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SA retirement fund industry healthy - FSB

12 November 2004 Angelo Coppola

The retirement fund industry in South Africa is going from strength to strength with total assets of all funds increasing by nearly 5 percent from R867 to R909 billion.

The annual report for the 2003 calendar year showed that the net assets of self-administered funds increased by 4.5% from R352 billion in 2002 to R368 billion in 2003.

According to the report, in spite of total fund contributions increases of 12.2%, income from investments (including the adjustment to fair value) decreased by nearly 92 percent. Employer contributions increased by 14.5% while members' contributions went up by 8.5%.

Total net cash inflow increased by 73.3% from R19 043 million in 2002 to R32 994 million in 2003 as income increased by 20.7% while expenses decreased by 0.1%.

Return on investments (ROI) over the past five years has shown a steady decline from a high of 16.6% in 1999, to 0.7% in 2003. Benefits paid by all pension funds increased by 1.1% from R72 494 million in 2002 to R73 318 million in 2003.

Investment patterns of self-administered funds show that insurance policies (33%) still formed the bulk of investments, followed by shares in companies (30.6), followed by bills, bonds and securities (13%).

The balance is split between other assets (8.5%); deposits and Krugerrands (6.6%); collective investment schemes (5.4%); immovable properties (1.2%); loans (1.1%) and
debentures (0.6%).

During the period under review several inspections into pension funds were
conducted.

The inspections revealed, among other things, the following:
* Trustees of a fund failed to act with the required care, diligence and utmost faith in the investment of the funds' assets, resulting in a huge loss to the fund and its members.
Remedial action was taken and the fund trustees are taking legal action to recover lost money.

* Trustees of a fund did not act with the necessary due care and diligence by implementing amendments before it was approved and registered by the registrar.

Other statistics:

Number of registered administrators etc as at 31 August
2004:
Administrators 109 (2003:108)
Investment managers 73 (2003: 65)
Benefit administrators and investment managers 32 (2003: 34)
Employer administrators 81 (2003: 83)
Self-administered funds in default for submission of financial returns as at cut-off date of 10 August 2004: 267; for the cut-off date of 30 September 2003 the figure was 233.

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