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.
The implementation of audit findings and recommendations are time bound and monitored.
There is a periodic performance assessment of the internal audit unit. A set of clearly defined indicators measures its efficiency and effectiveness in improving the institution’s performance.
When auditing the institution’s reports, the internal auditor and actuary communicate clearly and effectively. The exchange of information between them neither compromises nor impinges upon their respective independence.
