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2020 National Social Security Fund • We need to develop a culture of saving • Severe inequality and high unemployment • The need to improve the social security framework • The State has to find solutions to the social problems The need for NSSF • Biggest Bargaining Council Fund in the country: • 10,000 employers • 450,000 active members(including pensioners) • 1,000,000 former members • R86 billion in size – of which R27 billion is surplus • Own Internal Benefit Administrator(cost recovery basis) • Own Internal Investment Manager(cost recovery basis) • Covered by the PFA from 2008 before under LRA since 1954 • 58 years of experience MIBFA FUNDS experience (MIPF & EIPF) • The challenges: • Paying death benefits and finding dependants(+200 deaths a month) • Normal claims payments 5500 a month • Surplus payments 5000 a month • To pay 20 000 surplus claims it will take 4 months • Sending out communication and statements to every member (10 000 employers and 450 000 members) • Trustees are elected by the sponsors(Trade Unions & Employers) NSSF challenges examples • Cost of Mibfa Funds: • Operating on a cost recovery basis • To generate a claim/tracing cost R40 (outsourced cost =R400 + R270) • Investment Cost ( the cost to manage total asset 20bp ) (80bp ) • Admin cost current members 0.4% of salary • Admin of pensioners and beneficiaries at no cost (80bp) • Death benefit self-insured & paid–up’s at no cost (80bp) • Section 14’s no cost (outsource = R1700 per hour) • (we are in process of recover cost except from beneficiaries) NSSF challenge to manage cost • Systems: • Create and maintain database i.e. deaths, new members etc. • Ensuring employer deducts contributions accurately and timeously • Managing possible fraud e.g. member company deducting without paying over, then liquidating and opening in another name • Company liquidations to recover contributions, resulting in job losses • Management information systems on all levels • Good payments system with all checks and balances NSSF challenges • Special committees to be established: • Investment Committee • Risk & Compliance Committee • Death Committee • Communication Committee • Governance Committee • Surplus Committee Committees will report 4-5 times a year to Board of Trustees Oversight by the Board of Trustees (fiduciary responsibilities) Governance • Conflict of interest • All processes to be transparent • Trustees to be elected by sponsor’s structures or elected by members? • All service providers has to declare benefits given to Trustees on a quarterly basis Governance • The NSSF must have it’s own Administration and Asset Manager (Core mandate) • They must be section 21 companies(not for profit) • Umbrella, Bargaining Council and NSSF can run side by side and the first two must meet a certain criteria or default into the NSSF • All service providers to declare gifts given to Trustees • Economies of scale negotiate best deals (housing backed loans) Conclusion