Abstract:As the principal decision-makers in retirement funds, trustees have a number of duties placed upon them including a duty of care, a duty of impartiality, a duty to avoid and manage conflicts of interest, a duty to act in accordance with the purpose of the fund and a duty of accountability. Decision-making by trustees and the actuaries that assist them can be informed by considering various ethical theories. This paper reviews the theory of right action, virtue theory and the ethics of care, together with the theory of justice, and interprets the duties of trustees and actuaries in terms of these theories. After consideration of other frameworks for ethical decision-making, a six-step decision-making framework based on the actuarial control cycle is developed to provide an initial attempt to formalise the process
of ethical decision-making in South African retirement funds. This framework is applied to case studies involving the review of surplus apportionment, an investment policy statement, the distribution of death benefits, and annuitisation options. The case studies illustrate that, although the framework itself does not provide ethical solutions, it assists trustees, and the actuaries who advise them, with the process of making an ethical decision.

Abstract:This paper presents the results of an investigation into whether age or work status are statistically significant determinants of the change in the consumption rate at and in retirement. This research used data from the Income and Expenditure Survey 2005–2006 for households comprising one or two adults. It was found that gifting and non-healthcare consumption, which includes gifting, are not influenced by age or work status. Certain households were found to have higher healthcare
consumption after retirement than before retirement. This result challenges the belief that retired households have lower consumption than working households, all other things equal, and may therefore necessitate an upward adjustment to retirement adequacy goals.

Abstract: Despite the importance of retirement adequacy goals to public policy, retirement fund design and personal financial planning, there has been little formal research on the estimation of retirement adequacy goals for South African households. This research derived estimated retirement adequacy goals for employed one- and two-adult households. A consumption-smoothing model with a minimum-income underpin was developed to estimate wealth–earnings ratio goals using data from the Income and Expenditure Survey 2005–2006. Household wealth–earnings ratio goals were estimated to be between 10,5 and 18,2 times annual salary depending on retirement age,
household composition, income, location, age, education, household income distribution, home ownership and salary support. Considering current retirement savings rates, retirement before age 67 is unlikely to be affordable for most households.

Abstract:The Pension Funds Second Amendment Act, 2001 required funds to provide statutory minimum benefits for exiting members and pensioners. Any surplus arising at the statutory valuation following the promulgation of this Act was to be distributed—initially to former members and pensioners to top up their benefits to the statutory minimum, and then equitably to all stakeholders. Surplus available in retirement funds was originally estimated at R80bn, but the surplus distributed by May 2012 was only about R47,6bn. This paper considers some reasons for this discrepancy and, in particular, gives an analysis of 447 surplus valuation reports. It shows that, by strengthening their valuation assumptions and motivating contingency reserves, actuaries reduced the surplus by R10bn for these 447 funds. The paper questions whether the strengthening of valuation bases was justified and examines critically the new actuarial methods introduced following the promulgation
of the Act.