The impact of new default regulations on retirement funds

The recent implementation of the retirement funds default regulations – intended to ensure members get good value for their savings with added transparency and choice - has implications for trustees, the most notable being added layers of complexity and responsibility.


During a panel discussion on this very topic at a Nedgroup Investments | ENGAGE event in association with Business Day in Johannesburg recently, Olano Makhubela, Deputy Executive Officer for Retirement Funds at the Financial Sector Conduct Authority, said the aim of the new default regulations is to better manage some of the complexity around fund management, to ensure a number of issues including that trustees have the necessary skills, that funds invest sufficiently in administration, and that members are better informed of their options. Ultimately, the new default regulations are about making sure members don’t pay exorbitant fees and get value for their money, he said.

One of Makhubela’s first acts after taking office was to prohibit the ‘Acceptance of Gratification’, which applies to trustees, principal officers and other stakeholders. The idea behind this directive, he revealed, was to manage undue influence on trustees. He conceded that while the directive may have gone too far, it was there to stay and further clarification would be provided to the industry.


The process around agreeing on the default regulations has been both consultative and inclusive, said Leon Campher, CEO of the Association for Savings and Investment South Africa (ASISA), adding that the new regulations are close to world class.


The majority of retirement fund members are not financially literate, which means that transparency is even more important so that they understand the benefit of the fund, pointed out Bashkar Latchman, an Independent Principal Officer.


The new default regulations, said Karthi Pillay, specialist in retirement fund governance at Telkom Retirement Fund, puts the onus on the fund to provide members with a cradle to grave education to ensure they make the right choices.


A second panel discussion was deliberated over potential collaborative opportunities between business leadership and government that could deliver quick wins to take SA forward. A fundamentally different kind of capitalism and economy is required in SA, which works to benefit more people, said Peter Bruce, the former editor-in-chief of both Business Day and Financial Mail. Businesses, he added, should not be chasing quarterly targets but should be focused on the longer term.


The next few years will be about filling holes, said Mark Barnes, CEO of the SA Post Office. It’s time to think beyond the constructs and clear the table between government and business and rewrite the way we operate rather than adapt other models.


Any system that leans towards exclusivity is less likely to be sustainable, pointed out Nelson Themba Godi, chairperson of the Standing Committee on Public Accounts (SCOPA), and having had a history of exclusion, SA needs to ensure that it’s more inclusive in the future. Where SA has failed since 1994, is in figuring out how to fundamentally change the way it operates. Government’s inability to be decisive, he added, is a weakness.


Tiso Blackstar associate editor, Ranjeni Munusamy, agreed, saying the problem with the ANC is that it has no new ideas and is fumbling when it should be coming up with practical solutions. “My fear is that this ‘new dawn’ could turn out to be a ‘false dawn’. Execution, which has always been the problem with the ANC, will be the big test for the ruling party under Cyril Ramaphosa,” she opined.


Both business and government are, in the main, aligned in terms of what the country’s problems are. However, it’s the execution that is the issue, said Nic Andrew, MD of Nedgroup Investments. SA’s issues are complex and won’t be easily solved. However, it’s imperative that some quick wins are achieved and this is possible if business, labour and government work together.

 

ENDS

 

Nedgroup Investments offers low-cost retirement fund solutions that incorporates both passive and active investment strategies. The group’s retirement funds, revealed Nedroup Investments Head of Institutional Business, Quaniet Richards, address the simplicity, transparency and cost efficiency concerns raised by the regulatory panel.

 

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