Trustees and administrators will need to pay close attention to the Financial Sector Conduct Authority’s new Conduct Standard 2 of 2025, which ushers in a new era for retirement fund administration.
During a last month October, Institute of Retirement Funds Africa president Geraldine Fowler and executive Wayne Hiller unpacked the key provisions, explaining what the framework means for administrators, trustees, and the regulator itself.
The Conduct Standard – formally titled “Conditions Prescribed in Respect of Pension Fund Benefit Administrators” – was published on 6 August. It replaces Board Notice 24 of 2002, which governed the sector for more than two decades but was deemed outdated and inconsistent with modern conduct regulation.
Fowler said the new rules were “necessary and overdue reform”, noting the FSCA has modernised the 2002 framework to close critical gaps and reflect current realities. Since then, initiatives such as Treating Customers Fairly (TCF), the Retail Distribution Review, and the Twin Peaks regulatory model have transformed the environment.
Persistent weaknesses – from poor governance and conflicts of interest to outsourcing risks and data deficiencies – underscored the need for a more robust standard.
“The Conduct Standard represents modernisation,” Fowler said. “It puts fairness at the heart of administration, clarifies roles and responsibilities, and reinforces accountability. You can delegate the function, but you cannot delegate accountability.”
Why a new standard was needed
Fowler explained that the previous Board Notice no longer matched the realities of today’s industry.
“Technology has evolved dramatically, member expectations have increased, and the complexity of pension administration has grown exponentially. The old Board Notice 24 of 2002 was simply no longer fit for purpose.”
The FSCA’s objectives were threefold:
- to modernise the regulatory framework;
- to embed TCF principles as a cornerstone of conduct regulation; and
- to address gaps in governance, conflicts of interest, complaints management, and data ownership.
“This is not just a technical update,” she said. “It represents a fundamental shift in how we think about pension administration, placing members’ interests at the very centre of everything we do.”
Phased implementation
Hiller explained that it was decided to roll out the Conduct Standard in three phases to allow sufficient time for compliance.
- Phase 1 (effective 6 August 2025) covers existing obligations such as business principles, fit-and-proper requirements, accounting, auditing, insurance, liquidity, and FSCA notifications.
- Phase 2 (effective 6 February 2026) focuses on governance arrangements, conflicts-of-interest and complaints frameworks, and data management.
- Phase 3 (effective 6 August 2026) deals with the more complex requirements – administration agreements, service-level agreements, and outsourcing arrangements.
“The phased approach allows thoughtful and effective implementation rather than a rushed tick-box exercise,” Hiller said.
He advised administrators to start early, allocate resources, and set internal deadlines ahead of regulatory ones.
“The FSCA will expect to see evidence that you’re making progress, not just scrambling at the last minute.”
Putting fairness at the centre
At the heart of the new standard is Treating Customers Fairly. Fowler said TCF was now a measurable, enforceable principle rather than a “nice-to-have”.
“It is a required operational mindset that must guide every action an administrator takes,” she said.
The six TCF outcomes – fairness in culture, clear information, consistent service, accessible processes, products that perform as promised, and no unreasonable post-sale barriers – will form the benchmarks against which the FSCA measures compliance.
“As you think about implementing this Conduct Standard, always come back to this question: are we treating our customers fairly?” she said. “If the answer is yes, you are definitely on the right track.”
Fit-and-proper requirements
A key element of the new framework is ensuring that key persons are fit and proper. This applies to directors, senior managers, and heads of control functions.
“These are ongoing obligations,” Fowler said. “They’re not a one-time check at registration or once a year. Key persons must maintain these standards at all times.”
The requirements rest on two pillars: character and capability. Individuals must demonstrate honesty, integrity, and good standing – with no history of fraud or dishonesty – and possess the necessary qualifications, skills, and experience.
“If a key person no longer meets the fit and proper requirements, the administrator must immediately notify the FSCA and take the appropriate action,” she said. “The people managing pension fund administration must be both trustworthy and competent.”
Outsourcing: accountability stays home
Outsourcing remains common in retirement fund administration, and the Conduct Standard recognises this reality while setting clear accountability rules. Fowler summarised these as the five golden rules:
- The administrator remains accountable. “Even if a function is outsourced, accountability stays with the administrator,” she said. “You can delegate the function, but you cannot delegate accountability.”
- Fund consent is required. Administrators must obtain prior consent from the fund before outsourcing any function.
- The provider must be FSCA-approved. Only section 13B-approved benefit administrators may perform outsourced services.
- A written contract is mandatory. All arrangements must be formally documented.
- Ongoing oversight is essential. “Outsourcing does not mean out of sight, out of mind,” Fowler said.
“These rules prevent administrators from washing their hands of responsibility once a task is delegated.”
What trustees must do
Fowler said trustees now have a clearly defined oversight role. “Active oversight is essential to protect members’ interests,” she said.
Trustees should:
- Verify that their administrator is FSCA-approved under section 13B.
- Ensure administration agreements are compliant and protect the fund’s interests.
- Give consent to any outsourcing arrangements and verify that subcontractors are also approved administrators.
- Monitor the administrator’s performance and review regular compliance reports.
- Understand the complaints process and track how issues are resolved.
- Confirm data ownership rights and timely access to member records.
- Review conflict-of-interest policies and ensure they are implemented.
- Check insurance and liquidity to confirm ongoing solvency and risk cover.
“You as trustees have the duty to ensure your administrator is operating in compliance with the Conduct Standard,” Fowler said. “If you have concerns, raise them. If you need information, ask for it.”
What administrators must do
Administrators, Fowler said, face an extensive list of compliance obligations, but they can be managed with planning and teamwork.
Key requirements include maintaining sound governance, ensuring fit-and-proper key persons, establishing complaints and conflict-management frameworks, keeping accurate data records, notifying the FSCA of material changes, maintaining sufficient liquidity and insurance, and managing outsourcing arrangements.
“Compliance is ongoing, not a one-time exercise,” she said. “You can’t simply tick these boxes and move on. Use the phased timeline to your advantage – focus on immediate priorities first, then the six- and twelve-month items. And don’t do it alone: involve your legal, audit, IT, and governance teams.
“The goal here is not just compliance for compliance’s sake,” she added. “The goal is to operate a high-quality, member-focused administration business that treats customers fairly and delivers excellent service.”
What the FSCA must do
Finally, Hiller set out nine responsibilities for the regulator itself. The FSCA will:
- Supervise compliance with the Conduct Standard.
- Receive notifications of business or personnel changes.
- Review annual financial statements to assess soundness.
- Determine submission formats via RF Notice 10 of 2025.
- Approve and register administrators under section 13B.
- Take enforcement action where administrators fail to comply.
- Provide guidance on interpretation and application.
- Monitor TCF outcomes across the industry.
- Oversee the transition into the Conduct of Financial Institutions framework, integrating the standard into South Africa’s broader conduct-regulation framework.
“The FSCA is not an advisory body – they are the regulator, yes, but their goal is the same as ours: to protect pension fund members and ensure a sound, fair, and efficient retirement system,” Hiller said. “If you approach compliance in good faith and engage constructively with the FSCA, you will find them to be reasonable and supportive.”
The road ahead
The new Conduct Standard represents a watershed moment for South Africa’s retirement sector. It establishes a stronger, fairer, and more consistent regulatory framework designed to protect pension fund members while raising the standards for administrators.
For trustees, administrators, and the FSCA alike, the Conduct Standard signals a clear path: accountability, member-centric governance, robust oversight, and compliance are non-negotiable. While implementation will require careful planning, collaboration, and ongoing monitoring, the overarching goal is simple – to ensure that retirement fund members receive fair, transparent, and high-quality administration.
As Fowler emphasised, “The new Conduct Standard represents a significant way forward for the South African retirement sector, it creates a stronger, fairer and more consistent regulatory framework that ultimately protects venture fund members. Yes, it will require some effort to implement. Yes, it will raise the bar for administrators, but it is the right thing to do, and it will make our industry better.”
