What exactly is an umbrella fund?
Umbrella funds are pension or provident funds that many different employers can join, compared to retirement funds that are managed in-house by a company. Sometimes umbrella funds are set up for specific interest groups such as trade unions while others attract members from diverse services and industries.

Why are umbrella funds in the news?
Umbrella funds have been available for many years in SA, but they are in the news because new funds have been launched offering more investment choice, transparency and member communication. This is partly in response to increasingly onerous retirement fund trustee and administration requirements, which are driving a move to outsourcing.

How much market share do umbrella funds have?
According to the Financial Services Board, about R867-billion worth of SA retirement funds belonging to 9.8 million members were under both umbrella and stand-alone company management at the end of 2002. Some 8.6 million members were active and the remaining were pensioners and dependents. This number may seem high but some members belonged to more than one fund. In May 2004 there were 458 local umbrella funds in SA administering the retirement savings of 658 825 members.

How should my company go about selecting a good umbrella fund?
There is a wide selection of umbrella funds catering for different sized companies with various needs. It's best to choose a new generation umbrella fund from a well-known brand. The fund should have a robust IT administration platform and a trustee board with well-known and respected industry players. Also ask about employee education — top umbrella funds will hold staff educational seminars, offer educational material and have a call centre and website to keep members updated.

How can I ensure a comfortable retirement if my savings are with an umbrella fund?
It's best to not view your retirement fund in isolation. Rather draw up a personal financial plan with the help of a qualified financial planner. Then you can make the right investment choices and ensure you are building up a solid asset base for yourself and your dependents.

How do I make my voice heard if I have complaints about how the umbrella fund is run?
A good umbrella fund will set up an employer/employee committee to make decisions and interact with the fund trustees. This will ensure that your voice is heard. If you are still dissatisfied, you can write to the principal officer of the fund. If you are still unhappy, you can contact the Pension Funds Adjudicator. Your complaint must be sent in writing to:
The Pension Funds Adjudicator
PO Box 23005
Claremont
7735
or faxed to 021 6740185, or emailed to enquiries@pfa.org.za.

How can I check on the value of my pension?
By law members must get an annual statement informing them of their pension fund's value. But this isn't always good enough, especially when investment choices are available to you. The better umbrella funds will send you a quarterly statement and offer you internet access so you can check the current value of your pension fund online. There should also be a call centre to answer any questions.

What is the role of the umbrella fund trustees?
Their role is to run the umbrella fund in the best interests of the members. Often trustees are current or former employees of the sponsor, the life assurance or other company offering the umbrella fund. It's best to look for an umbrella fund known to include independent, outspoken trustees who are respected in the industry. They are more likely to look after your interests than to be swayed by other stakeholders.

I feel overwhelmed by the investment choices available in the umbrella fund. How do I choose the best option for me?
Many companies select an investment option on behalf of their staff. But if you must select an investment option it's best to do so with the help of a professional adviser. He or she can help you make the right choice, in the context of your personal financial plan. You are not picking a horse on the races. You are making long-term choices in order to build up a solid asset base for your retirement. A good umbrella fund will also offer educational seminars for staff to help you choose what's right for you. The fund should also offer educational material and a call centre. You have every right to expect guidance every step of the way.

How much of my hard-earned cash is being siphoned off for admin, commissions and other expenses?
A good umbrella fund will be 100 percent transparent with all costs listed. You should also pay only for the benefits you use. Some retirement plans spread their costs between all members of an umbrella fund, irrespective of the services chosen. Look for an umbrella fund that has eliminated this. Some umbrella fund costs may initially appear higher than freestanding funds, but people tend to forget how much time and money goes into choosing and training trustees, travel, administration, consulting, fidelity insurance and member communication and servicing.

What happens to my pension if I want to change jobs and move to another company?
It's said that in an average lifetime a person will change jobs four times, and this affects the mobility and value of many peoples' retirement savings. You can make use of a preservation fund when you change jobs so that your assets aren't dissipated.

How much of my money goes to agent commissions?
Commissions can be paid on the total amount an employer-sponsored fund will transfer to an umbrella fund, and also on the contributions that will be made to the fund. Commissions on contributions are negotiated within guidelines laid down by the Life Offices' Association. Leading umbrella funds offer free financial analysis and educational advice for individuals in return, although not all umbrella funds offer this.