PENSION FUNDS EVOLUTION, REFORMS AND TRENDS IN SOUTH AFRICA

Year 2017, Volume: 9 Issue: 2, 134 - 151, 01.06.2017

Nthabiseng Moleko Sylvanus Ikhide

Abstract

This paper presents a graphical and descriptive analysis of the historical trends of
the South African pension fund sector in order to provide insights and
understanding of non-banking finance. Using a combination of secondary data and
a desk review of existing literature, we provide in-depth analysis of the different
types and number of pension funds, industry trends, policy reforms and legislative
frameworks enacted by the South African government for the development of the
sector. The study identified the evolution of the pension fund industry to be in four
phases coinciding with different waves of industry policy reforms, namely: the
infancy phase (1911-1958); institutionalisation phase (1959-1984); separation and
continued separation phase (1985-1994); and corporatisation and amalgamation
(1995-2015) The industry growth analysis indicated that a compounded annual
growth rate of 14 percent is the highest annual growth over the past decade and this
growth exceeds the global market average of 6.5 percent over the same period. The
industry trend analysis is indicative of an upward trend in terms of funds’
membership with the trendline showing a steep rise to over 15 million members
from under 10 million memberships with the space of a decade. However, the
number of pension funds operating in the industry has declined due to a steady
move towards umbrella funds. Although the South African pension fund industry is
not only moving in the right direction but also considered a beacon of success
around the world, there remains huge potential for growth of the sector. Therefore,
maintaining sound regulatory policies and government interventions will continue
to ensure that pension funds are well managed and bad practices discouraged in the
sector through the oversight functions of government regulatory institutions such as
the Pension Fund Registrar and Financial Services Board.

Keywords

Pension Funds, Trends, Reforms, South Africa, PIC