Abstract
M.Comm.
Pension funds have risen to great prominence in the last two decades because they provide a service that fits the needs of individuals. The community at large are rapidly accepting and demanding facilities for proper retirement planning. Employees contribute towards retirement funds and their contributions are tax deductible while taxable to the employee upon retirement, generally at a lower rate.
The employer, who has instituted the retirement fund, owes the fund because the employer is regarded as being in the position of a trustee. The most important fiduciary duty the employer owes to the fund is the duty to act in good faith. This duty should be exercised when setting up the fund, appointing trustees, paying benefits, etc. (Liberty Life, 1997:9).
The retirement industry plays an important role in our economy. A retirement fund must be registered with the Financial Services Board and approved by the South African Revenue Services to obtain the necessary tax benefits provided to retirement funds. The performance of any fund depends on the investment decisions made by the fund sponsor.
There are a few types of retirement funds with various structures. There are: (1) pension funds, (2) provident funds and (3) retirement annuities. Pension funds and provident funds are employer-based schemes because only the employer can initiate it. The third alternative, a retirement annuity, caters for self-employed individuals and the private investor wanting to utilize the tax benefits provided to retirement funds (Bradley et al., 2000:185)
The objective of the research is to determine the strategic investment planning of pension funds in South Africa. Does the pension fund management treat the fund like a business? Does the fund have a detailed investment process? Does the fund have a detailed investment policy framework?