In my previous article, I wrote about an overview of the Uganda Retirements Benefits Regulatory Authority Act in general.
I highlighted the implications of the Act to both new and existing retirement benefit schemes. In my next series of articles I will talk about the duties of the different parties as stipulated by the URBRA Act.
The major parties in this regard include the trustees of the scheme, the fund manager, the custodian and finally the administrator of the scheme. However, schemes may from time to time use the services of other distinguished professionals such as auditors, lawyers and actuaries.
In 1921 the trust became the universal basis for private occupational pension schemes because of the introduction of tax relief. The word TRUST refers to the duty or aggregate accumulation of obligations that rest upon a person described.
The responsibilities are in relation to property held by him or under his control. He will be compelled by a court in its equitable jurisdiction to administer that property in the manner lawfully prescribed by the trust instrument.
As a consequence, the administration will be in such a manner that the consequential benefits and advantages accrue, not to the trustee, but to the persons called the beneficiaries. A retirement benefit scheme must be run and managed under the guidance of a “constitution” or what is technically called a trust deed.
It is necessary to obtain professional advice on the preparation of a trust deed as it is an extremely important document. The trust deed entails rules which are the operational particulars of the scheme and everything that a member needs to know about the scheme.
If possible it should be summarised into a small booklet and distributed to members. The Retirement Benefits Act requires that schemes be established under an irrevocable trust. After the preparation of the trust deed and therefore the establishment of the right nature and design of the scheme, the sponsor (employer) can now appoint trustees, one-third of whom must be nominated by the members in a defined benefit scheme.
In a defined contribution scheme half of them must be member-nominated. In the event that the employer does not want to appoint member trustees, he can appoint a corporate trustee (a body corporate) to run scheme affairs. The regulations provide that there should be at least three trustees (unless a corporate trustee is appointed) and the number must be odd.
There is no maximum allowable number of trustees. Section 46 of the Retirement Benefits Act requires that on the acceptance of the trust, the trustees have among many others the following duties: The duty to manage and oversee the operation of the scheme in accordance with this Act and regulations made under this Act; Trustees must ensure that the scheme has a prudent investment policy on the investment of its funds so as to maintain the capital of the scheme and to secure market rates of return on its investments.
The investment policy of a scheme must be implemented subject to any regulations made for that purpose by the minister in consultation with the RBA; Trustees must ensure that no scheme funds can be used to make direct or indirect loans to any person or invested contrary to any guidelines prescribed for that purpose or invested with any institution with a view to securing loans at a preferential rate of interest to the sponsor, trustees, members or the manager of such scheme.
Trustees are also required by law to keep proper books and records of account of the income, expenditure and assets of the scheme fund and within a period of six months after the end of each financial year, ensure that accounts are prepared.
Hamza Mutebi, is the manager, business development at UAP Financial Services firstname.lastname@example.org