South Africa’s retirement fund industry has undergone significant regulatory changes, with higher standards of governance being imposed on trustees, according to PwC’s 2012 Retirement Fund Strategic Matters and Remuneration Survey released today.
The majority of trustees (72%) believe that the South African retirement fund industry is appropriately regulated from the perspective of protecting members. Some participants emphasised the importance of the role played by the Regulator in the effective monitoring and supervision of compliance with legislation. However, a number of trustees also felt that the industry is possibly over regulated and that legislation is not focused sufficiently on the key risk areas from the perspective of protecting members.
More scrutiny than before
Tom Winterboer, PwC Financial Services Leader for Southern Africa and Africa says: “Trustees face more scrutiny and oversight than ever before, particularly in the wake of the recent economic uncertainty which has raised higher levels of governance and seen some significant regulatory changes in the industry.
“In South Africa, the most far-reaching changes have been the introduction of the revised Regulation 28. This imposes a much higher level of governance on trustees in relation to investments, which now needs to be monitored on a ‘look-through’ basis. Compliance is required not only at fund level but also at member level.
“There is a renewed focus on trustees’ obligations to take into account the members’ needs in deciding how to invest the assets to meet those needs.”
Benchmarking trustees
The PwC 2012 Retirement Fund Strategic Matters and Remuneration Survey collates the responses of 228 participants representing a total asset base of R708 billion across a wide range of funds from large to small. It offers a benchmark against which trustees can compare various aspects of their fund’s working and strategies with those of their peers.
The aim of the survey is to identify trends in roles and remuneration of trustees and principal officers and shed light on the stance retirement funds currently take on trustee education and on various aspects of corporate governance and risk management.
The study covers four focus areas: trustee remuneration; the education of trustees; principal officers and their remuneration; and aspects of regulation and risk management.
Gert Kapp, Retirement Fund Leader for PwC, Southern Africa, says: “It is not surprising to note that the majority of participants (73%) feel that the latest regulatory changes for funds and the industry as a whole will result in an additional cost for members of funds.”
Areas of regulatory changes
The three top areas of regulatory changes expected to have the most additional cost for members of funds were compliance with Regulation 28; compliance with section 13B by investment and benefit administrators; and compliance with proposals contained in recent amendments to the income tax laws.
The majority of participants (68%) felt that there was scope for simplification or a reduction in costs in the operation of their funds. “This suggests that respondents believe that fund arrangements and operations are more complex than necessary or desirable and in our experience this is often the case,” says Kapp.
Following on from PwC’s previous Retirement Funds surveys in 2007 and 2010, adherence to sound principles of governance remains a high priority for trustee boards. Most participants fell into one of two evenly matched camps: one that saw the King III Report on Corporate Governance as valuable for funds and the other that felt Pension Fund (PF) Circular 130 provided sufficient guidance on fund governance.