In terms of FSCA Communication 31 of 2023, the FSCA has called for input on the draft standard which introduces quarterly reporting under Regulation 28 of the Pension Funds Act, 1956. The Prudential Standard prescribes quarterly reports for pension funds relating to:
- non-compliance with Regulation 28; and
- assets held in terms of Regulation 28 (as amended).
This is the second set of proposed reporting standards, with the first set being released in November 2022. At present the exception reporting standard is used and the intention is to replace it with the quarterly reporting method by 2025. The FSCA has recognised some of the challenges that were raised during industry commentary and as a result, there are some changes proposed in terms of the first and second drafts of the standard. However, the FSCA remained of the view that it is critical to ensure that the current non-compliance with Regulation 28 quarterly reporting is aligned with the amended Regulation 28. As such, the FSCA removed the requirement to report on assets held in compliance with Regulation 28 from the draft Prudential Standard and will proceed with the current approach of quarterly reporting on non-compliance with Regulation 28.
Despite the change in approach in the current draft, the FSCA remains of the view that the current approach of “exception reporting” is not sufficient and does not allow for or enable proactive and pre-emptive supervision in the context of Regulation 28. The Regulator is of the view that the existing approach is ineffective and creates risks, noting an increase in the number of pension funds that do not submit their current Regulation 28 non-compliance reports, however, stating that auditors still identify non-compliance in the audited annual financial statements. Holistic Regulation 28 quarterly reporting will assist the FSCA and boards of pension funds to proactively monitor compliance and enable corrective action in a timely manner.
The FSCA therefore retains the view that there is a need to implement holistic (unaudited) quarterly reporting on assets in terms of Regulation 28 for pension funds. As such, the FSCA is publishing a new draft Prudential Standard for public consultation.
Supporting documents to the communication refers to:
- Regulation 28, which restricts the amount of money that funds may invest in specific assets or asset classes, safeguards the savings of members of retirement funds.
- amendments to Regulation 28 in force since 3 January 2023 require additional reporting in relation to infrastructure assets, and
- stakeholder input on the November 2022 proposals prompted the FSCA to confine the new quarterly reporting standard to issues of non-compliance with Regulation 28 (known as exception reporting)
Interested parties are invited to submit comments on the draft Prudential Standard to FSCA.RFDStandards@fsca.co.za in the prescribed format.
The deadline for the submissions is the 31 January 2024.