The Cost of Compliance with the Two-Pot System
The cost of compliance for running a business in South Africa has increased in the past few years. This is mostly due to increasingly complex administrative and reporting requirements set by regulators. South Africa’s new two-pot retirement system is no exception. According to the Financial Sector Conduct Authority (FSCA), administering the system comes with a hefty price tag of R300 million a year.
In a recent article, the FSCA revealed that retirement fund administrators have already spent over R1.6 billion to implement the system, including IT changes, staff training, and call center expansions. While 64% of administrators have absorbed some or all of these costs, others have passed them on to members through fees, such as withdrawal charges or increased administration fees.
This means retirement fund members could be footing the bill, especially those who aren’t withdrawing their savings. Since only 40% of eligible members have tapped into their savings pot, the remaining 60% might face higher fees as administrators seek to recover costs.
The FSCA is scrutinising these fees to ensure they are fair and provide value for money. If fees are deemed unreasonable, there may be moves to cap or regulate them. A detailed report from the FSCA is expected early next year, which could lead to further discussions with National Treasury about fee transparency and potential legislative changes.
Key Takeaways for Accountants
With several regulatory changes impacting the work of accountants in the past year, the cost of compliance is a sore topic for many. Keeping on top of changes, communication to clients and costing structures are becoming more and more important. Keep the following in mind:
Transparency is critical, your clients need clear information about fees to make informed decisions. Detail the services you perform for the fees you charge in adequate detail.
Cost distribution matters and clients must understand how fees are structured and their long-term impact.
Know about upcoming regulatory updates and potential legislative changes that will impact the services to your client.
