RETIREMENT FUND SURVEY

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.