The board and management have the technical expertise to determine whether investment proposals have undergone due diligence, and act upon their determination.

The investment unit of the institution efficiently implements the investment policies set out by the board or management.

The investment unit follows the prudent person principle in managing the funds of the institution. The prudent person principle is integral to the fiduciary duties of the board and management in administering and managing the funds of the institution.

There are many areas to be addressed in enforcing the prudent person principle in the investment of social security funds. These guidelines are addressed specifically to institutions with internal investment units.

For social security institutions that have a mandate to manage the investment reserve funds of the programme, whether through internal and/or external fund managers, the board and the management are duty bound to ensure that the funds are invested in accordance with basic prudential rules such as profitability, safety, liquidity and diversification.

For institutions that have investment reserve funds, standards and benchmarks are established for the returns on fund investments to support the financial sustainability of the programme.

To maintain its financial sustainability, the contribution rates are set according to the promised benefits of the social security programme.

The programme has regular actuarial valuations to monitor sustainability.

The actuarial measures of the social security programme are well defined and documented to enhance accountability, transparency and predictability in the administration of each of the social security programmes established by the institution.

Depending upon the legislation, policy or decree that establishes the social security programme, the board and management of a social security institution may be duty bound to maintain an adequate level of funding to deliver the promised benefits to members and beneficiaries of the scheme, and to ensure the cost effectiveness of the administration of the social security programme.