FNPF Genesis & Board Functions
This is the first of a series of articles on the role and functions of the Fiji National Provident Fund (FNPF). These articles have been compiled to assist our members understand the Fund’s business and what FNPF offers them as Fiji’s only superannuation fund.
The Origins of FNPF
The concept of a national savings scheme was first mooted in the 1940’s by the Honourable A. A. Ragg.
In a speech to the Legislative Council in 1945, Hon. Ragg planted the idea of a savings plan aimed at the old and disabled.
Although his ideas were not supported at that time, it sowed the seed for what would eventually, some two decades later, be-come the Fiji National Provident Fund.
It was several years later that the Fiji Industrial Work-ers Congress (now known as the Fiji Trades Union Congress) actively pursued the idea again, through its then General Secretary, Mohammed Ramzan.
In 1963, a government appointed social security advi-sor, Mr J. E. Ashford, produced a report titled ‘Social Security in Fiji’.
This report was published as Legisla-tive Council Paper #26 of 1964 and primarily recom-mended the establishment of a provident fund.
Three years, later the FNPF was established and was managed by Mr Hugh Robinson who had also man-aged the Malaysian Employees Provident Fund.
The first chairman was Mr J.F. Griffiths.
To start its op-eration in 1966, FNPF had loaned £10,000 (approxi-mately $30,000) from the Fiji Government.
This loan was paid off in less than a year.
Now, the Fund has grown to a $5.1 billion institution, and is the country’s largest financial institution.
Over the years, the Fund’s primary objective remains to provide financial security for Fijians.
In so doing, the Fund is committed to understanding our custom-ers, offering quality services and ensuring sustain-able returns so that members can enjoy a meaningful retirement.
FNPF continually strives to live its core values of humility, accountability, integrity, innova-tion, teamwork, excellence, passion and courage in all facets of its operations and services.
The FNPF Board and its functions
The FNPF Board is the body corporate responsible for the Fund.
Prior to the FNPF Reforms of 2011, the FNPF Board composition reflected the tripartite arrangement of its key stakeholders, allowing for equal representation from employees, employers and government.
Now, the FNPF Act requires the Minister for Economy to appoint members, recommended by the Reserve Bank of Fiji, who have between them appropriate skills and expertise in investment management, corporate gov-ernance, accounting and auditing, finance and bank-ing, risk management, law, actuary, information technology or a similar engineering discipline.
The current Board members are Chairman Mr Ajith Kodagoda (Chief Financial Officer C J Patel & Com-pany & is also Chairman of the Fiji Revenue Customs Authority), Deputy Chairman Mr Tevita Kuruvakad-ua (General Manager iTaukei Lands Trust Board), Members Ms Makereta Konrote (Permanent Secre-tary for Economy), Ms Bhavna Narayan (Partner La-teef & Lateef Law firm) and Mr Sanjay Kaba (Civil En-gineer and Principal of HLK Jacobs).
Between them, these members have the necessary skills and exper-tise required to be members of the Board.
The Board is entrusted with managing the affairs of the Fiji National Provident Fund in an efficient and effective way by establishing and implementing ap-propriate and effective governance systems and pro-cesses, including quality assurance processes and processes for measuring the performance of the Fund benchmarked to internationally accepted standards.
The Board is duty-bound to act honestly in all matters related to its functions; to exercise a high degree of care, skill, diligence as an ordinary prudent person would exercise in dealing with property of another for whom the person felt morally bound to provide; to ensure that its duties and powers are performed and exercised solely in the best interest of members.
As stipulated in Section 6 of the FNPF Act 2011, the FNPF Board is mandated to:
- a) collect and manage contributions;
b)hold, invest and manage the funds in accordance with this Decree;
- c) develop and offer financial products and services in accordance with this Decree;
- d) conduct education and information programs, and carry out other activities, to encourage peo-ple in Fiji to make informed and appropriate ar-rangements, through saving and effective money management, for income after they retire from the paid workforce;
- e) provide to the Government of Fiji and its agen-cies information and advice on matters affecting retirement savings policy and post retirement in-come policy;
- f) conduct and promote research into matters af-fecting retirement savings and post retirement income and other matters that relate to its func-tions;
- g) publish material on matters that relate to its func-tions; and
- h) carry out other functions conferred on the Board by written law.
The Board provides strategic guidance and advice to Management to ensure the sound management and investment of members’ funds.
The Board’s responsibilities, inclusive of Management’s duties, are spelt out in the Governance Policy that includes a Board Charter.
The Board meets on a monthly basis, and as and when required, to deliberate on decision papers.
These papers are first scrutinized by respective committees of the Board and recommendations are provided to the Board for decision.
The decisions of the Board are conveyed to Management and the minutes of the meet-ings are confirmed and filed as corporate records.
Now, we will explain the first two functions of the Board:
1.Collect and Manage Contributions
The FNPF Board is mandated by law to collect con-tributions from employers. Currently, FNPF collects 18 per cent of the employees’ gross wages as contributions.
Of these, 8% is the contribution from the em-ployee and 10% from the employer.
Each employee should have the amount deducted towards their FNPF contributions reflected in their pay slips.
It is important that all employees insist on receiving their pay slips to sight deductions made by their employers to their FNPF account.
Every month employers pay the contributions deduct-ed from their employees, in addition to their contribu-tions, to FNPF.
Employees are able to check whether these are paid to their accounts by contacting or visit-ing the nearest FNPF office.
Employees can also track their FNPF balances by registering for MyFund, an SMS facility that allows you to check your balances and eligibilities via your mobile phones at a minimal charge.
The total number of members registered with the Fund as of 30 June, 2016 was 406,065 compared with 403,316 in 2015.
Registered employers totaled 10,564 compared with 9,770 for the same period in 2015.
Total contributions collected was $480.6 million in 2016.
These contributions are invested by the Board to grow members’ savings.
- Hold, Invest and Manage Funds
The FNPF Board takes seriously its fiduciary role to safeguard its members’ savings by ensuring that it in-vests contributions in growth assets so that members realise the benefits of these investments through annual interest payments to their accounts.
FNPF’s broad investment objective is to maximize long-term investment returns, by investing in growth assets.
Investments assets or options are selected in order to:
- Provide a wide range of investment opportunities in various asset classes so as to allow for diversifi-cation and cover a wide risk/return spectrum
- Maximize returns within reasonable and prudent levels of risk;
- Provide returns comparable to returns for similar investment funds or compared to market rates; and
- Control administrative and management costs of investment activities.
Currently, the Board invests members’ funds in the following asset classes:
- Government Securities
- Equities
- Term Deposits
- Commercial Loans
- Properties
- Fixed Income Securities
- Cash
In the last financial year, FNPF achieved a Return on Investment of 6.9%, and declared an annual interest rate of 6.25% resulting in $239million being distributed to members accounts on 30 June, 2016.
In a nutshell, members’ funds with FNPF come from three sources:
- Employees (Members) contribution of 8% of their gross salary
- Employers contribution of 10% of their gross salary
iii. Interest earned by FNPF and paid out on 30th June, every year
In the case of Voluntary Members, they source their own contributions and these earn an annual interest as declared by the Board, and as paid out to compu-sory members (employees).
nIn our next article, we will discuss FNPF Membership and Member Accounts. For more information – please contact info@fnpf.com.fj
