The current discussion in the media and the article titled “ANC suggests pension funds take some Eskom assets” by Bloomberg has arisen because of a paper published by the ANC’s Transformation Committee.
The proposals, which are outlined in the ANC’s document titled “Reconstruction, Growth and Transformation: Building a New Inclusive Economy”, outline the party’s vision for the post coronavirus economy. However, the term “prescribed assets” does not feature in the document.
What Does The Paper Propose?
The paper proposes an amendment to Regulation 28 to allow (not force) pension funds to invest directly in infrastructure assets and development finance institutions such as the Development Bank of South Africa (DBSA) and Industrial Development Corporation (IDC). Retirement funds may allocate their investments directly to these institutions, bypassing asset managers, and possibly saving on costs. At this moment, it is not clear how this will apply to unit trust-based retirement products that have a daily liquidity requirement.
What Is The Difference Between This Proposal And Prescribed Assets?
Prior to 1988, prescribed assets meant pension funds and insurance companies had to invest a large portion of assets in government and parastatal bonds. Many fear a return to such an arrangement, especially given the government’s large budget deficit and high borrowing costs. However, there is no indication of such a step. We were always of the view that the policy of prescribed assets would not be in the best interests of our clients or the broader economy. Our opinion was always that a more viable alternative to meet government’s investment objectives, would be to increase the efforts to make South African assets more attractive on a project basis and to generally improve the tone, structure and long-term certainty of public private partnerships. The “Reconstruction, Growth and Transformation: Building a New Inclusive Economy” paper is more aligned to our approach.
What Process Will The ANC Have To Follow If It Were To Amend The Pension Funds Act?
The ANC’s proposals do not automatically become government policy. The ANC, as the governing party, will first have to consult with all stakeholders including business, labour, community, opposition government and ASISA before any amendments can be made to Regulation 28. This paper is not final and is still far from being government policy and law.
If Ultimately Passed Into Law, Will This Practice Be Unique To South Africa?
Globally, pension funds prefer infrastructure as an asset class because of its stable long-term returns. If direct investing into infrastructural and development funds is approved, this will be an additional asset class that the client can diversify into, and these investments can still earn a decent return. It will not become a case of the state confiscating pensioners’ hard-earned money. Old Mutual has a long history of investing in infrastructure and development assets, and would like to expand this offering on behalf of our clients, subject to our investment criteria being met. The challenge was never a shortage of funds, but rather a shortage of viable projects.
Which Assets And Investments Would Be Affected If The Paper Becomes Policy?
Currently, the targeted investments seem to be retirement funds.
What Should I Do In The Meantime?
Although at times the relationship between government and the party, ANC, can be confusing, it is important to remind your clients that the government ultimately approves regulations. Clients need to remain focused on the key principles in times of uncertainty:
We encourage you to remain invested, as time out of the market is costly and cash holdings expose them to inflation;
- The tax benefits of retirement vehicles are substantial, and it would be a pity to miss out due to fear of a policy change that is still very unlikely;
- Remember that markets are cyclical. As they go up, they will eventually go down and vice versa; and
- Stick to your investment strategy, don’t listen to market noise and act on impulse. When you want to change your strategy, speak to a financial planner or investment professional.
Source: Old Mutual June 2020
Improve Your Work-Life Balance During Lockdown
If we had predicted that many South Africans, including yourself, would be working from home indefinitely back in January, you would have thought this year was set to be a breeze, right? Reality is a little different, though. Working from home has its challenges that can affect your life. Here five ways you can improve your work-life balance right now.
Set Boundaries
Boundaries are a great way to create structure and look out for yourself. Without them, anything goes. Depending on the type of work you do, set boundaries regarding when you will work and when you will be off for the day. Don’t work around the clock. There will always be something to do, but you must take care of yourself to make sure that you are well-rested so that you can give your best when it is time to work.
Switch Off
Before lockdown, we used to pack up and leave the office at the end of the day. Now that we’re working from home, it’s easier to keep working around the clock without even noticing. Remember how you used to feel if you worked for a long time without going on leave? You’ll soon feel like that if you don’t take a break. Prioritise and respect your personal time as much as you respect your work time.
- Switch off your computer and put it away after work.
- Clean your desk and pack away all work equipment and stationery.
- Change into more comfortable home clothes.
- If possible, leave the room you usually work in and go relax in another room.
Reconnect With Loved Ones
Even though you may be working in the same space at home with your loved ones, once you log on to your computer, you’re virtually in a different world. Reconnect after work. Talk about the challenges you faced, and share your victories, however small they may be. It can help bridge the gap work creates between you.<br><em>If you live alone, set aside time to video call your loved ones after work.</em>
Pay Attention To Yourself
Working around the clock can take a toll on you. Recognise the signs that you’re tired and you need a break. If you notice that you’re more irritable, struggling to concentrate, or any other behaviour that is out of character for you, make time to find out how you are feeling.
Be Intentional About Resting
It’s easier to just sit in bed, streaming shows for hours on end, but that doesn’t mean you’re getting the best rest. Routine can quickly become monotonous. Vary your relaxation activities. Try riding a bicycle or playing with your kids and pets outside.
Have a look at this “>Great Self-Awareness Tips From Momentum Multiply.
The Future Of Your Loved Ones May Depend On A Single Form
Why Should You Complete A Beneficiary<br>Nomination Form? Upon your death, the trustees of your Pension/Provident Fund will need to know who your dependants and beneficiaries are. This important information will assist them with the decision on allocating your available fund death benefits as fairly as possible.
Is It Important To Keep This Form Updated? It is very important that you ensure your nomination form contains your latest family information. Imagine you did not update your form when you got divorced or re-married. Would you want your ex-spouse to receive your benefit and leave your new spouse destitute?
What Will Happen If You Do Not Complete A Beneficiary Nomination Form? Without an updated beneficiary nomination form, the trustees are not in the position to identify all your dependants and take your wishes into account when allocating your fund death benefits. They will have to allocate and pay the benefit according to the limited information they have.
How Is Your Death Benefit Determined? It could be that you qualify for two types of benefits: fund death benefits and/or separate group life scheme benefits.
- Fund death benefits
- (this is also sometimes called approved benefits)
- Your fund death benefit may consist of the following:
- YOUR MEMBER SHARE
- ANY INSURED DEATH BENEFIT PAYABLE BY THE FUND (IF THIS IS APPLICABLE)
- Separate Group Life Scheme Benefits
- (this is also sometimes called unapproved benefits)
- Your separate group life scheme benefits consists of:
- THE AMOUNT YOU ARE INSURED FOR IN TERMS OF THE GROUP LIFE POLICY
What Is The Difference Between The Two Types Of Benefits And Who Decides How It Is Paid?
It is very important that you understand what the difference is, because this will influence how you complete your beneficiary nomination form.
There Is A Difference Between A Dependant And A Beneficiary
It is very important that you understand what the difference is, since you need to list both on your nomination form.
More Questions And Answers To Help You Understand We include a list of further questions and answers that can help your understanding.
SOURCE: SANLAM
