Regulation 28 Explained — What It Means for Your Retirement Portfolio

1. Which funds are covered

Regulation 28 applies to all retirement funds registered under the Pension Funds Act. This includes:

• Pension funds
• Provident funds
• Retirement Annuity funds
• Preservation funds (pension and provident)
• Beneficiary funds

It does not apply to Tax-Free Savings Accounts (TFSAs), discretionary investment accounts, or endowment policies. This is why TFSAs are often positioned alongside a Retirement Annuity — the TFSA operates outside Reg 28 constraints, allowing full offshore and equity exposure if appropriate.

2. The key asset allocation limits

The primary limits under Regulation 28 as currently structured are:

The 2022 increase in the offshore allowance from 30% to 45% (with an additional 10% for rest-of-Africa) was a material change — significantly expanding the ability to diversify away from South African assets within a regulated retirement structure.

3. Why these limits exist

The Regulation 28 framework serves two purposes: protecting members from concentration risk, and ensuring that retirement capital contributes to South African economic development through meaningful domestic investment.

The constraints are not arbitrary. They reflect a considered balance between:

Critics argue the domestic bias works against long-term returns given South Africa’s structural economic challenges. Supporters argue the constraints prevent excessive concentration in any single market or asset class. Both perspectives have merit — and the limits have evolved over time to reflect this tension.

4. Common misconceptions

5. How advisers structure within Reg 28

The constraints of Regulation 28 do not prevent intelligent portfolio construction — they require it. Experienced advisers work within the framework by:

• Maximise the 45% offshore equity allowance through global index or active funds
• Use rand-hedge local shares (resources, dual-listed counters) for additional global exposure within the local equity bucket
• Hold listed property selectively — global REITs via the offshore allowance, local REITs domestically
• Use the bond/cash allocation defensively during high-risk periods without breaking equity limits
• Combine multiple regulated structures (RA + TFSA) to optimise total portfolio construction across Reg 28 and non-Reg 28 wrappers

“The TFSA and RA combination is one of the most tax-efficient portfolio structures available to South Africans — and the absence of Reg 28 in the TFSA is a key part of why.”

For most investors, the RA handles tax deductibility and forced discipline. The TFSA provides tax-free growth without investment constraints. Used together, they extract more from South Africa’s tax system than either does alone.

6. What changes in Regulation 28 mean for existing investors

Regulation 28 is not static. The 2022 offshore limit increase was one of several amendments over the past decade. Investors with older RA policies may find that their underlying fund allocations do not yet reflect the updated allowances — particularly if they are in legacy products where fund mandates have not been updated to utilise the expanded offshore capacity.

This is one reason why periodic portfolio reviews matter. A retirement fund structured ten years ago may be significantly underexposed to offshore assets relative to what is now legally permissible — and relative to what would be appropriate for the investor’s risk profile and time horizon.