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A Fin24 user wants to know about the application of regulation 28 of the Pension Funds Act. He writes:
Does regulation 28 allow property and equity to be more than 90 %?
My own understanding is that you can have 75% equity and 25 % property.
Mike Brown, managing director of etfSA responds:
The following seems applicable:
Regulation 28, which governs the assets and exposure to such assets that can be used in retirement funds, was initially promulgated in 1962 as part of the Pension Funds Act (1956).
The regulations under the original regulation 28 prescribed the maxima for various types of investments that may be made by a retirement fund as:
* Not more than 75 percent may be invested in equities;
* Not more than 25 percent may be invested in property;
* Not more than 90% may be invested in a combination of equities and property.
Amendments to regulation 28 came into force from July 2011. The new regulations restate the overall limit of 75% for equities and 25% for listed property.
The restriction to a combination of 90% for equities and property has not been included in the new regulation.
This can lead to two interpretations, which should at least keep the lawyers and compliance officers happy:
* The old resolution of a 90% limit to a combination of equities and property has not been specifically rescinded so still applies;
* The new regulation 28 requirement does not specifically prescribe a limit of 90% for a combination of equities and property, so this limit no longer applies.
However, there is a twist in the tail. The new regulation 28 requires that “retirement products should be compliant not only at a fund level, but also at member level”.
The trustees of the retirement fund would, therefore, approve and maintain the exposure limits for the entire fund and all members to different types of investments.
For prudential reasons, they are unlikely to accept an asset allocation which has 100% weighting in JSE listed equities.
This means the Fin24 user may be correct, but the retirement fund trustees will still have the final say.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
Does regulation 28 allow property and equity to be more than 90 %?
My own understanding is that you can have 75% equity and 25 % property.
Mike Brown, managing director of etfSA responds:
The following seems applicable:
Regulation 28, which governs the assets and exposure to such assets that can be used in retirement funds, was initially promulgated in 1962 as part of the Pension Funds Act (1956).
The regulations under the original regulation 28 prescribed the maxima for various types of investments that may be made by a retirement fund as:
* Not more than 75 percent may be invested in equities;
* Not more than 25 percent may be invested in property;
* Not more than 90% may be invested in a combination of equities and property.
Amendments to regulation 28 came into force from July 2011. The new regulations restate the overall limit of 75% for equities and 25% for listed property.
The restriction to a combination of 90% for equities and property has not been included in the new regulation.
This can lead to two interpretations, which should at least keep the lawyers and compliance officers happy:
* The old resolution of a 90% limit to a combination of equities and property has not been specifically rescinded so still applies;
* The new regulation 28 requirement does not specifically prescribe a limit of 90% for a combination of equities and property, so this limit no longer applies.
However, there is a twist in the tail. The new regulation 28 requires that “retirement products should be compliant not only at a fund level, but also at member level”.
The trustees of the retirement fund would, therefore, approve and maintain the exposure limits for the entire fund and all members to different types of investments.
For prudential reasons, they are unlikely to accept an asset allocation which has 100% weighting in JSE listed equities.
This means the Fin24 user may be correct, but the retirement fund trustees will still have the final say.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
