Because fund administrators perform most operational activities, trustees sometimes assume that responsibility for those activities has also been transferred. Under the Financial Institutions and Markets Act, however, this is not the case. Trustees retain fiduciary responsibilities even where administration functions are outsourced.

In this and the next newsletters, we will present the ten responsibilities most frequently misunderstood in practice, and many other differences between the PFA and the FIMA.

1. Trustees remain responsible even when administration is outsourced.
Many trustees believe that appointing an administrator transfers responsibility for operational functions. In reality, outsourcing transfers execution, not accountability.

Trustees must therefore continue to supervise the administrator and ensure that the fund is administered correctly.

2. Administrators do not make governance decisions
Administrators provide operational support, but governance decisions must always be made by trustees.

Examples of trustee decisions include:

Administrators may advise trustees, but they do not have decision-making authority.

3. Trustees are responsible for the fund rules.
Fund rules are the legal constitution of the retirement fund. Trustees must ensure that the rules are:

Administrators typically prepare rule amendment documentation for submission to NAMFISA, but trustees must approve the amendments.

4. Administrators execute benefit calculations, but trustees remain accountable.
Benefit calculations are usually performed by administrators. However, trustees remain responsible for ensuring that:

Operational accuracy, therefore, requires both administrative controls and trustee oversight.

5. Trustees are responsible for financial soundness
Administrators provide data to valuators, but trustees must ensure that the fund remains financially sound.

This includes monitoring:

Financial soundness ultimately falls within the trustees’ fiduciary responsibilities.

The key governance principle
The relationship between trustees and administrators can be summarised by a simple rule:
Trustees govern. Administrators execute.
Trustees retain fiduciary responsibility for the retirement fund, while administrators provide the operational infrastructure required to implement trustee decisions.

Understanding this distinction is essential for maintaining strong governance and protecting the interests of retirement fund members.
Clear governance structures:

For trustees, understanding the distinction between governance and administration is one of the most important elements of effective pension fund governance.