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New duties imposed on trustees by the amendments to the Pension Funds Act

The Financial Services Amendment Act came into effect on 28 February 2014 and amends the Pensions Funds Act (“the Act”). It introduces an assortment of new duties and responsibilities for pension fund trustees.

Trustee training

Prior to the amendments, trustee training was a strong recommendation. The legislature, recognising the increasingly complex role played by trustees, together with the risk of personal liability, has amended the Act to empower the registrar to prescribe the level of skill and training that a trustee must attain. Trustees will have 6 months from the date of their appointment to acquire the prescribed skills. There is a further duty on trustees to retain these skills throughout their tenure on the board. Employer-appointed and member-elected trustees, while well-intentioned, often lack the expertise and experience offered by professional trustees and as a result, do not always take as active a role in the management of the fund as they should. Most decisions are delegated to professional service providers with trustees happy to hand over the reins, largely unaware that they are still accountable to members and beneficiaries in respect of the management of the fund. With mandated trustee education, trustees will better understand their duties and will be better equipped to add value to the fund.


Trustees are privy to confidential information pertaining to the business of the fund. There was previously no legal obligation on a trustee to report or disclose any prejudicial information to the authorities. The Act addresses this by imposing a ‘whistle-blowing’ obligation on trustees. A trustee must inform the registrar in writing of any information relating to the affairs of the fund, which in his/her opinion may seriously prejudice the financial soundness of the fund or its members. This obligation arises as soon as the trustee becomes aware of such information. The ‘whistle-blowing’ obligation is a statutory obligation that overrides any duty of loyalty or confidentiality that the trustee may owe to the members or the fund. The Act extends the protections provided by the Protected Disclosures Act (Act 26 of 2000) to trustees.

Fiduciary Duty

The legal nature of a trustee’s duty has been the topic of much debate in recent years. It is generally accepted that trustees owe a fiduciary duty to the fund and a duty of good faith to members. A fiduciary duty is a legal duty of trust and care imposed on an individual who manages the property or finances of another person. Fiduciary duties encompass duties of good faith, skill, diligence and prudence. The Act imposes a fiduciary duty on trustees in favour of both the fund, to ensure that the fund is properly governed and members and beneficiaries in respect of accrued benefits or any amount accrued to provide a benefit. The Act provides a specific duty on trustees to act in the best interests of members or beneficiaries to whom benefits have accrued. Investment strategies tend to favour short term returns and hence younger members as opposed to pensioners. There is much debate internationally on whether a short-term strategy is the best option for pension funds, given that the nature of a pension fund is to accumulate funds at the present date to pay for liabilities at a future date. Trustees need to balance the needs of younger members who require capital growth with those of older members closer to retirement who require income preservation. Although investment functions may be outsourced, trustees at least from a strategic perspective must ensure that the interests of all members are taken into account. With a fiduciary duty to the fund and a separate duty owed to members and beneficiaries in respect of accrued benefits, there is uncertainty as to what is expected of trustees in instances where the best interests of the fund and the best interests of these members and beneficiaries are not aligned.

To download the article as pdf – click here

Natasha Marhye

Legal Specialist – Momentum FundsAtWork

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