Pension Funds Act, 1956 (Act No 24 of 1956)

Regulations

Part VII : General

39. Annuity strategy
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(1)

(a)The boards of all pension, pension preservation and retirement annuity funds must establish an annuity strategy.
(b)Where the rules of a provident or provident preservation fund enable a member to elect an annuity, the board must establish an annuity strategy.

 

(2)Boards must ensure, and be able to demonstrate to the Registrar on request, that—

 

The proposed annuity or annuities as per the annuity strategy are appropriate and suitable for the specific classes of members who will be enrolled into them

(a)in determining an annuity or annuities, the board has considered, as far as it can reasonably ascertain: the level of income that will be payable to retiring members; the investment, inflation and other risks inherent in the income received by retiring members; and the level of income protection granted to beneficiaries in the event of the death of a member enrolled into the proposed annuity;

The objective, asset class composition and performance of the annuity are communicated to members

(b)with respect to a living annuity, the asset class composition of investments, their performance and changes in the incomes in respect of the annuity must be communicated to members on a regular basis, in a clear and understandable language and in a format which may be prescribed;

Annuities have reasonable and competitive fees and charges

(c)the fees and charges in respect of the annuity or the assets held in respect thereof are reasonable and competitive, considering the benefits provided to members;

All fees and charges, and their impact on members’ benefits are disclosed

(d)all fees and charges, whether borne directly or indirectly by the fund, implicit or explicit, are disclosed on a regular basis to boards and the relevant information is appropriately disclosed to members, in a clear and understandable language, and in formats which may be prescribed;

Members are given access to retirement benefits counselling

(e)members are given access to retirement benefits counselling not less than three (3) months before their normal retirement age as determined in the rules of the fund and as may be prescribed; and

The annuity strategy is reviewed annually

(f)it reviews the annuity strategy at least annually to ensure that the annuity or annuities continue to comply with this regulation and are appropriate for members.

 

Living annuities

 

(3)

(a)In addition to traditional annuities, living annuities may be paid directly from the fund or through a fund owned policy or sourced from an external provider as part of the annuity strategy; provided that in each case, the investment choice is limited to four (4) investment portfolios, which portfolios are compliant with regulation 28 and 37 and draw down levels are compliant with a prescribed standard.
(b)Where the living annuity is paid from the fund or through a fund owned policy, funds must monitor the sustainability of income drawn by retirees in these living annuities and make such members aware if their drawdown rates are deemed not to be sustainable.

 

In-fund annuities other than living annuities

 

(4)An annuity payable by the fund in terms of the rules of the fund may be chosen as part of the annuity strategy.

 

Out of fund annuities, other than living annuities

 

(5)Annuities provided by a long-term insurer may be provided as part of the annuity strategy subject to such conditions that the Registrar may prescribe.

 

Exemption

 

(6)The Registrar may on written application by a fund or in general, exempt a fund, or categories, types or kinds of funds, from all or any of the provisions of these regulations, subject to conditions that the Registrar may impose.

 

[Regulation 39 inserted by regulation 2(1) of Notice No. 863 of 2017]