PENSION LAWYERS ASSOCIATION BREAKFAST SEMINAR Oyster Box Hotel, Umhlanga 10 August 2017

REPORT BACK FROM IPEBLA CONFERENCE Speaker: Carlyle Field

General overview of conference 135 delegates from 22 countries (11 South African) 3 day conference held at the end of May 2017 Biennial conference Venue: Prague, Czech Republic Mostly breakaway sessions, each topic explored by various jurisdictions Full report available on: 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 DC is the future but there are initiatives in certain countries to promote hybrid DB/DC arrangements

General international themes Longevity concerns are being addressed by encouraging partial retirement (consistent with changes to the Income Tax Act in 2015) and increasing normal retirement age (to around 66/67) Costs are receiving intense scrutiny (consistent with move to DC)

Where are we falling short in South Africa? Amongst the worst in the world in respect of insufficient retirement savings, when looking at the population overall. Primary reasons for this are: the popularity of provident funds (which typically do not promote preservation and/or annuitisation) The inadequacy of the State Old Age Pension – comparatively we are way behind the benchmark in respect of a Pillar 1 scheme. The result is that we have one of the lowest replacement ratios worldwide.

Where are we falling short in South Africa? Fees We have a much more developed DC occupational pension landscape (compared to the State-funded [i.e. Pillar 1] schemes that are still popular worldwide) Despite this, fees are only receiving particular emphasis now in the Draft Default Regulations Other countries have already introduced advanced legislation, directives or guidelines to address fee structures.

Where are we falling short in South Africa? Implementation of personal information protection (POPI) measures Auto-enrolment UK and Germany implemented compulsory DC arrangement that must be implemented by every employer (even if just on opt-out basis) Our focus is on compulsory preservation and annuitisation (Draft Default Regulations)

Where are we doing well in South Africa? Trustee duties We have an advanced regulatory and legislative framework governing trustee duties and obligations (PF Act, PF Circular 130, Trustee Training Toolkit etc) Employer is often the pension plan sponsor in other jurisdictions, “two hats theory”, creating conflicts of interests and resulting in litigation Proactive regulator – reactive in other jurisdictions

Where are we doing well in South Africa? Focus on ESG principles for investment (Code for Responsible Investing in SA [CRISA], ASISA draft regulations and Regulation 28) Highly developed pension and financial services industry Result of an earlier transition from DB to DC and the inadequacy of our public retirement savings arrangements vs private occupational arrangements

Where are we doing well in South Africa? Draft Default Regulations These themes (preservation, annuitisation and fee disclosure) are only starting to receive major attention in other jurisdictions. Developed annuity market Also a result of an advanced private occupational scheme landscape but fees still a concern.

Other interesting points Impact of UBER Specifically the distinction of employee vs contractor Possible hybrid arrangements DB and DC elements, also known as “Defined Ambition Schemes”

THANK YOU