3.3 Growing Versus Contracting Fund
A fund that is growing receives more contributions and investment income than it pays in benefits. Unless the fund rules provide otherwise, the fund can thus use some of this to pay benefits and invest only the difference. Using this method, it will not need to sell investments until the benefits start to exceed the […]
3.2 Nature and Term of the Liabilities
Retirement funds invest in assets to meet liabilities that arise from the benefits to be provided at some time in the future. To minimise the risk of failing to meet the liabilities when due, it is always recommended that the assets held behave in a similar manner to the liabilities. Firstly, the term of the […]
3.1 Introduction
The discussion below about the investment strategy of retirement funds is for the most part not applicable to pension and provident funds that provide individual investment choice to members, because members of these funds themselves select the investment composition of the policies or collective investments that one day will provide the benefits. They make their […]
2.4 The Liquidator
While most people tend to accept the fact that a business could merge with another company, be bought out by a competitor, or even close as a result of going insolvent, they tend to forget that the retirement fund for the employees of the business will also be affected. The retirement fund will probably also […]
2.3 The Pension Fund Adjudicator
It sometimes happens that there is a disagreement between a member and the fund. In the past, the only recourse that a member had was to go to a court of law and to try and get a favourable decision at considerable expense. The government, being aware of this problem, created the position of the […]
2.2 Key Role-Players in a Retirement Fund
A. Employer (sponsor) At the outset of a fund, the employer is usually involved in setting it up and choosing the benefit structure. This process may entail employee involvement, or, in the case of a negotiated fund, a union may be involved. The employer needs to make key decisions regarding the fund. These decisions include […]
2.1 Introduction
Most people in South Africa contribute to retirement funds through an employer-sponsored scheme. Under this arrangement, the employer gives its employees the facility to contribute to a retirement fund that is run or overseen by the employer. The employees are known as members and the employers are known as sponsors. The main purpose of a […]
1.4 Retirement Reform
One should note that the whole future of retirement fund provision in South Africa has been under constant review for many years. A number of previous attempts to reform the system have foundered. Overall, the government is engaged in a process to ensure that all South Africans have a reasonable amount on which to retire. […]
1.3 Pension Fund Circulars
From time to time, the Commissioner of the Financial Sector Conduct Authority deems it necessary to issue circulars to the retirement fund industry on matters that are of concern to him. Circulars sent to the retirement fund industry by the Commissioner are preceded by the prefix PF and are commonly known as the PF Circulars. […]
1.2 Legislative Environment
Considering the importance of retirement fund benefits to the citizens in enabling them to support themselves and to continue to maintain a decent standard of living on retirement, the state has deemed it necessary to enact legislation that protects the members’ fund set aside for this reason. All retirement funds must be registered in terms […]