Why Regular Fund Audits Matter for South African Employers
South African labour law and the Pension Funds Act require every employer-sponsored retirement fund to remain competitive, transparent, and well governed. Yet many Human Resource (HR) teams and business owners set up a plan and seldom revisit it.
Failing to review performance exposes employers to three major risks:
- Legal and Fiduciary Exposure
The Financial Sector Conduct Authority (FSCA) expects trustees and sponsors to prove that fund investments, fees, and governance remain appropriate. Persistent underperformance or poor oversight can attract regulatory penalties. - Talent Retention
Strong, transparent benefits are a proven drawcard for top talent. If employees see fees climbing or returns lagging, they may question management’s stewardship. - Hidden Costs
High administration and asset-management fees quietly erode long-term savings. Over a decade, a 0.5 % fee gap can reduce final payouts by double-digit percentages.
Step-by-Step Retirement Fund Performance Review
Step 1: Analyse Returns vs. Benchmarks
Compare 3-, 5- and 10-year annualised net returns with the fund’s stated benchmark, typically Consumer Price Index (CPI) + 3–5 %. Persistent underperformance for three consecutive years demands action.
Step 2: Evaluate Fees and Total Expense Ratio (TER)
Benchmark all administration and asset-management fees against South African industry averages. A TER above roughly 1 % is a red flag. Request a full cost disclosure as required by the FSCA.
Step 3: Assess Asset Allocation and Risk
Check the equity, bond, cash, and offshore split. Does it match employee demographics and risk appetite? Younger workforces can usually tolerate more equity exposure, while older teams may need a defensive tilt.
Step 4: Review Governance and Compliance
Confirm that trustees meet FSCA fit-and-proper requirements, that the Investment Policy Statement (IPS) is current, and that all statutory filings are up to date.
Step 5: Measure Member Engagement
Low contribution rates or limited understanding of fund options undermine outcomes. Survey staff, review participation rates, and test whether communication channels, emails, intranet posts, workshops, actually drive action.
Key Metrics HR Managers Should Track
Keep this quick-scan checklist visible during every annual review:
- Annualised net return vs. benchmark
- Total expense ratio (TER) and admin fees
- Asset allocation spread (equity/bond/cash/offshore)
- Last FSCA audit date and regulatory compliance score
- Member contribution and participation rates
Common Red Flags That Demand Action
- Underperformance: Returns lag the benchmark for three years running
- Excessive Fees: TER consistently above industry average
- Governance Gaps: Late statutory filings or missing trustee training
- Poor Communication: Employees unaware of fund changes or investment choices
When to Bring in a Professional Adviser
If internal reviews uncover chronic underperformance or complex compliance issues, a third-party retirement fund consultant can:
- Negotiate lower administration or investment-management fees
- Recommend or transition to higher-performing managers
- Restructure the investment strategy to match workforce needs
Example: A mid-sized manufacturer that partnered with Clarity cut its Total Expense Ratio (TER) from 1.4 % to 0.9 %, improving projected employee payouts by more than 10 % over ten years.
Not sure how your fund measures up?
Book a Retirement Fund Audit Call with Clarity Employee Benefits to benchmark fees, returns, and governance before your next Financial Sector Conduct Authority (FSCA) review.
FAQ
How often should a company review its retirement fund?
At least once a year, with a formal trustee or Human Resource (HR) committee review documented every 12 months.
What is a good benchmark for fund performance?
Many South African funds target CPI + 3–5 % over the long term, but each strategy sets its own benchmark.
How can we reduce retirement fund fees?
Consolidate multiple funds, negotiate directly with asset managers, or shift part of the portfolio to lower-cost passive strategies.
Do small businesses need a professional review?
Yes. Even small employer-sponsored funds must meet FSCA standards and provide fair outcomes.
What happens if we ignore a performance review?
Employers risk regulatory penalties, employee dissatisfaction, and potential legal claims.
Strengthen Your Plan Before the Next FSCA Audit
Regular reviews are no longer optional. South Africa’s regulatory environment, rising cost pressures, and employee expectations require HR leaders and business owners to treat the retirement fund as a living strategy, not a once-off setup.
Ready to safeguard your employees’ future and reduce costs?
Schedule your Retirement Fund Audit Call with Clarity Employee Benefits today.
