The Financial Services Board is also struggling with a significant backlog in their case loads and are unable to meet their own turnaround times (especially in the Section 14 transfer department).

What is clear from these stats is that:

1. There is a significant number of complaints being received by the PFA (which in turn means there are some serious issues with the way that many retirement funds are being run and probably means there are some more “scandals” on the horizon),
2. Both the PFA and the FSB are not able to deal with their respective workloads and appear to be significantly under-staffed. As a result, the people that they are there to serve and protect (investors) are being prejudiced.
3. If you have a complaint about the regulators (FSB or PFA) there is nowhere you can turn.

So who regulates the regulators…?

Attempts to contact the FSB today have proved fruitless…the website is down as are their telephone lines.

Related posts:

1. Sometimes cutting out the middleman just leaves a gaping hole!
2. Thanks to the regulators!
3. 5 Aug 2009

Just read an article online about how in these tough times one of the positive outcomes is that people seem to be investing more into their retirement funds. The bad news, though, is that it is still usually too little to enable most people to retire financially secure.

Of bigger concern for me, however, is that not only are most people contributing too little, but on top of this, most people are probably not taking enough risk on their funds. This has mostly to do with the fact that most funds are completely inappropriately named or labelled.

For example, where there is individual fund choice within a pension fund, there are usually 3 or 4 funds such as the “Aggressive Fund”, the “Balanced Fund”, the “Conservative Fund” and possibly a guaranteed or money market fund. On seeing the word “Aggressive”, most investors usually panic and run for the relative safety of the Balanced or Conservative Fund (after all this is retirement money so they don’t want to risk it). Balanced Funds in this context will usually have ±50% in equities with the Conservative Funds having even less. Now we know that the best way to beat inflation (over time) is to have exposure to equities. So while they will probably not lose too much in the down cycle as a result of this choice, they will most probably also not benefit sufficiently in the up cycles.

The problem, you see, is in the names of the funds. Remember that in terms of the investment guidelines for retirement funds, you can never have more than 75% of the total fund invested in shares*…so how can that ever be an “Aggressive” fund? In the unit trust industry, funds with 75% in equities are usually referred to as Managed or Balanced Funds. So why the inconsistency in naming when it comes to pension funds?

As a result of this inconsistency, my suspicion is that not only are people not saving enough money for their retirement, but on top of this, they are also being too conservative with their fund choices and as a result of this they will have even less than they expected when they retire.

Bottom line is that if you have time on your side (at least 12-15 years before retirement) you should most probably be in the most “aggressive” portfolio that you can – this is the greatest chance you have of achieving inflation beating returns.

So remember, when it comes to retirement money, you can not, by definition, have an aggressive fund – at least 25% of the fund will be in cash, bonds and property at any stage.

*yes, I know that technically speaking there could be up to 90% in shares and property, but the reality is that this is usually not the case, with most “aggressive” funds having 75% or less in equities with the balance in bonds and cash.

Related posts:

1. Dilbert on Finance
2. Just because it is raining it does not mean the drought is over!
3. Financial Planning for Dummies – Part 3