Can my asset manager move my funds?

Nov 27 2012 12:44
A Fin24 user who is successfully managing his own living annuities wants to know what rights asset managers have to move funds under Regulation 28. He writes:

I have living annuities, which I have had from approximately 1997.

I am 75 years of age and have managed them myself. They are both with Fairbairn Capital. I have grown them significantly and draw 5% per year.

At present my property portfolio stands at approximately 33% of the total.

Fairbairn advised me two weeks ago that they will have to move some of my property portfolio out, as only 25% is allowed in property. My research on Regulation 28 is that it does not apply to owner-managed living annuities.

So I have informed Fairbairn that if they even think of moving some of my property portfolio out, I will strongly object. The unit trust prices fluctuate daily and my property units have produced growth and regular quarterly returns.

We do not need some academic to make a broad requirement without having a clue as to what or how the living annuity is comprised, and how it has been managed.

Can you please just confirm that the trustees must consult first, and then agree that for owner-managed living annuities they have no power to demand change at all.

Piet Spreeuwenberg, client services manager at Old Mutual responds:

The criterion for deciding whether a living annuity contract falls under Regulation 28 is whether the annuity is owned by a retirement fund or the member.

Most are owned by the member but in some cases they are owned by the fund. Fund-owned living annuities have to comply with Regulation 28.

If the Fin24 user's annuity is fund-owned, he would have benefited from the "grandfather" provisions of Regulation 28 which excludes contracts that started before April 1 2011 from the asset limit requirements.

He would have lost this exemption if he made a material change (such as a switch between assets) subsequent to the regulation becoming effective.

If his annuity is subject to Regulation 28, then the trustees are obliged to request that he switch his assets to be within the limits (a maximum exposure to property of 25% among others) and should he fail to do so, switch his portfolio so that it is compliant.

If his annuity is not fund-owned, he does not need to comply with the asset limits.

We found two contracts in the Fin24 user's name; one of them is fund-owned, and the other is member-owned. The fund-owned contract has lost its grandfather status due to switches earlier this year.

It is possible to transfer the fund-owned contract to become member-owned, in which case the living annuity would no longer be subject to Regulation 28.

 - Fin24

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