The so-called ‘default’ regulations are meant to improve retirement fund members’ outcomes
In August 2017 the Minister of Finance issued the final ‘default’ regulations to the Pension Funds Act. In the words of the National Treasury, the aim of these regulations is to ‘improve the outcomes for members of retirement funds by ensuring that they get good value for their savings and retire comfortably’.
The regulations require retirement fund trustees to offer certain portfolios or options
According to the regulations, trustees must offer the following to investors:
In addition, it is critical that these defaults are simple, cost-effective and transparent.
Practical steps to implement the regulations by the deadline of 1 March 2019
Although these regulations became effective on 1 September 2017, existing funds have until 1 March 2019 to implement these defaults. This may seem like a long way off, but to ensure you meet this deadline, it is best to start taking action now. We are already actively engaging with our service providers to understand how these regulations apply to our funds. Below are a few practical steps to help guide you through the process.
Step 1: Determine whether the regulations apply to your fund
The lists below indicate which funds are exempt from the default regulations.
Funds that are not affected by Regulation 37 – default investment portfolio
Funds that are not affected by Regulation 38 – default preservation
Funds that are not affected by Regulation 39 – annuity strategy
Funds may also be able to apply for exemption from complying with the regulations. However, at this stage there is no clarity on the conditions for exemption.
Step 2: Undergo training about what implementation involves
Once you know whether or not the new regulations apply to your fund, you have to engage with the various service providers you work with to ensure you are prepared. We encourage you to undergo specific training that can help equip you to make decisions around the implementation of these regulations.
Step 3: Compile a project plan for each affected fund
Fund consultants should develop an action plan for each fund. This plan should set out each task and its deadline, taking into account costs and efficiencies. To ensure the fund is on track to be compliant by the deadline date, the plan should be monitored at each trustee meeting or more regularly, depending on the complexity of implementation.
Step 4: Consider the terms of each regulation in detail
The lists below set out the specific issues you should consider relating to each regulation and how to address these.
Regulation 37 – Default investment portfolio
Regulation 38 – Default preservation
Regulation 39 – Annuity strategy
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