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FSCA PUBLISHES SEVERAL DRAFT CONDUCT STANDARDS RELATING TO RETIREMENT FUNDS FOR PUBLIC COMMENT

By David Geral,Deirdre Phillips Thursday, June 11, 2020
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The Financial Sector Conduct Authority (FSCA) has recently published several draft Conduct Standards and has invited interested parties to comment on them.

Draft Conduct Standard on retirement fund contributions

The draft Conduct Standard on retirement fund contributions, amongst other things, prescribes:

  • a standard format in which a fund must notify every participating employer of the employer’s duties, obligations and liabilities in terms of section 13A of the Pension Funds Act, 1956 (PFA);
  • the format of reporting by principal officers and/or authorised persons, and boards of funds, insofar as it relates to various matters falling within the ambit of section 13A of the PFA and Regulation 33 of the Regulations made under section 36 of the PFA; and
  • sets requirements for boards of funds when outsourcing the collection of arrear contributions to attorneys.

The FSCA advised that the draft Conduct Standard is intended to replace Regulation 33.

Draft Conduct Standard on conditions for living annuities

The draft Conduct Standard on conditions for living annuities seeks to prescribe the conditions that living annuities need to comply with in order to be considered as part of a fund’s ‘annuity strategy’ as defined in the Regulations.

The draft Conduct Standard:

  • sets out the general conditions for including living annuities as part of the annuity strategy;
  • sets out the requirements relating to ensuring sustainability of income;
  • requires certain information to be communicated to members;
  • recommends drawdown rates; and
  • sets out the maximum drawdown limits.

Draft Conduct Standard on communication of benefit projections to fund members

The draft Conduct Standard on communication of benefit projections to fund members seeks to standardise the minimum information that should be provided to fund members and to ensure that benefit projections are communicated to members throughout the various phases of fund membership.

The draft Conduct Standard:

  • imposes general principles regarding the communication of benefit projection;
  • places an obligation on funds to provide members with benefit projection statements, and the frequency at which such statements must be provided;
  • specifies the minimum information to be contained in benefit projection statements;
  • sets out the methodology to be applied in the calculation of benefit projections; and
  • sets out how assumptions relating to benefit projection calculations are to be determined and/or used.

Draft Conduct Standard on conditions for investment in derivative instruments for funds

The draft Conduct Standard on conditions for investment in derivative instruments for funds sets out overarching principles for the uses of derivative instruments by funds. This has been done as an attempt to balance the benefit with the possible risks associated with funds investing in derivative instruments.

The draft Conduct Standard sets conditions relating to:

  • permissible uses of derivative instruments;
  • general conditions in using derivative instruments;
  • the allowable counterparties for purposes of derivative instruments;
  • the calculation of exposure to derivative instruments;
  • allowable netting provisions for derivative instruments;
  • collateral; and
  • receiving information.

The draft Conduct Standards, comments template and supporting information can be accessed here for Retirement Fund Contributions; here for Living Annuities, here for Benefit Projections; and here for Investment in Derivative Instruments.

Comments on the draft Conduct Standards must be made in the respective comments template and submitted to [email protected] by 31 July 2020.