BUSINESS NEWS - Despite the fact that it is a slow and sometimes painful process, government is still committed to reforming the local retirement landscape.
Finance Minister Malusi Gigaba announced during his budget speech that government has directed the Financial Services Board (FSB) to proceed with measures to modernise and improve the governance of all retirement funds, starting with a proposed requirement that all retirement funds will have to submit audited financial statements annually in future.
Fiona Rollason, head of Alexander Forbes Legal Services, says currently all retirement funds have to submit annual financial statements to the regulator but for smaller funds, the requirement that they should be audited is waived.
In an information circular issued by the FSB dated February 8, Olano Makhubela, deputy registrar of pension funds, notes that it is in the process of implementing a more pro-active approach to the supervision of retirement funds, with a dedicated focus on member protection.
“This process and approach necessitates comprehensive and timeous reporting by funds.”
As a result, the Registrar intends to withdraw the audit exemption for smaller funds for all financial years starting after January 1, 2019.
Makhubela also notes that the current practice – where certain funds submit annual statements six to eighteen months after their financial year ends – is not conducive to effective supervision.
As a result, it intends to propose to National Treasury that legislation be amended so that funds have to submit their statements within three instead of six months after year-end.
Rollason says government is looking a lot more closely at the governance of retirement funds – how they are run, controlled and managed. Late submission of annual financial statements is often an early indicator of problems at a fund.
“While the FSB doesn’t have the financial statements to review, problems can be arising in the fund.”
For smaller funds, however, a requirement that statements have to be audited will have cost implications, Rollason says.
Makhubela acknowledges this in the circular.
“Smaller funds, therefore, should consider the viability of continuing as self-standing funds or alternatively consider transferring to an umbrella fund that will be suitable to meet the needs and requirements of the fund, employer and its members, and by ensuring that such an umbrella fund offers good value.”
