The Financial Sector Conduct Authority (FSCA) is probing the charges imposed by pension funds and fund administrators on two-pot withdrawals.
According to Matthew Parks, Cosatu parliamentary co-ordinator, the matter has been under review at the National Economic Development and Labour Council (Nedlac).
The FSCA, the Association for Savings and Investment SA (Asisa), and the Treasury had all been involved, he said, adding that discussions were continuing. Cosatu has proposed to the Treasury that caps be imposed on what pension funds can charge.
By early November the SA Revenue Service had received 1.7-million applications for withdrawals which totalled just over R30bn.
A study by Keystone Actuarial Solutions estimated the average fee charged by pension funds and administrators for a withdrawal to be about R320. The highest fee for a withdrawal of R30,000 was R600, charged by Alexforbes and NMG, but their minimum fee for smaller withdrawals was lower than other service providers at R100 or less.
‘Appropriate’
On the basis of an average R320 charge on the 1.7-million withdrawals, pension funds and administrators would have made a total of R544m since the two-pot system came into effect on September 1.
Alexforbes head of best practice Vickie Lange noted that the two-pot reforms had meant additional costs, one-off and ongoing related to among others IT, additional resourcing, member communication, processes, and training.
“We consider the fee structure to be fair and appropriate,” Lange said.
In a written reply to a parliamentary question by EFF MP Omphile Maotwe, finance minister Enoch Godongwana said he had no knowledge of any alleged inflated costs or profits charged by insurance companies as a result of the implementation of the two-pot system.
Maotwe asked the minister whether he had been informed that private insurance companies were “making huge profits from the two-pot retirement system”, and what steps the National Treasury would take to stop this.
Godongwana said an actuarial company had shared the findings of a survey of savings component withdrawal fees and administration fees by a few retirement fund administrators.
Charges
“The minister is also informed that the FSCA has issued a request for information on charges and fees charged on two-pot savings withdrawal claims to ascertain the fees and charges associated with the two-pot system and how the fees will be calculated by administrators and self-administered funds.
“The FSCA has indicated its intention to publish a report of its findings after obtaining the requested information. The purpose is to assess the impact of these fees and charges and gain a better understanding of their structure.”
Godongwana said the two-pot regime was still in its inception phase and the National Treasury, together with the relevant regulatory agencies, would continue to monitor its implementation.
“The FSCA has thus taken the first step to see whether boards of funds ensure that reasonable fees are charged for, among others, withdrawals from the savings component in terms of the two-pot system.”
FSCA departmental head of fund governance and trustee conduct Zareena Camroodien said the authority had sent out a request for information after the issue being raised by Cosatu at Nedlac.
Most administrators had responded and the responses would be consolidated and analysed after which a report on the aggregated amounts would be published.
She said the FSCA did not regulate fees but if it discovered outliers or excessive costs it would hold engagements with those responsible.
While Parks said he could understand the need for an initial charge to recoup costs incurred in setting up new systems for the two-pot regime, he could see no reason it should be an ongoing charge on future withdrawals as some pension funds had indicated would be the case.
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