Retirement savings industry lament onerous regulations

DOMESTIC retirement industry groups are finding asset allocation rules increasingly restrictive, and have voice protest they are not able to benefit from the stronger economic growth offered in other countries, according to Sanlam Employee Benefits CEO Dawie de Villiers.

At a symposium hosted by the insurer, Mr de Villiers said 42% of respondents in its 2016 Benchmark Survey believed that regulation 28 — a section of the Pension Fund Act that imposes the maximum amounts that may be invested in a particular asset class, such as domestic or foreign equities — was “unnecessarily restrictive”.

The number of respondents holding this belief rose from 15% last year.

The Financial Services Board, which enforces the Pension Fund Act, was not immediately able to comment on these findings yesterday. Treasury director-general Ismail Momoniat did not comment.

The limits imposed by regulation 28 make investments in hedge funds difficult. Only 15% of a pension fund’s assets can be invested in alternative assets such as hedge funds.

Research showed diversifying from SA would assuage pensioners’ concerns.

Elias Masilela, executive chairman at DNA Economics, said 57% of core pensioners surveyed said the “political and economic environment was cause for concern” in retirement, and were worried about the implementation of the National Development Plan.

“Will government be able to do all those things?” he asked.

But an SA Venture Capital Association study found South African investors failed to take advantage of changes made to regulation 28 in 2011 to increase their investments into alternative assets markedly.

It said a study by advisory firm RisCura of asset allocation by pension funds across 10 African markets found SA had the second-lowest allocation to “other” assets. SA’s allocation of 2.3% to this asset class fell below Namibia’s 8.5%, Swaziland’s 10.9%, and Zambia’s 38%.

The global average allocation to this category is about 24.8%.