The Financial Sector Conduct Authority has published a draft Notice that will exempt transfers involving retirement annuity funds and preservation funds from the requirements of section 14(1) of the Pension Funds Act (PFA).
The draft Notice follows a request from industry stakeholders for the Authority to consider exempting transfers involving RAs and preservation funds (collectively referred to as retail funds) from section 14(1).
Section 14(1) sets out the requirements with which funds must comply before they can merge (amalgamate) or move money and members to another fund (transfer).
Members belong to RAs and preservation funds by choice, not as a result of an employer-employee relationship, as is the case with pension and provident occupational funds. Transfers into or out of these retail funds is done voluntarily at the request of the member, often based on advice from an authorised financial adviser.
Whereas transfers to occupational funds are usually done on a group basis, transfers into and between retail funds are individual transfers.
A transfer from an occupational fund to a retail fund is preceded by withdrawal from that fund, which is followed by a recognition of transfer form to be completed by both the funds. The same principle applies to transfers between retail funds.
Accordingly, transfers into and out of retail funds are similar to section 14(8) transactions because the member is aware of or in agreement with the transaction. Therefore, the complete section 14 process would be unnecessary. Section 14(8) determines that section 14(1) does not apply to funds where the affected members were duly informed of a proposed transaction in the case of an amalgamation or transfer.
The exemption will apply to transfers between RAs, transfers between preservation funds, or transfers from a preservation fund to an RA fund.
The exemption is subject to:
- compliance with the requirements in paragraph 16 of FSRA Conduct Standard 1 of 2019;
- retail funds keeping proper records of transfers;
- the transfer of the assets and liabilities within 180 days of the effective date of transfer; and
- increasing or decreasing any assets transferred with the fund return from the effective date until the date of final settlement.
Comments on the draft Notice must be submitted to FSCA.RFDstandards@fsca.co.za by 5 June 2025.
