Service providers
The following services are offered to company retirement funds:
- Advice/consulting
- Administration
- Investment management
The employer should conduct a cost-benefit analysis when selecting service providers.
Advice/consulting
This covers the content of this section of the website i.e. guidance on the key decisions when starting or optimizing your retirement fund. Ongoing consulting services may include legal updates, actuarial reports and investment advice.
Administration
The main functions include contribution collection, forwarding contributions to risk providers and the investment managers, managing member exits and benefit payments and reporting (employer and employee).
Investment management
A fund may have one or more investment managers. The manager should invest the fund assets according to their specific investment mandate (although many funds do not have clearly defined mandates and benchmarks). Investment performance should be measured against an appropriate and specified benchmark (although again, many funds fall well short of this basic requirement).
Service provider charges
Consulting and administration: as % of salary, generally between 0.5% and 1%. Some administrators also charge an administration fee (as a % of assets) for managing the investments.
Investment management: as % of assets, generally between 0.5% and 1.5% pa. May include performance fees.
Investment advisors may charge a fee as a % of assets.
These costs are often not fully disclosed and thus difficult to measure. The average cost of retirement investing is around 3% pa of investment assets.
Other selection criteria
Cost cannot be the only criteria. In selecting your service provider, you should also consider qualitative aspects. These includes the accuracy and consistency of communication (reports and performance feed-back), administrative competence (this may require a due diligence review), the level of transparency (on costs, fees and performance), the ease and functionality of online services, the emphasis on governance, the make-up of the Board of Trustees (ideally professional and independent) and the ethical values espoused by the organisation.
More about starting a retirement fund
- Legal structure: umbrella or stand-alone?
- Product: Pension or provident fund?
- Who should be eligible to join? Membership criteria
- How much should you contribute? Contribution rates
- Should you attach risk benefits to the fund?
- Who does what? Service providers
- Governance: Board of Trustees and Principal Officer
- Specifics: Fund rules
- Should you offer investment choice?
- Should you offer a preservation fund option?
