 2015, the Trustees declared an increase of 4.7% with effect from 1st September With inflation running at 4.7% for the 12 months ended 30 June 2015, the increase of 4.7% represents 100% of the current inflation rate. The table setting out actual increases to pensioners follows: Date of Increase Increase CPI over period Increase as % of CPI % 3.9% 205% % 5.4% 333% % 6.7% 299% % 13.7% 91% % 6.4% 0% % 3.5% 0% % 5.3% 94% % 5.0% 70% % 6.4% 109% % 6.6% 91% * % 4.7% 100% * Note that the figures for the CPI over period are reported for year on year ending 31 August except those for 2014 and 2015, which are reported for year on year ending 30 June Please note that from 2014 the Trustees use the 30 June CPI figure for the basis of future increases to allow more time for the Trustees to assess the financial position of the Pensioner Account and the individual pensioners, against a consistent CPI (inflation) measure, prior to the announcement of the annual pension increase.

12 7. GENERAL 7.1 NOMINATION OF BENEFICIARIES One of the most challenging tasks facing the Trustees is to ensure that lump sum benefits paid on the death of It is hoped that through the retirement reform initiatives employees will be encouraged to a member are equitably allocated to dependants of that member. Although the nomination form is not binding on the Trustees, it does serve as an important guide in the event of the death of a member. save (more) through retirement funds, and be able to provide for their own retirement and curb old-age poverty and excessive dependency on relatives and the Government. The Trustees therefore urge all members of the Fund to ensure that their Nomination of Beneficiary forms are completed, and thereafter updated on a regular basis, to reflect an accurate record of the status of each member s dependants and/or nominees. This form can be obtained from your Bursar or directly from the Fund s website at or Fund benefits can be preserved and kept in the retirement funding system by placing it in a retirement annuity, transferring it to your new employer s fund or transferring it to a preservation fund. PAGE 12

13 PAGE 13 LEARNING PLANNING LIVING 7.2 PRESERVATION OF BENEFITS When withdrawing from the fund and considering what to do with your fund benefit, the preservation of your retirement savings should always be your first consideration. It is crucial that members seek and obtain appropriate advice from a financial adviser on the investment of their benefits before leaving the Funds. Preservation occurs when money saved for retirement through pension, provident and preservation funds remains in those funds until the person retires, or is rolled over into another similar retirement savings vehicle without incurring taxes or penalties when a person changes jobs. Retirement savings, for the average worker, are the single largest source of income post retirement. However, rates of preservation are very low. Cashing out accumulated retirement savings prematurely erodes financial security in old age, undermines the alleviation of poverty and increases reliance on others. Government and the retirement industry are considering various options to increase rates of preservation in recognition of the need to protect retirement savings. Fund benefits can be preserved and kept in the retirement funding system by placing it in a retirement annuity, transferring it to your new employer s fund or transferring it to a preservation fund. 7.3 ADVICE TO MEMBERS It is crucial that members seek and obtain appropriate advice from a financial adviser on the investment of their benefits before leaving the Funds. To find an accredited financial adviser you can visit the Financial Planning Institute s website at or you can phone Old Mutual on

14 7.4 RETIREMENT REFORM Government is concerned that most South Africans do not save adequately for retirement and that only about half the country s workers belong to a retirement fund. Government has implemented certain reforms to try and improve the savings culture in South Africa. Some critical aspects of the reform took effect in: 2013 (enhancing governance through the Financial Services Laws General Amendment Act, No 45 of 2013); March 2014 (the increase in the tax free lump sum on retirement, as announced in the Minister s Budget Speech); and March 2015 (taxation of disability benefits) disability premiums are taxed as a fringe benefit in the hands of the employee. Should a member become disabled, however, the disability income will be paid tax-free. In October 2014, the implementation of harmonisation of pension and provident funds (they will be exactly the same - all funds will operate like pension funds), that was to be effective 1 March 2015, was delayed by Government. The following changes were applicable to retirement funds from 1 March 2014: Tax tables on retirement lump sums and withdrawal changed with effect from 1 March 2014; Tax-free limit for retirement and death lump sums increased from R to R at retirement, involuntary retrenchment and death; Tax-free limit for withdrawal claims increased from R to R on resignation or dismissal; The aggregation principle still applies at retirement date which means that the taxpayer will receive R tax-free from all his/her lump sum benefits once over his/her life-time. NEW TAX FREE SAVINGS PRODUCTS (Effective March 2015) Tax-free savings accounts allow for flexible contributions and do not require individuals to commit to any future contributions. Amounts within the tax-free savings accounts can be withdrawn at any time! What are the benefits of a tax-free savings account? Tax-Free Savings accounts offer the following features: You don t pay tax on dividends! Dividend tax is a tax charged at 15% on shareholders when dividends are paid to them. A dividend is in essence a payment by a company to a shareholder out of the profits of that company. You don t pay tax on income! Income tax is a tax imposed on an individual s income/earnings, such as interest earned on investments. You don t pay tax on capital gains! Capital Gains Tax is tax charged on profit which arises from a sale of property or an investment. Maximum tax-free savings limits An individual, including your spouse and children, may each contribute up to R per year in tax-free savings and investments with a lifetime contribution limit of R All returns from such products will be tax-free in the hands of the individual who owns them. Investors must also be able to access their savings and investments within seven business days after they request it. Tax-free savings account rules and exclusions Products that carry performance fees will not qualify as tax-free investments, and neither will those products that expose an investor to an excessive level of market risk. Most of the large insurers in the country offered these products from 1 March This product is ideal for members who wish to grow additional retirement savings. Most South Africans do not save adequately for retirement and that only about half the country s workers belong to a retirement fund. PAGE 14

15 PAGE 15 LEARNING PLANNING LIVING 7.5 OLD MUTUAL FUND SELECT ANNUITY At retirement members often struggle to make the right choice of annuity. Since June 2013 the ISASA Trustees offered members the Old Mutual Fund Select Annuity (FSA) as a default pension solution. The Trustees believe it is a good solution for many members, because it is easy to invest in, and it provides a reliable monthly pension for life. Best of all, it is cost effective because the charges members pay are similar to those that are usually only available to staff of big companies, not individuals. Benefits of the FSA include: It is safe as it will last your whole life; It is cost-effective as it s offered to you at good rates that would normally only be available to employees retiring from a big company; and It is trusted it has been chosen by your Fund trustees and is offered by Old Mutual. Few people attain great lives, in large part because it is just so easy to settle for a good life. Through Learning Planning and Living we are Moving from Good to Great Members who are two years from retirement will receive an FSA quotation via . The quotation will give the member a good idea of what they can expect to receive as a monthly income after retirement, based on their current Accumulated Credit. Thereafter they will receive these quotes every six months until retirement. RH Lloyd Chairman of the Board of Trustees ISASA Pension Scheme and Provident Fund

16 ISASA Independent Schools Association of Southern Africa 2015 REPORT BY THE BOARD OF TRUSTEES We thank the following talented ISASA artist and photographer pensioners for sharing their creative masterpieces and moments with us in this Annual Trustee Report: Owen Roberts, Suzanne Hill, Margie Smith, Estelle Hale, Barbara Marais, Liesje Carter, and Melanie Webb