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Retirement Funding Shifts to the Unit Trust Industry




September 1, 2008


South Africa


Last year the South African unit trust industry grew by a record R58.2 billion to R546 billion, displacing the life assurance industry as the preferred vehicle for long-term saving. 

According to Dale Lippstreu of Maitland’s fund services division this represents nothing less than a tectonic shift in savings patterns, considering the pre-eminent position once enjoyed by life assurance savings products.
Up until recently the sale of market-linked retirement fund products such as retirement annuities, preservation funds and living annuities was the sole preserve of linked investment service providers (LISPs) operating under life licences. 

Yet unit trust management companies are now moving rapidly into this space. They have their own life licences and are packaging their own underlying unit trusts to service the discretionary investment market. 

“Unit trusts are broadly regarded as the most cost-effective, direct and efficient means to access professional asset management. 

Nothing prevents other investment vehicles from achieving the same, but the fact that that they seldom do, is in my opinion because they lack the transparency inherent in unit trusts.

“The unit trust industry has worked hard at transparency. As a result, practices which held potential prejudice to investors have been eliminated and standards which ensure full disclosure of costs have been advanced. 

Contrast this with the undisclosed or poorly disclosed practices in the life assurance industry and the consequences that have been brought upon it as a result,” he says. 

Maitland’s fund services division provides administration and infrastructure services to the fund management industry. 

Its investor services platform has recently been expanded to offer administration to management companies offering their own retirement fund products.

Russel Julie, head of investor services at Maitland, says the platform caters for endowments, retirement annuities, pension and preservation funds and living annuities. 

He says the reporting function is crucial, allowing investors to receive regular reports indicating the status of their investments in a totally transparent manner.

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