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Retirement Funds Default Regulations

The latest ASISA Dispatches comments as follows:

The final regulations were issued by the Minister of Finance on 25 August 2017. The effective date is 1 September 2017 with 18 months being afforded for existing default arrangements to comply.

Unfortunately, the regulations failed to provide a lead-in period for existing funds that do not currently have default arrangements. ASISA raised this with National Treasury and the Financial Services Board (FSB) and in response the Registrar of Pension Funds issued an exemption for funds registered before 1 March 2018. These funds need to be compliant by 1 March 2019.

The regulations also refer to a prescribed standard for living annuity draw-down rates where living annuities are offered as default options. A working group established under the ASISA Disclosure and Standards Standing Committee is in the process of developing an ASISA Default Living Annuity Standard with a view to presenting it to the regulator as a basis for the “prescribed standard” for default living annuities.

A second working group, also under the ASISA Disclosure and Standards Standing Committee, has finalised a draft Retirement Savings Cost Disclosure Standard to address the cost disclosure requirements of the regulations. The draft Standard adopted similar principles to the ASISA Retail Standard on Effective Annual Cost (EAC). ASISA members are proceeding with consumer testing and are hoping to submit a final version to the ASISA Board for approval by the end of the year.

The working group has also begun work on an individual employee cost disclosure standard and is making good progress in this regard.

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