A New Act_ Promontory

8/6/2019 A New Act_ Promontory

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2Promontory Financial Group Australasia

Introduction

1. Key features of the new law

2. New Fund structure

3. The Board

4. Entitlement to benefits

5. Improved enforcement

6. Reporting and communications

7. Strong supervision structure

8. Transition to the new law


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New Fund structure

The FNPF to be split into 2 funds

Retirement Savings Fund (RSF)

Purpose of RSF: to hold and manage contributions tomaximise the amount available at retirement

Retirement Income Fund (RIF)

Purpose of RIF: to pay pensions provided by theBoard under the new law and under the FNPF Act

Each fund has a different risk profile and is

managed separately The funds are accounting entities

Consistent with best prudential practice


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New Fund structure

The RSF will collect, hold and managecontributions and voluntary contributions

The 2 account structure for the RSF

The preserved account The general account


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The Board

A restructured Board

7 members, appointed by the Minister

Elections for Board members not practical and too

expensive 1 member from employer groups panel

1 member from employee groups panel the concept of the most representative trade unions, this type

of provision is not in itself contrary to the principle of freedom of

association, provided that certain conditions are met (ILOCommittee of Experts)

1 Government member

4 independent members


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The Board (continued)

Chairman and Deputy Chairman to be independentmembers

Skills requirement

Board to have an appropriate mix of legal, financial,investment, risk management and commercial skills

Reserve Bank to apply fit and proper person test

before appointment

Security of tenure limited grounds for removal, eg Reserve Bank advice that Board member no longer fit

and proper

Bankruptcy

Conviction for serious offence / disqualified from acting as

a director


7/227Promontory Financial Group Australasia

The Board (continued)

Requirement for Code of Conduct for Boardmembers and staff

Detailed provisions about conflict of interests

Explicit duty on the Board to act in members bestinterests

Explicit duty on Board members to ensure that

Board acts in members best interests

Board complies with the new law Requirements for Board committees

Audit, investment, risk management, HR / remuneration

Whistleblower protection



Contributions and benefits

employeremployer Voluntarycontributions

mandated

contributions

General account

70% 30%

Split betweenthe preservedand generalaccount is asdetermined by

the person whopays thevoluntarycontributions(employee oremployer)

Preserved account



Contributions and benefits (continued)

Entitlement event Preservedaccount

General account

Turning 55 Yes Yes

Retiring from workforce afterturning 55

Yes Yes

Death Yes Yes

Leaving Fiji permanently Yes Yes

Physical or mental incapacityfrom ever engaging inemployment

Yes Yes

First home Limited access Yes

Other social good purposes,

eg medical, educationpurposes, as determined bythe Board with Reserve Bankapproval

No Yes




Requirement to take the minimum amount frompreserved account as a pension

Except where very low amounts (administrativelyinefficient)

Will be a life pension unless the annual / monthlyamount is below the base pension amount (to bedetermined)

If it is, can be a term pension, or an account based

pension

Can top up the pension with any excess over theminimum amount, use the excess for anotherproduct or take itas a lump sum



Entitlements to benefits (continued)

Preserved account May be taken as anpension (same ordifferent), as a top upto the pension, or aslump sum

Must be taken as anpension

Low value amount;paid as lump sum

$




The general account amount can be taken as anaddition to the pension, or as a lump sum, or as adifferent kind of pension product


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The Board will be required to develop and offeralternative retirement income products

not just the life time, single / joint product

Other products will be subject to actuarial sign off,and Reserve Bank approval

The law will provide a structure for other financialinstitutions to offer retirement income products

Again, subject to actuarial sign off and Reserve Bankapproval

In line with recommendations of World Bank, IMF etc

This will take some time to develop


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Nominations for death benefits

Restricted to spouse, children, parents and financialdependents

Nominee must be one of these at members death

If no valid nomination, benefit becomes part of themembers estate


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Entitlements to benefits (continued)

Housing concession from preserved account

Housings multiplier economic effect

A one off right to access up to

28.5%* of preserved account and All of general account

Limited to first home purchase or construction

Requirement to repay the preserved account in

priority.

* Assumes a preservation of 70% of contributions; this provides accessto 20% of total contributions


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Improved enforcement

A comprehensive set of powers for the Board toenforce employers obligations

Includes

Audit / examination rights Powers of entry and inspection

Powers to recover outstanding amounts in full

Extending liability to directors of employer companieswhere appropriate

Garnishee powers Stop travel powers

All subject to appropriate protections

Legal professional privilege etc


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Strong supervision structure

Explicit recognition that Reserve Bank has the roleof prudential supervision of the Board and itsoperations

Principles to guide Reserve Bank supervisory actionsmembers best interest, prudent management

Key actions require Reserve Bank approval /actuarial sign off


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Strong supervision structure (continued)

Critical role for actuaries

A major role in transition restructuring into 2 or morefunds

Monitoring sustainability of existing products

Evaluating new products

Advice on investments

Financial condition reports to Reserve Bank

Critical role for auditors

Financial statements

Risk management policies and procedures advice

Valuations in accordance with accounting standards


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A comprehensive set of supervisory tools andrequirements for the Reserve Bank to use -including

Prudential rules Examinations and on-site inspections

Requirements for financial condition reports

Strong reporting requirements to Reserve Bank

From Board

From actuary / auditor

Powers to give directions to Board

Statutory management if necessary


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These powers will apply to any body that is licensed tooffer retirement income products if that market is openedup to competition


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Q & A

A New Act_ Promontory

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