LEGAL UPDATE ISSUE 03

Regulation 28 Changes and Directive 5

Regulation 28 Changes
The revised Regulation 28 requirements were recently released and would initially apply as from 1 July 2011. Subsequently the Financial Services Board advised that the effective date has been changed to 31 December 2011. Some of the more important amendments are:

• A “look through basis” to apply to all pension assets. All accumulated assets and future contributions are to be invested within the prescribed asset class limits. Even in cases where assets are held in life policies (i.e. through investment houses with a life license where investments are held in a “life wrapper”) a full look through summary of assets, showing all asset classes, has to be reported on in the Fund’s annual financial statements. In the past, such assets were only labelled as “linked insurance policies”. Individual member’s pension funding assets via their retirement fund or retirement annuities or preservation funds, will also have to comply with this requirement.
• Allowable offshore investment exposure increased to 25%, with a further 5% in Africa.

The following table summarises some of the key numbers as far as the asset class limits are concerned:

Directive 5: Appointment and termination of Principal Officers of Pension Funds
Directive 5 was recently released by the Financial Services Board. Directives are law as opposed to Circulars which serve as guidance notes only. The Directive deals with the fiduciary duties of trustees insofar as the appointment and termination of a Principal Officer. A Board will have to ensure on a more regular basis that the Principal Officer is fit and proper for the position. The Board of Trustees also has to ensure that the Principal Officer is informed of his/her duties and responsibilities in terms of legislation.

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