scholarly journals Mitigating the South African retirement-income shortfall crisis

2018 ◽  
Vol 11 (1) ◽  
Author(s):  
Adriaan E. Pask ◽  
Johan Marx
Keyword(s):  
South African ◽  
Asset Allocation ◽  
Pension Funds ◽  
Retirement Income ◽  
Ceteris Paribus ◽  
National Budget ◽  
Investment Returns ◽  
Retirement Fund ◽  
Retirement Wealth ◽  
Income Shortfall

Orientation: National Treasury acknowledges that 90% of all South African retirees will not have adequate financial resources in order to sustain themselves.Research purpose: This study aimed to address the retirement income shortfall by assessing possible changes to prudential retirement fund regulations.Motivation: Asset allocation plays a pivotal role in achieving the required rate of return of any portfolio. However, the restrictions on asset allocation imposed by article 28 of the Pension Funds Act of 1956 limits pension funds’ ability to achieve adequate returns.Research approach: A survey was conducted among chief investment officers (CIO) of the top 25 South African investment management companies.Main findings: The study proposes changes to the Income Tax Act, the Collective Investment Scheme Control Act and Regulation 28 of the Pension Funds Act.Managerial implications: The proposed framework should result in fewer pensioners becoming dependent on the state for their pension and empower pensioners to have greater amounts of post-retirement savings.Contribution: The contribution of this article is the proposed changes to the regulatory framework, which could – ceteris paribus: (1) Enable SA retirement fund investors to contribute to the retirement wealth pool in an unconstrained manner. (2) Enable SA retirement fund assets to increase investment returns by as much as 1.21% per annum. (3) Increase the average SA GRRs from the current projected 10.0% to 10.7% by 2045. (4) Increase the efficacy of the existing tax incentives. (5) Reduce spending requirements for grants in the national budget.

scholarly journals A comparison of retirement saving using discretionary investment and Regulation 28

2018 ◽  
Vol 21 (1) ◽  
Author(s):  
Gizelle D. Willows ◽  
Thomas Burgers ◽  
Darron West
Keyword(s):  
South Africa ◽  
South African ◽  
Asset Allocation ◽  
Pension Funds ◽  
Investment Risk ◽  
Retirement Savings ◽  
Primary Reason ◽  
Risk And Return ◽  
Retirement Saving ◽  
Retirement Fund

Background: There is growing uncertainty in global society with regard to how retirement savings should be approached. The primary reason for this is that most societies do not save enough and their citizens run out of money during retirement. Aim: This study investigates whether the limitations imposed by Regulation 28 of the Pension Funds Act of South Africa encourage optimal asset allocation and reduce investment risk for retirement savings when contrasted with discretionary investment. Setting: The study looks at hypothetical individuals who are subject to tax and retirement consequences as administered by South African legislation. Methods: A quantitative risk and return analysis was performed while considering two hypothetical investors who are identical in all aspects other than their choice of investments. Results: The findings indicate that Regulation 28 is effective in reducing the investment risk of retirement savings; however, it may also force the investor to sacrifice wealth. Conclusion: Depending on the tax bracket in which the investor sits, discretionary investment may be preferential to investing in a retirement fund under the mandate of Regulation 28.

Extending Death Benefits to Cohabitants under Section 37C of the South African Pension Funds Act: Hlathi v University of Fort Hare Retirement Fund

2012 ◽  
Vol 56 (2) ◽  
pp. 296-306
Author(s):  
Ntombizozuko Dyani
Keyword(s):  
South Africa ◽  
South African ◽  
Legal Protection ◽  
Pension Funds ◽  
Bill Of Rights ◽  
The South ◽  
Retirement Fund ◽  
University Of Fort Hare

AbstractCohabitation is left largely unregulated in South Africa, which means that many cohabitants are left destitute or financially worse off when their cohabiting partners die. The Pension Funds Act 24 of 1956, in particular section 37C, is one of the few pieces of legislation that afford legal protection to cohabitants who are left financially worse off due to the death of their partners. However, three previous pension funds adjudicators gave different views as to how to interpret this provision. This note seeks to compare three decisions by three different adjudicators and concludes that the latest decision in Hlathi is the most preferred, because it interprets section 37C progressively, taking into account the spirit, purport and objects of the Bill of Rights.

scholarly journals Benchmark selection and performance

2019 ◽  
Vol 19 (4) ◽  
pp. 511-531 ◽  
Author(s):  
Dirk Broeders ◽  
Leo de Haan
Keyword(s):  
Asset Allocation ◽  
Pension Funds ◽  
Investment Risk ◽  
Cross Sectional ◽  
Security Selection ◽  
Regulatory Data ◽  
Investment Returns ◽  
And Performance ◽  
Style Preferences ◽  
The Impact

AbstractUsing regulatory data free of self-reporting bias for 2007–16, we decompose investment returns of 455 Dutch pension funds according to their key investment decisions, i.e., asset allocation, market timing and security selection. In extension to existing papers, we also assess the impact of benchmark selection. Over time, asset allocation explains 39% of the variation of returns, whereas benchmark selection, timing and selection explain 11%, 9% and 16%, respectively. Across pension funds, asset allocation explains on average only 19% of the variation in pension fund returns. Benchmark selection dominates this by explaining 33% of cross-sectional returns. We relate the choice for a specific benchmark to investment, risk and style preferences.

scholarly journals THE DUTY TO EFFECT AN APPROPRIATE MODE OF PAYMENT TO MINOR PENSION BENEFICIARIES UNDER SCRUTINY IN DEATH CLAIMS

2017 ◽  
Vol 12 (2) ◽  
pp. 143
Author(s):  
M Mhango ◽  
N Dyani
Keyword(s):  
South African ◽  
Pension Fund ◽  
Pension Funds ◽  
Retirement Fund ◽  
The Right ◽  
A Minor ◽  
Provident Fund

his note focuses on the payment into a trust arrangement in favour of a minor beneficiary as contemplated in terms of section 37C (2) of the Pension Funds Act 24 of 1956. The aim is to examine the criteria under which the boards of management of pension funds may deprive a guardian the right to administer benefits on behalf of minor beneficiaries. This examination is conducted within the context of the approach adopted by the Pension Funds Adjudicator in four specific determinations decided prior, but relevant, to the amendments to the Pension Funds Act, where the board in each case unlawfully deprived a guardian of the right to administer death benefits in favour of a minor beneficiary. Therefore, the note will discuss four specific determinations and thereafter comment about the criteria to be used by practitioners. The note argues that these determinations should be welcomed because of their progressive interpretation of the Pension Funds Act and for setting an important precedent for pension fund practitioners and boards. In each case, the Pension Funds Adjudicator found a violation of section 37C. The note also criticises the remedy granted in two of the determinations, namely Moralo v Holcim South African Provident Fund, and Mafe v Barloworld (SA) Retirement Fund Respondent, and argues that the Pension Funds Adjudicator’s ruling on these matters was arbitrary and capricious because it disregarded its own precedent in Lebepe v Premier Foods Provident Fund & Others. We therefore submit that the Pension Funds Adjudicator should have ordered the boards in Moralo vHolcim South African Provident Fund, and Mafe v Barloworld (SA) Retirement Fund Respondent to pay all of the benefits directly to the complainants and guardians in those determinations.

scholarly journals Do boards of trustees of South African retirement funds owe fiduciary duties to both the funds and fund members? The debate continues

2017 ◽  
Vol 15 (2) ◽  
pp. 553
Author(s):  
Motsotsile Clement Marumoagae
Keyword(s):  
South African ◽  
Pension Funds ◽  
Board Of Trustees ◽  
Boards Of Trustees ◽  
Best Interest ◽  
Fiduciary Duties ◽  
Regulatory Changes ◽  
Retirement Fund ◽  
Fund Industry ◽  
Retirement Funds

Over the years, the South African retirement fund industry has experienced major regulatory changes. These changes were aimed at imposing a higher standard of governance on the boards of trustees governing various pension funds. As such, there has been a debate within the retirement fund industry as to whom the board, as the governing and managing body of the retirement fund, is accountable. South African courts and tribunals adjudicating pension fund related disputes and the retirement industry at large seem to share the view that the board of trustees is accountable to both the fund and its members. In that the board of trustees owes fiduciary duties to both the fund and its members, meaning that the board is required to act in the best interest of the fund and its members. However, in this paper I demonstrate that the boards of trustees of South African Pension Funds are accountable to and owe fiduciary duties only to the fund they serve and not members of those funds. Furthermore, I submit that at the very best the board owes a duty of good faith towards the members of the fund. In order to substantiate my submissions, I distinguish the legal position relating to trust law from the law relating to retirement funds in South Africa.

scholarly journals Assessing Market Risk in BRICS and Oil Markets: An Application of Markov Switching and Vine Copula

2021 ◽  
Vol 9 (2) ◽  
pp. 30
Author(s):  
John Weirstrass Muteba Mwamba ◽  
Sutene Mwambetania Mwambi
Keyword(s):  
South Africa ◽  
Crude Oil ◽  
South African ◽  
Asset Allocation ◽  
Markov Switching ◽  
Tail Dependence ◽  
Lower Tail ◽  
Oil Market ◽  
Oil Markets ◽  
Vine Copula

This paper investigates the dynamic tail dependence risk between BRICS economies and the world energy market, in the context of the COVID-19 financial crisis of 2020, in order to determine optimal investment decisions based on risk metrics. For this purpose, we employ a combination of novel statistical techniques, including Vector Autoregressive (VAR), Markov-switching GJR-GARCH, and vine copula methods. Using a data set consisting of daily stock and world crude oil prices, we find evidence of a structure break in the volatility process, consisting of high and low persistence volatility processes, with a high persistence in the probabilities of transition between lower and higher volatility regimes, as well as the presence of leverage effects. Furthermore, our results based on the C-vine copula confirm the existence of two types of tail dependence: symmetric tail dependence between South Africa and China, South Africa and Russia, and South Africa and India, and asymmetric lower tail dependence between South Africa and Brazil, and South Africa and crude oil. For the purpose of diversification in these markets, we formulate an asset allocation problem using raw returns, MS GARCH returns, and C-vine and R-vine copula-based returns, and optimize it using a Particle Swarm optimization algorithm with a rebalancing strategy. The results demonstrate an inverse relationship between the risk contribution and asset allocation of South Africa and the crude oil market, supporting the existence of a lower tail dependence between them. This suggests that, when South African stocks are in distress, investors tend to shift their holdings in the oil market. Similar results are found between Russia and crude oil, as well as Brazil and crude oil. In the symmetric tail, South African asset allocation is found to have a well-diversified relationship with that of China, Russia, and India, suggesting that these three markets might be good investment destinations when things are not good in South Africa, and vice versa.

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