Cost disclosure standard for umbrella funds
EMPLOYERS will find it easier to select the most cost-effective umbrella retirement fund solutions for their employees from March next year, when the Association for Savings and Investment South Africa (Asisa) Retirement Savings Cost (RSC) disclosure standard comes into effect.
The new disclosure standard commits Asisa members, which include the large life companies and retirement fund administrators, to present all costs (based on certain assumptions) relating to umbrella retirement fund solutions in a standardised way, enabling employers to compare like with like when considering quotations from different providers. This will also make it easier for trustees of umbrella funds to assess costs.
Asisa and its members began developing the RSC disclosure standard two years ago following the launch of the Asisa Retail Standard on Effective Annual Cost (EAC). The EAC standard enables you and your adviser to compare costs and their estimated impact on investment returns across most retail savings and investment products.
Taryn Hirsch, the senior policy consultant at Asisa, says the current RSC disclosure standard is relevant only at an employer and trustee level. “It is not a fund member cost disclosure standard and is not designed for disclosure to individual fund members. It should therefore not be confused with the retail EAC standard.”
The RSC disclosure standard also does not apply to stand-alone retirement funds, retirement annuity funds, preservation funds or beneficiary funds.
Hirsch says the development of a member-level disclosure standard is the next priority for the Asisa working group.
From March 1 next year, Asisa members will provide employers and trustees with a disclosure template indicating all costs that will be incurred at scheme level.
The template will reflect four separate components into which various charges are allocated over various investment periods:
• Investment management charges; • Advice charges; • Administration charges; and • Other charges including regulatory, compliance and governance costs.
The RSC will be calculated separately for each component, and these will be combined to derive the RSC for the umbrella fund as a whole. The value for each component, as well as the total RSC, will be displayed as a percentage in a table at four mandatory disclosure periods: one year; one to three years; one to five years; and one to 10 years. – Staff Reporter