Implications of Pension Reform (Governance) on Members and their Dependents Samantha Davidson 19 August 2013

Governance Reform Focus on amendments to Pension Funds Act, 1956 in Financial Services Laws General Amendment Bill, 2012 FSB also updating Circular PF130 – can be issued as a Directive (legally binding) once Bill enacted

Governance Reform Not new Taylor Commission, 2002 recommended FSB monitor fiduciary duty compliance by trustees All funds (incl. umbrella) have elected trustees Echoed in NT Retirement Reform discussion paper, 2004 Some changes in Pension Funds Amendment Act, 2007

Governance Reform “Good governance benefits everyone except the corrupt” (Rosemary Hunter presentation to Financial Planning Institute in April 2002) Protects fund assets Enables competing interests (of members, beneficiaries, sponsoring employer, regulator) to be managed

Governance Reform NT Technical Discussion Paper Sept 2012 “Preservation, Portability and Governance for Retirement Funds: “in a financial world of increasing complexity that demands high levels of expertise, it is widely believed that many trustees may lack the competence to make investment decisions consistent with the best interests of beneficiaries (members)”

2013 Reform proposals Executive Summary re: governance: Duties of trustees to act independently and free from conflicts of interest to be strengthened by elevating PF130 to Directive (draft for comment later in 2013) FSB to monitor trustee appointments (including “fit and proper” requirements) May elevate FSB Trustee Toolkit to basic, independent, compulsory and free training for trustees Minister to convene a trustee conference with a view to strengthening governance of retirement funds Financial Services Laws General Amendment Bill, 2012 in Parliament

FSLGA Bill extracts Add to section 7A of PFA New sub-section (1A) – composition board of trustees compliant at all times New sub-section (3) – registrar to prescribe minimum skills and training each trustee must attain within 6 months of appointment and retain throughout New sub-section (4) – whistle-blowing obligations on trustees (read with new section 9B re: protection of disclosures)

FSLGA Bill extracts Add to section 7C of PFA In pursuing its object, the board shall ... “act independently” “have a fiduciary duty to members and beneficiaries in respect of accrued benefits or any amount accrued to provide a benefit, as well as a fiduciary duty to the fund, to ensure that the fund is financially sound and is responsibly managed and governed in accordance with the rules and this Act”

FSLGA Bill extracts Amend section 7D(c) of PFA The duties of a board shall be to... “ensure that adequate and appropriate information is communicated to the members and beneficiaries of the fund informing them of their rights, benefits and duties in terms of the rules of the fund, subject to such disclosure requirements as may be prescribed”

FSLGA Bill extracts Insert section 7D(2) to PFA Expressly permits trustee board to delegate (if provided by rules) but “the board is not divested or relieved of a function delegated” Insert section 7F to PFA Trustee may be excused from liability (other than for wilful misconduct or breach of trust) if: “acted independently, honestly and reasonably”, or “fair” having regard to all the circumstances

DISCUSSION