The role of the Principal Officers of retirement funds

By Tokiso TKay Nthebe

It is such an exciting time for the pension fund industry in Lesotho, where the Government of Lesotho (GoL) enacted the Pension Fund Act (PFA) No.5 of 2019 and Pension Fund Regulations of 2020. This is a game changer for the country, because for years the industry had to rely on the Income Tax Act and Insurance Act as it did not have specific legislation governing retirement funds. Though still at infancy stage, this is a great opportunity for Lesotho to develop and build its economy; where retirement assets can be used to develop infrastructure, invest in businesses, and create employment. 

Hand putting Coins in glass jar with retro alarm clock for time to money saving for retirement concept

Legislation plays an important role in helping industry players administer, govern, and manage retirement assets; enabling them to ultimately provide benefits for members. Members therefore need to know pension laws and understand the role stakeholders such as board of trustees (BoT) or Principal Officers (PO) play when it comes to retirement funds. 

As an advocate for retirement planning, I encourage members of retirement funds to know the rules of their respective funds and appreciate what the stakeholders overseeing and managing their retirements do. Now that we have a PFA and its regulations, all stakeholders of a pension or provident fund cannot claim ignorance when outcomes do not go well for them, especially members. Because there is already inherent information asymmetry between members and service providers of pension funds, it is your responsibility as a member to educate yourself. In this article, I discuss the PO’s role and why they are key in retirement funds. 

Who is the Principal Officer (PO)?

A PO as defined in the PFA and the Principal Officers Association of South Africa, represents and oversees the governance of retirement funds – be it occupational funds (where there is an employer/employee relationship) or umbrella funds (where multiple employers can participate under one umbrella fund).  The PO is appointed by the BoT, and assists the board with identifying risk areas, monitoring performance indicators, and ensuring that internal systems of control are effective. Reporting to the BoT, the PO is the Chief Executive Officer of a Pension Fund, and is accountable to the members of the Fund, the BoT and Registrar of Pensions (Central Bank of Lesotho in this context).  Lastly, the PO is also a liaison between the Fund and Regulator, ensuring that the Fund is always compliant.

Requirements to be a PO

For one to be a PO, he/she should be a resident of Lesotho and must comply with the fit and proper requirements – which include being able to manage his/her personal finances, have the necessary work experience, qualifications, and fiduciary responsibilities to make sound financial decisions.  The PO should act with due care, diligence and have the members’ best interests. 

Why is understanding the PO’s role important?

The PO as a representative of the funds ensures that the fund adheres to its code of conduct, rules, and investment policy statement (IPS) to achieve member’s financial needs. To ensure that your biggest assets are protected to provide post-retirement, members of retirement funds (occupational or umbrella fund) have a responsibility to empower themselves with knowledge, especially around pension laws. This includes joining a fund that is registered, compliant and with great performance to meet their retirement goals. 

First appeared in Insure Digest Newsletter, February 2022