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
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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
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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
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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
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Contributions and benefits (continued)
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
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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
$
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Contributions and benefits (continued)
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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Contributions and benefits (continued)
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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Contributions and benefits (continued)
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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Strong supervision structure (continued)
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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Strong supervision structure (continued)
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
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