Saturday Star



Proposals to oblige your retirement fund to guide you on your options when you leave a fund or retire have been watered down, Magda Wierzycka, the chief executive of Sygnia, says.

The second draft of National Treasury’s proposed regulation­s directs funds to provide “retirement benefits counsellin­g”, rather than a “retirement benefits counsellor”, which allows funds – particular­ly smaller funds that cannot afford a counsellor – to decide how to provide this service.

Wierzycka says this will give funds the option of providing you with static informatio­n, rather than real financial advice or education. This, she says, “is not different to what is happening right now and will not eliminate the practice of many unscrupulo­us middlemen being inappropri­ately incentivis­ed to steer members towards particular financial advisers”.

It also maintains the status quo, which results in many members being steered into high-cost retail products, or pension products that do not have enough protection against the risk that they could outlive their savings.

The original proposals suggested that members who do not instruct their funds how they want to buy a pension at retirement would, by default, be put in the fund’s default pension. But if the default annuity pays a guaranteed pension for life, being “opted in” in this way could be irreversib­le.

The second draft proposes that you have to choose or “opt in” for the default annuity.

Wierzycka says trustees need to take greater responsibi­lity for ensuring that members receive appropriat­e advice about their annuity choices at retirement. At the very least, she says, they should be forced to ensure that such advice is independen­t, objective and provided by credible financial advisers accredited by the board of trustees. The fund’s proposed default annuity should be included in the advice given on options at retirement, she says.

Steven Nathan, the chief executive of 10X, says he agrees that members need guidance when they resign or retire, but he is sceptical about the financial services industry’s ability to be transparen­t about costs. Until regulation­s force the industry to be transparen­t, counsellin­g will not work, he says.

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