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What is Regulation 28

What is Regulation 28?

Regulation 28 is issued under the Pension Fund Act. It limits the extent to which retirement funds may invest in particular assets or in particular asset classes.  The main purpose is to protect the members’ retirement provision from the effects of poorly diversified investment portfolios. This is done by limiting the maximum exposure to more risky asset classes, making sure that no unnecessary risks are taken with retirement money. This helps to ensure that members’ retirement provision provide them with sufficient income in their golden years.

Source: Sanlam

What Are the Relevant Asset Class Limits?

These are guidelines that set, amongst other things, the maximum exposures that retirement fund savings may have to various asset classes, for example:

  • 75% in equities
  • 25% in property
  • 25% in foreign assets

Source: Allan Gray

How does this affect my retirement plans?

If you have an existing retirement fund plan that was issued before 1 April 2011, then you are not affected by the new asset limits as long as you make no changes to the plan. If, however, you make one of the following changes, your plan must be compliant at all times thereafter: 

  • Ad hoc recurring contribution increases, excluding the increases due to existing

contractual contribution growth

  • Ad hoc one-off contribution additions
  • Addition of contractual contribution growth
  • Switches between investment funds
  • Redirections of future contributions
  • Contribution frequency changes
  • Reinstatement of retirement annuity plans that have been paid-up for more than a

year

  • Conversion or continuation of older generation plans:

If you take out a new retirement fund plan it must comply with the new asset limits.  The test for compliance will be done on quotation date. The plan must also be compliant at all times thereafter.

Source: Sanlam

 

 



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