The Financial Services Board (FSB) announced yesterday that it would grant retirement funds and retirement fund members an exemption from complying with the investment limits in the revised regulation 28 of Pension Funds Act for six months after it comes into effect on July 1.
The exemption will be a huge relief, particularly for retirement annuity (RA) funds and larger pension funds that allow their members a choice of underlying investments.
RA fund members have in the past been able to breach the investment limits in regulation 28 as long as the fund as a whole complied with the limits.
Under the revised regulation 28, gazetted in March, each member’s investments will have to comply with the investment limits, principally to invest no more than 75 percent in equities and 25 percent offshore.
The revised regulation 28 stated that any new investments into retirement funds would have to comply with the new limits from April 1 this year. Existing investments were excluded from complying with the new limits, but if members made certain changes, such as adding to their investments or switching underlying funds, this would trigger a need to comply from July 1.
However, retirement fund administrators reported that they were unable to monitor and report on breaches of these investment limits without adapting their monitoring and reporting systems.
In a statement yesterday, the FSB said Dube Tshidi, the Registrar of Pension Funds, considered it appropriate to allow for a six-month transition period to December 31 this year to enable funds to adjust their systems, as well as investments, to ensure full compliance with regulation 28 by January.
The statement says that during the transition period, investments held by funds must not become less compliant with any of the limits set out in the current version of regulation 28.
Funds will also be exempt from the obligation to inform the registrar without delay whenever an individual member’s investments in the fund exceeds any regulation limit, but will next year have to report on this quarterly, with the first reporting quarter ending on March 31 next year, the statement says.