RE­TIRE­MENT FUND SUR­VEY

Weekend Argus (Saturday Edition) - - LIFE -

In a sur­vey of re­tire­ment funds car­ried out at the end of last year by au­dit­ing firm PwC, most funds were sup­port­ive of the govern­ment’s re­tire­ment re­forms, but did not look for­ward to the ex­tra re­spon­si­bil­i­ties placed on trus­tees.

Apart from the tax-de­ductibil­ity changes on con­tri­bu­tions that were in­tro­duced this year, re­forms in the pipe­line in­clude al­low­ing re­tir­ing or re­sign­ing mem­bers to re­main in a fund (in-fund preser­va­tion), giv­ing mem­bers a choice of in­vest­ment strate­gies as well as hav­ing de­fault op­tions, and pro­vid­ing ad­vice.

The sur­vey re­port, re­leased in June, says that most funds (78 per­cent) were in favour of the govern­ment’s broader ef­forts at en­cour­ag­ing preser­va­tion of sav­ings through reg­u­la­tion. And 76 per­cent be­lieved re­form will re­sult in bet­ter out­comes for mem­bers, in­clud­ing cost sav­ings, in­creased preser­va­tion and higher pen­sions on re­tire­ment.

About one-third of funds had moved to amend their rules to ac­com­mo­date the re­forms, 17 per­cent had fi­nalised amend­ments to their rules, and another 17 per­cent had made draft amend­ments. The rest were ei­ther await­ing fi­nal leg­is­la­tion be­fore draft­ing amend­ments (62 per­cent) or had not con­sid­ered the is­sue at all (four per­cent).

Boards ap­pear to have been proac­tive re­gard­ing cer­tain re­form pro­pos­als. A large ma­jor­ity (80 per­cent) of funds said they were con­sid­er­ing de­fault in­vest­ment port­fo­lios for ac­tive mem­bers. About half of them (48 per­cent) were look­ing at de­fault in­vest­ment port­fo­lios for paid-up mem­bers. And 36 per­cent were look­ing at an in-fund preser­va­tion op­tion.

On the tax-de­ductibil­ity changes, 19 per­cent of re­spon­dents said that no mem­bers of their fund would ex­ceed the R350 000 con­tri­bu­tion thresh­old, and 62 per­cent said less than five per­cent of mem­bers would ex­ceed it.

Over­all, there was lit­tle en­thu­si­asm for the added bur­den of re­spon­si­bil­ity that the re­forms will place on trus­tees. A typ­i­cal com­ment was: “The ad­di­tional re­spon­si­bil­ity of the fund to rec­om­mend or set up post­with­drawal, preser­va­tion, ad­vice and ad­min­is­tra­tion sys­tems cre­ates a cost and time bur­den.”

PwC’s “Re­tire­ment fund strate­gic mat­ters and re­mu­ner­a­tion sur­vey” is con­ducted ev­ery two years. It dis­trib­utes ques­tion­naires to as many funds’ prin­ci­pal of­fi­cers as pos­si­ble. In this last sur­vey, it was vol­un­tar­ily com­pleted by 100 funds.

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