RETIREMENT MATTERS 3 OF 2025

Retirement matters 3/2025

FSCA matters

Digital transformation

At their conference held in March 2025, the FSCA discussed their plans to reimagine their digital services to improve customer experience, operational efficiency and enhance their effectiveness. They seek to create a single digital portal so that users can avoid having to use multiple portals to access information. The FSCA is also creating a risk model, which will use Omni-CBR as baseline, to streamline data return and will work closely with the SARB on this.

A personalised dashboard, where an entity will be able to see all the issues that the FSCA is working on relating to that entity, will be available, where for instance overdue submissions can be viewed. It will be a two-way communication portal with all interactions with the FSCA, and should submissions be overdue, the system will update the risk profile. Consultations and a pilot project are underway, and implementation is envisioned for the third quarter of 2026.

Transformation questionnaire results

In the FSCA’s newsletter RF Talks, they provided feedback on the responses from the Regulation 28 questionnaire regarding transformation. The survey was done to enable the FSCA to understand how retirement funds approach service contracting when it comes to transformation. The findings/recommendations can be summarised as follows:

Funds should adopt a formal procurement policy that explicitly prioritises B-BBEE considerations.
Funds must require B-BBEE certification from their service providers, in line with their policy.
Ongoing compliance monitoring is crucial to verify service providers’ compliance.
Funds should have defined measures to address non-compliance.
B-BBEE principles should also guide the appointment of independent board members.

The FSCA will implement further monitoring mechanisms in the coming months to assess the progress made by funds.

Complaints Management Industry Review Report

The FSCA released a Complaints Management Industry Review Report in March 2025. To treat customers fairly, financial institutions need to, among others, implement and maintain effective complaints management frameworks that customers can access with ease. The review focused on assessing the effectiveness, timeliness, and accessibility of complaints handling by financial institutions. The reason for assessing these, is to establish a baseline for complaints management across the financial sector, test the consumer experience with complaints management in the financial sector and draw on existing information to map complaints management practices and drive consistent outcomes across the financial sector.

The FSCA found that, to be effective, financial institutions need to consider and implement:

Document processes for receiving, recording, reporting, and responding to customer complaints;
Explore seeking feedback from customers to identify areas for improvement;
Employ and train sufficient staff to handle complaints;
Enable complaints in more languages than English;
Resolve complaints within the set timelines;
Engage and communicate with fund members;
Automate systems to provide regular status updates;
Clearly document escalation processes.

The FSCA said that the Conduct of Financial Institutions (CoFI) Bill aims to formally incorporate Treating Customers Fairly outcomes into law. To prepare for CoFI’s implementation, the FSCA is developing theme-based frameworks, which will include a complaints management framework for all financial institutions. Insights from the report would assist in determining its complaints management supervisory focus areas.

Pension Lawyers Association conference

At the annual PLA conference, the FSCA provided the following feedback:

The FSCA plans to dedicate a team to terminating funds and Section 14 transfers.
The results of the two-pot implementation costs and fees survey will be published in due course. The FSCA will also engage with funds and administrators to ensure that fees and costs are reasonable.
The deadline for completion of the Trustee Toolkit was 28 September 2024. As at 31 March 2025, 19% of board members had not completed the Trustee Toolkit. Letters will be sent to non-compliant board members outlining regulatory steps the FSCA plans to take.
The FSCA confirmed that the Joint Standard on Cybersecurity and Cyber Resilience will come into effect from 1 June 2025. Their approach will be to assess the level of readiness and compliance through a survey, followed by engagements with funds and administrators.

Regulatory Strategy

The FSCA on 7 May 2025 published its Regulatory Strategy outlining its strategic direction for the next three years (1 April 2025 – 31 March 2028). The Regulatory Strategy is intended to provide general guidance on the fulfilment of the FSCA’s objectives and the performance of its regulatory and supervisory functions. It does so by outlining the FSCA’s priorities, focus areas, and intended outcomes for the next three years.

The following is noteworthy:

The FSCA’s major focus will be preparing for the implementation of the Conduct of Financial Institutions (CoFI) Bill. They will be transitioning existing conduct-focused financial sector laws in a harmonised and rationalised manner into a holistic conduct regulatory framework under the CoFI Bill. This includes planning for the development of a subordinate regulatory framework under the CoFI Bill and transitioning existing financial sector laws into this framework. This will involve developing a consolidated and harmonised approach to licensing, preparing for the transition of licenses, and granting licenses for new activities.
The FSCA will refine their approaches to crypto assets and open finance and will continue implementing their Sustainable Finance Roadmap, which will ensure a more inclusive financial sector that integrates environmental, social, and governance principles into its operations and promotes transparency.
The FSCA will work closely with the Prudential Authority (PA) on the transition of prudential regulation and supervision of collective investment schemes and retirement funds, from the FSCA to the PA. This transition is set to take effect by 31 March 2026. This will entail the conversion of certain frameworks into Joint Standards and potentially development of new prudential frameworks by the PA.
The FSCA will deepen engagement on issues impacting financial customers through collaboration with key role players such as financial institutions, policymakers, ombuds, and international bodies to ensure the alignment with their initiatives.
To drive meaningful conduct improvements, a critical focus area will be on strong cultural and leadership commitment to customer centricity throughout all levels within financial institutions. In conjunction with the PA, the FSCA will continue to work to finalise the regulatory framework for culture and governance, which sets clear expectations for leadership, accountability, and ethical behaviour within financial institutions.
A Framework for Unclaimed Financial Assets in South Africa and the FSCA’s Response to Comments on the Discussion Paper was published. The FSCA’s immediate focus will be on developing a regulatory framework that establishes clear and enforceable requirements for the identification, monitoring, tracing, and reporting of unclaimed assets or lost accounts. This framework will likely include the development of common definitions tailored to different asset classes, ensuring consistency and clarity in how unclaimed financial assets are classified and managed across the sector. The FSCA will also focus on the establishment of a central database and will support work related to National Treasury’s planned central fund.
The FSCA remains committed to transformation of the financial sector and will be engaging with financial institutions during supervisory interactions to assess their approach to transformation and track their progress in achieving transformation-related outcomes. A continued focus will also be placed on collecting and analysing transformation data, which will be used to monitor changes over time.
The FSCA will monitor the effectiveness of financial education initiatives undertaken by financial institutions in enhancing the resilience of their customers as part of overseeing implementation of the newly developed Conduct Standard for Consumer Education.

Late payment interest on contributions

In February 2023, the FSCA issued Conduct Standard 1 of 2022 on arrear contributions and the contravention of Section 13A of the Pension Funds Act. As a result, the industry requested clarity on the date from which late payment interest (LPI) must be calculated. FSCA Communication 15 of 2023 was subsequently issued, indicating that LPI starts running on the 8^th day, i.e. the day after the lapsing of the seven days following the end of the month in respect of which contributions were payable.

The Adjudicator then released Communication 1 of 2024, in which they stated that it was their view that LPI be calculated from the first day of the month following the month for which the contributions are payable.

After considering further legal advice, the FSCA issued Communication 6 of 2025 on 7 April 2025, stating that LPI must be calculated from the 1^st of the month and withdrew their previous communication.

Application of the in duplum rule to late payment interest

The in duplum rule means that the accumulation of interest on arrear contributions stops accruing when the sum of the unpaid interest equals the outstanding capital.

Background to the development of whether the in duplum rule applies to Section 13A interest:

When Conduct Standard 1 of 2022, dealing with requirements related to the payment of contributions was introduced, paragraph 5(1)(c) of the draft Conduct Standard read as follows:

“For purposes of Section 13A(7) of the Act, compound interest on late payments or unpaid amounts may not exceed the principal debt due in respect of the unpaid amounts, inclusive of all costs associated with the recovery of the unpaid amounts.”

Paragraph 5(1)(c) of the draft Conduct Standard in other words introduced the in duplum rule. Paragraph 5(1)(c) was however not included in the final Conduct Standard. In the FSCA’s response document it was stated:

“Refer to Section 103(5) of the National Credit Act 34 of 2005. Note that subclause 5(1)(c) has been deleted from the Conduct.”

Subsequently to the Conduct Standard being made final, the FSCA confirmed their interpretation that the in duplum rule applies to interest on arrear contributions as it is not expressly prohibited by legislation.

The Adjudicator expressed in their PFA Quarterly Digest of April 2023: “It is important for the Adjudicator and funds to apply the in duplum rule as these entities have a duty to be fair and impartial, not only to members of the fund but to the employers that participate in funds as well. In light of the in duplum rule, it cannot be considered fair for an employer to pay interest that exceeds its principal debt. Employers are encouraged to lodge complaints against funds that ignore this common law rule”.

The High Court case of Municipal Workers Retirement Fund[1] it was then found that the in duplum rule does not apply to arrear contributions, since the interest arises by operation of a statute (the Pension Funds Act) and not by a contract between the employer and the fund.

The Adjudicator then confirmed in their Communication 1 of 2024 that they consider themselves bound by the principle regarding the in duplum rule and therefore confirmed their alignment with the finding of the Court.

In a recent High Court case of Blue Crane Route Municipality[2] it was found that there is no reference to the in duplum rule in the Pension Funds Act but also no express wording to indicate that the legislature intended to exclude the rule when interest is payable on late contributions to a retirement fund.

The court took the view that the rate at which interest on a debt is calculated, be it in terms of the Pension Funds Act or the Prescribed Rate of Interest Act, 1975, is immaterial for purposes of determining whether the rule remains applicable. The rule potentially comes into play once interest is payable on a debt. The meaning of “debt” refers to something owed or due or which one person is under an obligation to pay or render to another. The court held that the amount owed by the Employer to the Fund in terms of the Pension Funds Act constituted a “debt” imposed by statute and, once interest became payable, the in duplum rule came into play.

This case has prompted the Adjudicator to revisit its stance and issued their Communication 1 of 2025, setting out their position that the in duplum rule applies to late payment interest calculated in terms of Section 13A of the Act.

Consensus has been reached between the FSCA and the Adjudicator that the in duplum rule applies to Section 13A interest on the late payment of contributions, and therefore that the interest can never be more than the principal debt.

Requirements for financial institutions providing financial education initiatives

The FSCA on 26 March 2025 published the Conduct Standard on Financial Education Initiatives.

The Conduct Standard will come into effect twelve months after the date of publication thereof. As it was published on 26 March 2025 it will accordingly come into effect on 26 March 2026.

The Conduct Standard will apply to all financial institutions, including retirement funds, administrators, and financial services providers but only if the financial institution provides or offers a financial education initiative as defined. A “financial education initiative” is defined as –

any financial education programme, or other similar initiative or activity that is aimed at providing financial education, excluding any such initiative that is aimed at marketing or creating awareness surrounding a specific financial product or service, financial product provider or financial service provider, or
a consumer education programme, which forms the basis for a financial institution to claim any points for consumer education in terms of the codes of good practice on broad based black economic empowerment issued by the Department of Trade and Industry.

It is important to note that the Conduct Standard is not aimed at activities which are aimed at marketing or creating awareness surrounding a specific financial product/service provider or their specific products. Neither is it the intention to include arbitrary actions such as the publication of a once-off article which provides consumer relevant information, even if the information is of a general nature.

Therefore, any retirement fund related communication or action that is aimed at providing information aimed at supporting an understanding of a particular retirement fund (including benefits and processes) will not constitute a financial education initiative. As a result, all communication by a fund to its members, even if it is broken up to be digestible, will be excluded.

In addition, any once-off or arbitrary publication (be it on a financial institution website or a news article) providing general consumer relevant information will not constitute a financial education initiative. However, if, for example, a financial institution executes a planned series of publications which is aimed at promoting financial education in a systematic manner, that would constitute a financial education initiative.

Conditions prescribed for benefit administrators

The Draft Conduct Standard on the conditions applicable to retirement fund administrators has been submitted to Parliament by the FSCA on 1 April 2025.

The conditions applicable to retirement fund administrators are currently prescribed in Board Notice 24 of 2002 (the Board Notice). The FSCA has however identified a need to strengthen the existing regulatory framework set out in the Board Notice and the Draft Conduct Standard will therefore replace the Board Notice as the new enhanced regulatory framework applicable to fund administrators.

The Draft Conduct Standard repeats some of the conditions that are currently prescribed in the Board Notice although they have been expanded on. The Draft Conduct Standard also includes conditions that are not currently dealt with in the Board Notice, especially requirements relating to governance and compliance such as fit and proper requirements, conflict of interest and disclosures, complaints management, and data management.

The fair treatment of customers is also a key aspect of the Draft Conduct Standard.

Once final, the Conduct Standard will come into operation in tranches, with certain parts coming into operation on the date of publication thereof and others 6 months or 12 months after the date of publication.

Exemption of retail funds from requirements of Section 14(1)

The FSCA on 17 April 2025 issued FSCA Communication 8 of 2025 to invite comments by 5 June 2025 on a draft notice proposing to exempt retail funds from having to meet the requirements on amalgamations and transfers in terms of Section 14(1) of the Pension Funds Act.

Any transfer in or out of retail funds is done on voluntary basis at the request of the member.

A transfer from an employer fund to a retail fund is preceded by withdrawal from that fund, which is then followed by a recognition of transfer form to be completed by both funds. The same principle should apply to transfers between retail funds as transfers in and out of retail funds are done at the instance of members and is therefore voluntary in nature.

The Authority envisages to exempt retail funds insofar as the transactions relate to the following transfers:

transfers between retirement annuity funds;
transfers between preservation funds; or
transfers from a preservation fund to a retirement annuity fund.

These transactions will be exempt on the basis that they meet the following conditions:

the requirements prescribed in paragraph 16 of FSRA Conduct Standard 1 of 2019 are at all times complied with. This paragraph deals with Section 14(8) transfers, which are transfers where a Section 14(1) scheme does not have to be submitted to the FSCA. They seem to suggest that form H and J will therefore have to be completed;
retail funds keep proper records of all such transactions;
the assets and liabilities are transferred within 180 days of the effective date of transfer; and
any assets transferred must be increased or decreased with fund return from the effective date until the date of final settlement.

Note that the industry has also requested that individual transfers of pensioners of occupational funds to insurers, be exempted from the provisions of Section 14(1).

Online reporting platform for security compromises

The Information Regulator (IR) has established a new Security Compromises Reporting functionality on the eServices portal which as of 1 April 2025, is mandatory for all organisations to report any security compromises. This means that the portal, rather than email, must be used.

The Security Compromises Reporting functionality is accessible through the eServices portal at https://eservices.inforegulator.org.za/compromises/default.aspx.

Reporting must be done where there are reasonable grounds to believe that the personal information of a data subject has been accessed or acquired by any unauthorised person. The responsible party must notify the IR via the eServices portal and the data subject (individual whose personal information relates to or is identified by), unless the identity of such data subject cannot be established.

Promotion of Access to Information – Reporting

Information Officers are required to report on the number of PAIA requests for information received by their funds on an annual basis. The report for the financial year from 1 April 2024 to 31 March 2025 has become due. Submissions have been opened on the website of the Information Regulator eServices: Information Regulator (inforegulator.org.za) from 1 April 2025 and will close on 30 June 2025.

Funds must submit their reports before 30 June 2025 to remain compliant with legal requirements, even if no PAIA requests were received. No extensions will be granted.

Draft King V code

The draft King V code on corporate governance was released for comments by 4 April 2025. It aims to be a more accessible document and to update and modernise King IV. In addition, it addresses issues like sustainability reporting, technological advancement, it suggests a more structured disclosure regime.

The draft King V code asserts that organisations should create value not only for themselves but also for their economic, social and environmental context.

Q&A

Do retirement funds need to hold components (pots) for members with unclaimed benefits?

The determining factor is when the member’s benefit became unclaimed. The following will then apply:

Members whose benefits became unclaimed prior to 1 September 2024, will have a vested component only as the legislation exempts members who were unclaimed as at 31 August 2024 from having to have a savings component and retirement component;
Members whose benefits became unclaimed after 1 September 2024 (for example a member who completed a withdrawal claim form in December 2022 and whose benefit became unclaimed in December 2024), will have at least a vested component and savings component as seeding capital would have had to be calculated on 1 September 2024; and
Members who leave employment after 1 September 2024 and their benefit subsequently become unclaimed may also have a retirement component as they would have already contributed in terms of two-pot retirement system.

[1] Municipal Workers Retirement Fund[1] v Umzimkhulu Local Municipality and Others (11458/2015) [2023] ZAKZPHC 80

[2] Blue Crane Route Municipality v Municipal Workers Retirement Fund and Another (1827/2024) [2025] ZAECMKHC 28

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