The savings and retirement industry has had many positive changes over the years that have led to better retirement outcomes for South Africans.
Over time, PPS has been able to adapt its offering to incorporate the changes. Let’s unpack some of the key changes that have taken place in the industry over the last few years.
Clean pricing:
The industry moved from ‘all in priced’ funds to transparent clean priced collective investments. This removed the unnecessarily complex rebate system that was replaced with the much easier priced method. A welcome relief for many.
Retail distribution review (RDR):
A term that was debated quite extensively and had many in fear was Retail Distribution Review, commonly referred to as RDR. RDR was introduced in an effort for financial institutions to treat customers fairly. A key focus was the move from commission-based to fee-based charging. There was a huge emphasis to professionalise the industry to ensure people are receiving sound advice at fair prices from credible professionals. In addition, we saw the arrival of Discretionary Fund Managers (DFM) with Category II licenses, who would build model portfolios for advisors who were previously only focused on risk products. This further ensures clients are placed in appropriate portfolios matching their risk profile. The DFM’s have also entrenched themselves by offering more than just model portfolios, but a few also offer practice management courses and additional systems that help better equip advisory practices.
Twin peaks was implemented:
South Africa was one of the first few countries to implement Twin Peaks regulation within our financial sector. Two regulators were set up under twin peaks. One is responsible for maintaining the stability of the financial system – also known as Prudential Authority. The other, the Financial Sector Conduct Authority(FSCA) is responsible for market conduct and consumer protection or what’s known as the ‘good conduct’ peak.
The Prudential Authority is a subsidiary of the South African Reserve Bank. The market conduct and consumer protection or ‘good conduct’ peak which is called the FSCA was previously known as the Financial Services Board (FSB).
Two pot system (possibly pressing ahead):
National Treasury is trying to find a balance between maximising retirement savings, minimising early withdrawals, and allowing for early access to retirement funds for unexpected events. The two pot system is looking to introduce a system where two thirds of contributions will go to the retirement pot and one third will go to the savings pot. The retirement pot cannot be touched until retirement – even if you lose or change jobs – and must be annuitised at retirement. A member can withdraw from the savings pot every 12 months, provided they have a minimum of R2000 in savings.
One of the key objectives of the RDR was that accountable institutions, such as listed companies, insurance companies, insurance intermediaries, and unit trust management companies, must be good/responsible custodians. This saw a move from a rules based to a risk based approach. This was a step away from merely requesting static documents towards looking at an individual’s level of risk based on the position they hold, family relations, political exposure and so on. PPS Investments has implemented this measure as a risk management counter.
The PPS platform has been able to adapt to all the changes faced over the years and continues to be a pioneer in the types of products we offer. Many of these changes have led to cost effective product offerings for clients. Some highlights include being the first company to offer family pricing which aggregates fees at a family level and being the only platform/linked investment service provider that offers Profit Share for qualifying members who invest in PPS unit trusts. All these measures are a reflection of our commitment to providing better retirement outcomes for our clients.
PPS Investments does not in any way guarantee the illustrated benefits shown. The illustrations shown are based on information provided by you/your financial adviser regarding your financial situation. PPS Investments offers these illustrations in order to assist you with understanding your financial planning. The calculations, illustrations and all information provided is of a general nature with no regard to the specific investment objectives, financial situation, or needs of any investor. PPS Investments, its subsidiaries, or its affiliates do not warrant or accept responsibility for the correctness or accuracy of any information and/or illustrations generated by this calculator/tool and shall not be held responsible for any claim for losses or damages which may arise out of the use of, or any reliance placed on, the information or illustrations contained herein. The actual future value of your investments will depend on the actual amounts that you invest and the associated investment performance, fees, and taxes of your selected underlying Investment option(s).
Nkululeko Kunene is institutional client manager at PPS Investments.
