Related Articles

Defined Benefit stand-alone funds can transfer to an umbrella pension fund arrangement (eFund Umbrella Pension Fund) as a defined benefit Participating Employer. The eFund is one of the few, if not the only, Umbrella Funds with multiple defined benefit Participating Employers left. In an umbrella fund there are several participating employers who enjoy more or less the same benefits and the fund is managed by professional independent trustees.

The benefits and fund structure of the DB participating employer will be duplicated in the Umbrella Fund arrangement, as such only the name of the Fund and administrator stand to change. The liability and assets of the DB participating employer will be ring-fenced in the umbrella and the risk service provider and investment arrangements will remain unchanged.

The South African retirement industry is heading strongly in the direction of umbrella funds: the number of stand-alone retirement funds in South Africa has more than halved over the past few years.

• The benefits for a DB stand-alone fund to join the eFund Umbrella Pension Fund can be summarised as follows:
• Lower administration Fees
• Lower audit Fees
• Lower Cost to Draft Financials
• Lower government levies
• No time consuming trustee costs (direct and indirect)
• Less time consuming work for the employers

Other Competitive advantages of eFund:

• The eFund reduces the average cost per member and can provide other advantages such as professional governance at a lower cost. Costs like Audit fees & Financials, levies, trustee expenses etc. are shared between the participating employers. The management of the Fund is less time consuming and the liability is also less for the Employer. In the eFund the Board negotiated bulk discounts for administration, investment and risk premiums.
•  eFund’s philosophy of open architecture and no cross subsidization allows unbundled solutions to be repackaged to provide for more cost-effective solutions.
• The eFund is one of a few Umbrella Funds that allows the Employer to shop around for risk benefits. Most umbrella funds are very prescriptive in that they only allow certain service providers.

How will the DB Participating Employer Fund operational costs be deducted?

The budgeted amount will be deducted from the ring fenced assets of the DB participating employer by a monthly budgeted contribution to the reserve account. Please note that after every financial year, the actual costs of eFund will be calculated, and any reserves/deficits will be carried to the next financial year.

Management Committee

Every participating employer should have a Management Committee to oversee the specific arrangements and issues with regards to the DB Participating Employer.

Liabilities and Surplus

It is important to note that the liabilities and the surplus of the DB Participating Employer will be ring-fenced in the eFund Umbrella Pension Fund – no other employer will have access to the surplus of any other employer. The same goes for all liabilities (pensioners etc.) of the Fund – they will remain the responsibility of that specific DB participating employer. The official Pension Increase Policy of the DB participating employer will remain unchanged. This policy is consistent with the Pension Funds Second Amendment Act, 2001.

Please contact us for a formal proposal.