Regulation 39 will help a member to understand available annuity strategy options, but does not intend to offer financial advice needed to ensure they fully understand all relevant factors
Three new pension regulations, colloquially dubbed “the default regulations”, came into effect on March 1. Regulation 39 specifically provides for retirement funds to establish an annuity strategy. It requires all pension, pension preservation and retirement annuity funds, unless exempted, to have a strategy giving members the opportunity to elect a retirement income solution tailor-made to their needs.
This model has not been successful. Regulation 39 is an express legal obligation on boards to assist retiring members with solutions aimed at achieving a sustainable retirement income. Another requirement of Regulation 39 is access to retirement benefits counselling. The counselling must include full disclosure and explanation, in a clear and understandable language, of risks, costs and charges, as well as the terms of the fund’s annuity strategy and other options available to members.
A retiring member will likely still need financial advice to decide on the value of the lump sum, if any, at retirement. In addition, the annuity strategy is not one of default — a retiring member is still required to make an individual choice on available options. This too will require financial advice.
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