May 06, 2011

FNPF hypes up new regulation that is still without credible oversight

As the regime's access to money becomes more problematic, the "easy money" becomes more attractive.

So we will watch their latest maneuverings with interest because of the hype that they attach to this exercise.

The sudden about-turn in their views about us, the folks who own the money, is indeed entertaining because they aim to regulate without credible oversight how they will continue to manage our pension funds.
fund plan
writer : ILIESA TORA

The Fiji National Provident Fund Review of the Act and Pension Scheme is expected to ensure re-focusing on the interest of members.

The review will be the topic of the FNPF Symposium at the Holiday Inn in Suva on May 11 - 12.

The Fiji Sun believes that the 45-year-old FNPF law will come under review to ensure that there is better governance and transparency in the handling of member funds and investments.

At the same time the review is expected to look at the percentage of savings that will be kept for members so that they will have enough funds to help them when they retire.

The FNPF law was made in 1966.

Members have in the past demanded that the FNPF change the law, which many believed can’t meet the demands of today’s economy, financial markets and technology.

The Fiji Sun believes the Review of the Act will include the review of the Fund as an institution and its corporate identity.

A key outcome expected from the review is the better enforcement for governance and transparency in the manner the Fund operates, with members’ interest as the priority.

The current FNPF Act provides for the Minister to appoint two representatives from each of employer groups, unions (representing workers) and Government - a total of six board members.

Currently there are five members that were appointed by the Minister of Finance.

Past FNPF boards have been criticised for poor investment decisions and there has also been criticism of previous Government interference in the decision making processes.

It has been argued that the current Act does not deliver the necessary independence and professional mix of skills and experience to govern the largest financial institution in the country.

The fiduciary responsibilities under the current law are not considered to be strong enough with respect to members’ interests.

Reforms in this area should include keeping a governance board with the Board’s primary fiduciary responsibility being to act, first and foremost in the best interest of Fund members.

The board make-up is also expected to include those with the right skills and experience (professional expertise).

There is concern also that change must happen in a meaningful way with retirement savings policies that is true to the FNPF’s goal of “securing your future”.

The Fund had engaged experts including consultants who designed Papua New Guinea’s superannuation scheme after their crisis 10 years ago.

The Fund is expected to refocus the scheme on providing a secure income in old age, with the emphasis on preserving retirement savings so they can grow.

Currently members can only access two-thirds of their total balances for general purposes (housing, medical, education) while the other one-third is reserved for retirement.

The proposed changes are expected to see changes to the portion preserved for retirement, which will be higher than the portion released for general purposes.

The preserved accounts are expected to be fully preserved until retirement (the earliest retirement age is 55 for most workers). It will grow by compound interest.

It will not be available for early access to benefits - keeping it growing is the only way to ensure that Fiji’s retirement savings scheme truly meets the promise of meaningful financial security in old age.

Members are expected to still be able to withdraw under the current practice from the general account.

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