Amendments to Regulation 28 of the Pension Funds Act

Regulation 28 of the Pension Funds Act sets out investment limits on certain asset categories in investment funds.  The regulation applies to investments in Retirement Annuities and Preservation Funds, as well as Glacier’s Retirement Fund Solution.

The regulation has recently been amended in an effort to ensure that funds set aside for retirement are invested prudentially.  The amendments include the following:

• The allowed maximum exposures to certain asset categories have been changed.

• Compliance with Regulation 28 is now required at retirement fund and member level (whereas it was previously only required at retirement fund level).

Glacier’s monitoring process

As an administrator of retirement funds, Glacier is required to monitor members’ (and retirement funds’) asset class exposures and take corrective action when necessary.  The process will be as follows:

• Should your investment become non-compliant, your intermediary will receive a report from Glacier, notifying him/her of the non-compliance. 

• Should a non-compliant investment not be rectified after notification was sent to your intermediary, a letter will be sent to you directly to give you the opportunity to rebalance the investment within a specified time period. 

• Should you fail to rebalance your investment so that it becomes compliant within the given time period, Glacier is required, by law, to make the investment compliant.  We will do this by switching a percentage of your non-compliant investment into the money market fund with the highest value in your plan.  Should there be no money market fund in your plan, the Glacier Money Market Fund will be used.

Glacier has put various controls in place to ensure that no new investment is issued, and no transaction concluded, unless it is compliant with Regulation 28.

Investments issued before 1 April 2011 will not have to comply with the new limitations, and will not be monitored, until such time as a transaction is done on the investment.  In this context, transactions are defined as:

• Switches & Rebalances (excluding switches between different classes of the same collective investment fund)
• Setting up a debit order, or changing an existing debit order (excluding automatic increases in debit orders and cancellation of a debit order)
• Additional investments

• Transfers of units into the plan

The same legislation and restrictions apply in respect of investments in private securities, regardless of whether they are managed according to a discretionary or non-discretionary mandate.  If the asset composition of your investment does not comply with the prescribed limits, Glacier will instruct the stockbroker to rebalance your share portfolio in the same manner as explained for unit trust investments above. 

Clients who are invested in wrap funds only, do not need to take personal responsibility for Regulation 28 compliance, as the wrap fund manager is responsible for compliance. 
The effective date of the amendments was 1 July 2011.

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