Fedgroup's Beneficiary Care funds

Looking after the needs of those who have lost a breadwinner is a massive responsibility. Pension fund trustees are tasked with deciding the best way forward when a member passes on, adding to the already onerous primary task of managing the pension fund.

With thousands of members to take care of and millions, if not billions, of rands under management, considering the needs of individual dependants of deceased members becomes a near impossible task.

Though administration systems may generally do a solid job when it comes to seeing to the requirements of their members, they are not necessarily flexible enough when it comes to enabling a quick decision that will affect the life of a child.

"If a child needs funds to get into a new school, and the trustees only meet every quarter, what needs to happen for the child to get access to these funds?" asks Fedgroup CEO Grant Field.

This is where Fedgroup's Beneficiary Care is able to assist pension funds. It's specifically designed to cater to the needs of beneficiaries, as Fedgroup has created specialised processes and administrative structures that provide close to real-time information for decision-makers. "We know exactly what's happening in the fund at any time, as the system updates every 15 minutes."

Through Fedgroup's Beneficiary Care, a child would easily be able to access the funding needed to get into a new school halfway through a term, for example. Fedgroup can process requests of this nature quickly because, aside from its administrative systems, it has a team of experienced administrators who specialise in dealing with such contingencies. Administrators form personal relationships with beneficiaries that last for the rest of their school careers.

In addition to such ad hoc payments, beneficiary funds are also expected to pay out a monthly sum to beneficiaries, which is critical to assist children who have no other way of sustaining themselves. Most pension funds are not optimally designed to make such payments, as these funds are geared towards pay out a single lump sum on retirement.

Because of this, cash management becomes a challenge, with some funds holding as much as 50% of assets in cash to effect monthly payments. Because Fedgroup's Beneficiary Care is set up with the express purpose of making monthly payments to beneficiaries, it holds only 2% of assets in cash, which means a much larger portion of beneficiaries' funds are optimally invested.

Another challenge faced by traditional pension funds with regards to beneficiary funds is on the management side. Pension funds often manage investments based on the life-staging of clients, and those that offer beneficiary funds often apply the same strategy. This is often inappropriate, as all beneficiaries are essentially at the same life stage and would benefit more from a preservation strategy.

In addition to these features, Fedgroup's Beneficiary Care also benefits from the most cutting-edge IT and administration system in the country, which further increases efficiency and drives down costs. This was proven when one of the major banks in the country outsourced its beneficiary fund management to Fedgroup.

"Before they enlisted our services, their cost-to-income ratio was 90%," says Field. "After they outsourced the administration to us, this ratio dropped to 40%, which includes our fees.

"Through these savings, more funds can go to the beneficiaries, improving the lives of some of the country's most vulnerable youth."