PENSION LAWYERS ASSOCIATION SEMINAR REPORT BACK FROM IPEBLA CONFERENCE Speaker: Paul Williams JHB: 15 August 2017 CT: 17 August 2017

General overview of conference IPEBLA holds a biennial conference Purpose: to share knowledge and experience Venue: Prague, Czech Republic 135 delegates (11 South African) from 22 countries Mostly breakaway sessions, each topic explored from the perspective of different jurisdictions Full report available: www.pensionlawyers.co.za

General international themes Worldwide concern regarding insufficient retirement savings Move away from state-funded pensions to occupational and/or private pensions Retirement and Normal Retirement Date are outdated concepts DC is (largely) the future Fund costs are under close scrutiny

Respects in which SA is an outlier Minimal state old age provision Extent of inequality Earliest to move from DB to DC (and unique in being employee-driven) - has had to grapple with DC issues earlier than other countries Not imminently faced with a demographic time- bomb

What are we doing well in SA? Governance/regulatory environment Advanced regulation of trustee duties (PF Act, PF Circular 130, Trustee Training Toolkit etc) US/Canada - Employer is often the pension plan sponsor (“two hats theory”) – structural conflict of interest Proactive regulator – reactive in other jurisdictions

What are we doing well in SA? Thought leadership at policy level Identified challenges arising from DC environment Leakage through inusfficient preservation High fees and ill-suited investments/products Decumulation phase Implementation of solutions (albeit slow) Trustee responsibility: defaults; annuity strategy Providers switch to outcomes based approach

What are we doing well in SA? Focus on ESG principles for investment Reg 28; Code for Responsible Investing in SA; ASISA draft regulations No specific recognition in many jurisdictions Highly developed pension and financial services industry Result of an earlier transition from DB to DC and the inadequacy of State pension Consumer choice, but over-dominance?

What could we do better in SA? Amongst the worst retirement savings rates in the world Primary reasons: No preservation – cash on withdrawal; The popularity of provident funds – cash on retirement; Socio-economic reasons – competing needs; The inadequacy of the State Old Age Pension

What could we do better in SA? Fees eat too heavily into retirement savings DC – members bear fees; no employer pressure to control Market has favoured complex, high fee products No regulation until now: Draft Default Regulations TCF principles Other countries: legislation, directives or guidelines - disclosure litigation

What could we do better in SA? Auto-enrolment UK - Obligation on employers to enrol all employees, but employees have 3 months to opt-out Germany following suit – 2018 A distant prospect for SA

Conclusions We need to stop beating ourselves up We are setting the regulatory pace in some areas: Default Regs ESG The industry is not the untamed beast we are sometimes led to believe We need to be careful not to over-regulate Impact on costs Risk stifling innovation The problem is not the industry but the lack of savings in it

THANK YOU