Purpose of Regulation 28 of the Pension Funds Act is to protect retirement savings.

The speed at which the Covid pandemic came upon us, particularly for the employee benefits and retirement fund industry, has been likened by some to a wave of change that was necessary to propel business thinking and its applications forward.

This has placed greater emphasis on the growing influence of a multitude of regulations, technologies and social ideas that were already in play before the lockdown took place.

In the broader context, SA’s economy was already in recession, with extensive job cuts across many sectors. This lack of growth was already causing unease among employers, retirement fund trustees and umbrella fund sponsors, all of whom are under pressure to deliver returns for clients nearing retirement and those who had recently retired.

In light of this challenge, there continues to be discussions over the practical role that corporates and retirement funds can play in breaching the divides that typify SA society, while balancing the scales of sustainable economic growth, and at the same time offering products and services that add value, in both human and economic terms.PUBLICIDAD

The retirement industry has been occupied with efforts to retain and grow local talent and deliberating on its participation in stimulating economic growth, with various degrees of government’s involvement being hotly debated.

Regulation 28 of the Pension Funds Act, which governs the asset class limitations on how pension assets are invested, has proven to be a sensible formulation in the face of the economic crisis presented by the Covid-19 pandemic.

It’s worth mentioning that the main purpose of Regulation 28 is to protect retirement savings by making sure they are prudently invested and protected from the consequences of poorly managed portfolios, so that members of these funds can enjoy sufficient income in their retirement years.

The limits placed on the allocation to aggressive assets has also helped many funds weather the storm, not to mention even more significantly the importance of helping clients remain invested through these cycles and market shocks.

Regulation 28 could arguably be seen as evidence that the government’s approach to regulating retirement fund investing contains a pragmatic view of the investment industry and an appreciation of the value of remaining invested through volatile market conditions and various life experiences.

Constructive engagements between the government and business to improve the lives of people by enabling and reinforcing a stable savings environment needs to continue. Higher savings levels from households, business and the government will support economic recovery efforts. Increasing retirement savings also has the long-term advantage of freeing up the state’s finances for other pressing requirements.

The country’s lockdown to stop the spread of the pandemic has unfortunately led to the closure of many businesses, which is accelerating the rising unemployment challenge that was already growing during the preceding economic contraction.

Fortunately, we are starting to see consumer spending coming back in many parts of the country, with Gauteng and KwaZulu-Natal proving to be the most encouraging examples. We are seeing many businesses adapting to new ways of doing business and, in some cases, re-emerging with a more digital and decentralised presence. These forward-thinking businesses have retained their core talent, despite in some cases having to lower employee remuneration.

One of the things we noticed was that companies that over time retained their core talent were the ones able to offer a comprehensive package of employee benefits, which proved its worth plainly during the uncertainty that came with lockdown.

Risk cover benefits have also been acutely important to employees in these uncertainty times. And where companies experienced financial stress that led to involuntary exits of their employees, these employees were able to access the savings they accumulated in retirement funds (over and above severance packages they would have received).

In essence, these employee benefits added an important layer of security and provided many employees with peace of mind when separated from the traditional office environment, finding themselves having to work from home and being divorced from the normal environment of business life.

As more people work from home in the growing digital business environment that has been accelerated by the pandemic, companies that are able to offer the security of comprehensive risk and retirement benefits will be better positioned to reinforce their culture of teamwork and belonging, despite a more distanced work environment.

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