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File Image: IOL

Umbrella funds to disclose costs to members

By Asisa Time of article published Jun 12, 2019

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Members of umbrella retirement funds will be able to assess the total impact of charges on their individual retirement benefits from October next year, when members of the Association for Savings and Investment South Africa (Asisa) implement the new Retirement Fund Standard: Effective Annual Cost (EAC) for individual fund members.

The standard was approved by Asisa’s board of directors last week, which means that Asisa member companies offering umbrella retirement fund solutions will start developing and implementing systems to enable disclosure at member level. Companies have until October 1, 2020, to complete implementation.

Taryn Hirsch, senior policy consultant at Asisa, says from October next year, all individual members of umbrella funds, as well as in-fund living annuities, will be able to request an EAC for their retirement benefits.

An in-fund living annuity is a living annuity offered by an umbrella fund to its members on retirement. Members can either retire from the fund (leave the fund) and buy their own living annuity directly from a product provider or they can remain a member of the fund and invest their retirement benefits in the in-fund living annuity.

Hirsch says the significance of the new EAC is that individual umbrella fund members will be able to review and compare charges on retirement fund products and then assess the impact on investment returns.

“This will enable members of retirement funds to make better informed decisions around both new and existing retirement fund product choices. For example, employees will be able to factor in cost decisions when deciding on whether to allocate additional funds to either their umbrella fund or a retirement annuity.”

Hirsch says that in terms of the new Asisa standard, member companies should communicate with fund members at least once a year, reminding them that they are entitled to request an EAC calculation. This notification should include information on how fund members can access their EAC.

The EAC Standard for Individual Fund Members is modelled on the Asisa Retail EAC Standard, which came into effect on October 1, 2016. A world-first, the Retail EAC enables consumers and advisers to compare charges and their estimated impact on investment returns in a meaningful way irrespective of whether the product is a unit trust, a living annuity, a retirement annuity or an endowment policy.

Hirsch says that together the new EAC Standard for Individual Fund Members and the Retail EAC Standard provide individual investors with a complete overview of how charges impact on their investments.


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