PRETORIA, South Africa’s National Treasury has issued the final retirement funds default regulations which will take effect on Sept 1, 2017, more than two years after the first draft of the regulations was published for public comment.

The final default regulations are the outcome of an extensive consultative process between the National Treasury, the funds management industry, the Financial Services Board (FSB) and other interested stakeholders. The first draft was published for public comment on July 22m 2015, and revised after taking into account public comments. The second draft of the regulations was published for public comment on Dec 9, 2016.

The Treasury says the final regulations are meant 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 funds’ trustee boards to offer a default in-fund preservation arrangement to members who leave the services of the participating employer before retirement, and also a default investment portfolio to contributing members who do not exercise any choice regarding how their savings should be invested, a Treasury statement says.

For retiring members, a fund should have an annuity strategy with annuity options, either in-fund or out-of-fund, and can only default retiring members into a particular annuity product after a member has made a choice. Member defaults should be relatively simple, cost-effective and transparent. The default regulations will require that fund trustee boards assist members during the accumulation and retirement phases.

The provisions in the regulations for default investment portfolio will mean that all retirement funds with a defined contribution category are required to have a default investment portfolio.

The regulations require that the investment portfolio that members are defaulted into should be appropriate, reasonably priced, well communicated to members, and offer good value for money while performance fees will be allowed but subject to a standard to be issued by the FSB and a regulatory or policy review.