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Pension plan: apartheid throwback?

Johannesburg - The Institute of Retirement Funds (IRF) has "no problem" with the principle of socially responsible investments, it said on Friday.

"But let's not fall into the trap of reintroducing the highly unpopular prescribed assets system of the apartheid era under a different guise," IRF president Shantha Padayachee said in a statement.

Economic Development Minister Ebrahim Patel announced on Thursday he was exploring ways of investing some of the R1.5 trillion of public and private retirement funds in development projects, including the possibility of issuing a development bond for socially responsibility investments (SRI).

Padayachee said the pensions sector would welcome limited investment of pension fund monies in social development projects, subject to certain provisos.

"Government is still to clarify its thinking on the issue and the recent announcement of draft changes to the Pension Fund Act's Regulation 28, which defines the prudential limits of pension fund investments was arguably the time and place to do this."

Padayachee said the last thing needed was for pension fund members' assets to be exploited, leaving them with less retirement money.

Investments should go into government backed assets with good returns.

"Defining those assets is therefore key to the whole issue.

There have been attempts in the past to do so, but typically they should include revenue producing regional and national infrastructure development, industrial development and community upliftment projects."

There was always a danger this would become another less than subtle tax of potentially monumental proportions. This had to be avoided.

"However the IRF would support the initiative in principle and subject to consultation provided there is a 'reasonable' limit on the amount of fund assets that have to be invested, they are invested within the parameters of Regulation 28 of the Pension Funds Act to spread risk, and most importantly, fund managers still have the freedom of choice within those investment parameters."

The SRI should not be seen as a separate asset class, subject to different government rules, she said.

- Sapa

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