RETIREMENT RISK

How municipalities should limit risk in retirement fund provisioning

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Municipalities as a tier of government have a certain constitutional obligations. To do this, they employ staff and one of the municipality obligations is to provide certain employee benefits to its employees.

The municipality needs to work together with the administrator of their retirement fund to ensure that all risks have been taken in consideration and the necessary mitigant factors are put in place.

Key to discharging its obligations and mandates to ensure service delivery in the respective communities they serve, is the appointment of skilled executives who must ensure that proper 
management systems in terms of the Municipal Finance Management Act, 2003 (Act No. 56 of 2003) are put in place and adhered to, to ensure good and clean governance.

The provision of employee benefits by any employer organisation has inherent risk associated with it. This risk must be managed effectively. It is in this vein that we tackle this subject.

It is common knowledge that risk is not something
you can completely eliminate. Risk management is
about limiting exposure and putting mitigating factors in place.

The provision of retirement to employees is a condition of employment in municipalities and this entail the deduction of retirement fund contributions as determined in the respective Fund Rules and in the case of the retirement fund for councilors, the Remuneration of Public Office Bearers Act.

The employer (Municipality) is further obliged to pay its own portion of the contribution together with the deducted contributions to the Fund (Fund Administrator). These funds offer inter alia, underwritten risk benefits for which premiums must be paid on time in terms of the policy conditions issues by the appointed underwriter.

Risks associated with Retirement Funds at municipalities:

  • incorrect percentage deduction of contributions
  • late payment of contributions

  • non-payment of contributions
  • non-submission of relevant data/information
  • late or non-submission of claims
  • non-payment of contributions
  • 
non-submission of relevant data/information
  • late or non-submission of claims

Solution to limit or mitigate the identified risks

Municipalities must work closely with the administrators of their funds to limit their exposure to risk relating to retirement funds. Moriting Wealth Managers believe that constant engagement with the financial and human resource functionaries at municipalities are fundamental in assisting the municipalities in managing risk associated with retirement funds.

Moriting possesses the skills and time to partner with the municipalities to further train, develop and also up-skill the employees (members of retirement funds) with retirement fund knowledge and financial planning.

Noxhanti Mshumpela

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