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It’s time to move on
from the prescribed
assets debate
INSTEAD OF A POSSIBLE REINTRODUCTION OF PRESCRIBED ASSETS, SOUTH AFRICA’S INVESTORS, POLICYMAKERS
AND RETIREMENT FUNDS SHOULD CONSIDER THE POSITIVE OUTCOMES OF IMPACT INVESTING.
IN ANY COUNTRY, retirement savings are a valuable source of development funding.
In South Africa, where the economy is strained, tax revenue is down and there’s R1.5 trillion retirement savings waiting to be tapped, it seems only natural for
the government to at least
consider allocating some of it to prescribed assets.
But, says Andrew Davison, Head of Advice at Old Mutual Corporate Consultants, retirement-fund members are counting on those funds for their retirement. Why should they therefore run the risk of low returns, especially when there’s a better option?
It’s useful to understand first of all that the prescribed assets debate is not new
in South Africa. ‘In 1977 it became law that retirement funds had to invest nearly 80% of their assets in government bonds,’ explains Davison. ‘In 1988, however, the Jacobs Committee found that the policy was
doing a lot of damage and not producing the intended benefits, and the prescribed assets regime came to an end in 1989.’
THE RISKS THAT COME WITH PRESCRIBED ASSETS The retirement-fund landscape has changed
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