Remuneration paid by retirement funds to their boards has escalated steadily but has kept within the three-year inflation average, the latest PwC South Africa’s Seventh Retirement Funds Survey publication said.
The survey showed 74% of the retirement fund respondents in this year’s survey said their board members were now being remunerated, which is substantially higher than the 47% who said this during the 2020 survey - specialised funds all remunerated their boards.
“What is clear is that proper governance comes at a price,” said PwC South Africa Retirement Funds Associate Director Nolwazi Radebe in a statement yesterday,
The findings in the latest report were based on responses from 60 funds, 25% of which had assets greater than R10 billion, 68% had assets greater than R50m, but less than R10 billion, and the remainder had assets less than R50 million,
The average rate per hour for a board chairperson increased by 8.1% for stand-alone funds and 13.3% for specialist funds. The average rate for independent/professional board members increased 5.9% for stand-alone funds and 5.5% for specialist funds. The average rate per hour for the principal officer rose 15.7% for stand-alone funds and 27.1% for specialist funds.
Meanwhile, the average annual retainer for a board chairperson is R375 550, while the average retainer for independent or professional board members is R301 046. A principal officer’s average retainer comes in at an average R730 904, the report showed.
The participating employer or sponsor set the level of remuneration of board members for 51% of the funds surveyed, while the remaining 49% said this decision was taken by the board or a board sub-committee.
“Although we observed a steady increase in the average remuneration paid to board members and principal officers since our 2020 survey, the three-year rate increase was surprisingly below inflation, with only principal officers and chairpersons of specialist funds keeping in trend with inflation,” Radebe said.
The average number of board members and independent board members fell from nine to eight, and three to two, respectively.
“We found the average number of board members and independent board members decreased from nine to eight, and three to two, respectively, compared to the 2020 survey,” he said,
Verwey Wiese, PwC South Africa Retirement Funds Partner, said that on the management of funds, more than 32% of respondents said the fund’s investments were managed by more than 20 asset managers, more than 95% were administered by a professional service provider. Only 25% of funds surveyed indicated they had less than ten asset managers.
“The challenge to boards would be to decide on the optimal number of asset managers to employ, given the costs and governance efforts required, weighted against the investment diversification that can actually be achieved,” said Wiese.
Another board responsibility is to ensure proper internal control systems are employed at the fund, including regulatory changes such as the proposed two-pot retirement system.
“With increased regulations comes increased costs that could potentially impact the sustainability of many retirement funds. Based on the results of PwC South Africa’s seventh Retirement Funds Survey publication, it is evident that the sustainability of current funds is crucial and should be a key focus area for the board of funds and the Financial Sector Conduct Authority as the primary regulator,” PwC said,
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