In March 2019, South Africa implemented one of the most significant changes in the retirement industry in decades: default regulations under the Pension Funds Act1. These regulations were designed, most importantly, to safeguard retirement fund members by promoting simpler choices, improved outcomes, and lower costs.
But six years later, the silence from the broader financial industry is deafening. Why? Because these regulations threaten the very lucrative business model the financial industry has grown accustomed to because when members leave retirement funds, they are advised to invest in expensive retail products2. A system built on complex products, opaque pricing, and high retail fees that have eroded the retirement savings of millions.
Amidst this silence, one financial company, Portfolium, is choosing not to stay quiet. Instead, it challenges the status quo, advocates for the very changes the Default Regulations represent, and builds solutions that prioritise members over margins. Their determination serves as a beacon of hope in an industry shrouded in silence.
The promise of the default regulations
The default regulations introduced three mandatory defaults for retirement funds:
1. Default Investment Portfolios – cost-effective and appropriate for most members.
2. Default Preservation Strategies – encouraging members to preserve benefits when changing jobs.
And most importantly
3. Default Annuity Strategies – helping members convert retirement savings into a sustainable income through cost effective products created by the retirement funds.
“These were not cosmetic changes – they were meant to shift the power balance from providers to members. They promised transparency, cost control, and above all, better retirement outcomes. But many retirement fund members have yet to feel the impact of these changes as many of them still end up in expensive retail products. The default regulations were implemented to significantly reduce fees, increase transparency, and ultimately enhance retirement outcomes for members,” says Charl Swart, managing director of Portfolium.
Why the industry isn’t talking
South Africa’s retirement system has long been dominated by legacy providers whose business models thrive on layers of fees, commissions, and complex product structures2. The advisory model currently in place needs to generate high fees from clients, whereas the default regulation aims for low costs. It’s like oil and water. The Default Regulations, by design, dismantle this model.
Rather than embracing the reforms, many in the industry have chosen inaction and silence. Implementation has been half-hearted. Communication to members has been minimal. And innovation? Almost non-existent. It’s a quiet resistance – but one that speaks volumes.
A new player with a clear vision
In the middle of this resistance, Portfolium is making waves. Its mission is bold: make the default regulations work as they were intended – to put members first.
By embracing transparency, designing fee-conscious investment solutions, and leveraging technology to drive down costs, this disruptor is delivering what the big players won’t: retirement products that help people retire better.
Moreover, they’re achieving this by educating members, promoting financial literacy, and assisting trustees of retirement funds and employers in reconsidering the default options available to their employees.
The road ahead
“South Africa needs a cultural shift in how retirement products are designed, priced, and delivered. That won’t come from those invested in preserving the old way of doing things. It will come from disruptors, advocates, and forward-thinking trustees who put members at the centre.
“The default regulations were a start. But without active implementation and innovation, they risk becoming another missed opportunity. It’s crucial that the industry actively implements these regulations and continues to innovate to ensure their success,” Swart says.
Let’s not let silence be the industry’s final word.
References:
1. Geldenhuys, J. (2019). Default regulations for retirement funds – Applicable from 1 March 2019 – Moonstone Information Refinery. [online] Moonstone.co.za.