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BusinessLive reports that the Financial Sector Conduct Authority (FSCA) is working with the Treasury to drive more consolidation among retirement funds because there are too many of them to achieve lower costs.
There are just under 1,500 active funds in the country and even though this is much lower than the 13,000 that existed 10 years ago, the regulator said this was still “too much” to achieve the economies of scale needed to reduce administration costs. “The question is how do we go about it because there are some sensitivities there,” said the FSCA’s Olano Makhubela during the authority’s retirement industry conference on Thursday. He indicated that a study showed that large funds provided more value for each rand of members’ money spent on administration and other costs. But, Cosatu has raised concerns that the consolidation drive would increase concentration in the sector, giving more assets to big administrators already receiving most of SA’s savings pie. The labour federation’s Jan Mahlangu said one-stop-shop corporate umbrella funds would be a barrier to entry for black-managed funds at a time when the country should be encouraging competition to drive down escalating retirement funds costs. He emphasised that if the drive for consolidation were to be happening in a transformed industry, Cosatu would not have a problem.
- Read the full original of the above report by Londiwe Buthelezi at BusinessLive
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