autopilot:
The silent tax on your retirement
Make retirement fund protection, performance, and fees part of every financial review
Save more. Start earlier. Leave your retirement savings invested. That is familiar advice. Yet while you work to build your savings, trustees, investment managers, administrators, and advisers are making critical decisions about your money behind the scenes—decisions that most fund members know very little about.
Most of us simply check our annual fund return and assume everything is being handled properly.
However, evaluating a fund requires looking beyond a single return number. Protecting your money is just as vital as growing it: a strong return cannot make up for poor safeguards, and efficient administration is useless if investment oversight is weak. If governance fails and savings vanish, legal explanations won't restore your lost retirement income.
Here are 12 practical questions every retirement fund member should ask to help contain losses and protect their future. Some of these questions may make the people managing your retirement fund uncomfortable. Ask them anyway.
However, evaluating a fund requires looking beyond a single return number. Protecting your money is just as vital as growing it: a strong return cannot make up for poor safeguards, and efficient administration is useless if investment oversight is weak. If governance fails and savings vanish, legal explanations won't restore your lost retirement income.
Here are 12 practical questions every retirement fund member should ask to help contain losses and protect their future. Some of these questions may make the people managing your retirement fund uncomfortable. Ask them anyway.
Part 1: Who is safeguarding your retirement savings?
1. Is Someone Checking That My Funds Are Still There, Still on Track?
A retirement plan on paper means nothing without active enforcement. Trustees receive regular manager reports, but what happens when performance falls short?
Ask your trustees:
- How often do you check performance against the Investment Policy Statement and portfolio objectives, and what was the most recent outcome?
- What specific warning signs trigger intervention, and when did you activate any of the triggers?
- What proof do I have that my contributions were paid in full and on time every month for the past year,
as required by Section 13A of the Pension Funds Act?
Ask your trustees:
- How often do you check performance against the Investment Policy Statement and portfolio objectives, and what was the most recent outcome?
- What specific warning signs trigger intervention, and when did you activate any of the triggers?
- What proof do I have that my contributions were paid in full and on time every month for the past year,
as required by Section 13A of the Pension Funds Act?
Bottom line: Monitoring results without taking action offers you zero protection.
2. Are the Safeguards Protecting My Retirement Savings Current and Effective?
Savings can be threatened by fraud, theft, administrative failures, or poor oversight. When lawsuits and forensic audits follow, legal bills mount quickly. Do those overseeing the fund have the skills and experience to test whether these protections actually work?
Ask your trustees:
- When was the most recent independent audit of our fraud and cyber-theft controls, and what risks were found?
- If funds are lost to fraud or admin failure, does our insurance cover 100% of the loss and recovery?
- Who pays for legal and forensic fees, and who is financially accountable when inadequate security controls allow members' savings to be stolen?
Ask your trustees:
- When was the most recent independent audit of our fraud and cyber-theft controls, and what risks were found?
- If funds are lost to fraud or admin failure, does our insurance cover 100% of the loss and recovery?
- Who pays for legal and forensic fees, and who is financially accountable when inadequate security controls allow members' savings to be stolen?
Bottom line: If lost money cannot be recovered, members take a permanent financial hit—regardless of who was at fault.
3. Are My Trustees Competenet and Independent?
Trustees approve policies, appoint specialists, and oversee long-term strategies. South African trustees complete prescribed training, but a certificate does not establish the judgment or independence needed to challenge experienced professionals.
Ask your trustees:
- Beyond compulsory training, what specific financial qualifications or independent advice does the board rely on when evaluating complex investment strategies?
- On what exact date and issue did the board last reject or overturn a recommendation from an investment manager or consultant?
Ask your trustees:
- Beyond compulsory training, what specific financial qualifications or independent advice does the board rely on when evaluating complex investment strategies?
- On what exact date and issue did the board last reject or overturn a recommendation from an investment manager or consultant?
Bottom line: Independent judgment matters much more than simply rubber-stamping expert advice.
Part 2: Portfolios, performance & Hidden costs
4. Who Decided This Was The Right Investment Portfolio for Me?
Where members have no choice—or when they do not exercise a choice—their savings are placed in a default portfolio chosen by the fund. But a 30-year-old and a 60-year-old carry entirely different financial risks.
Ask your trustees:
- When was the default portfolio structure last formally reviewed for member suitability, and what information about members' ages and needs was used?
- What percentage of members remain in the default portfolio at retirement?
Ask your trustees:
- When was the default portfolio structure last formally reviewed for member suitability, and what information about members' ages and needs was used?
- What percentage of members remain in the default portfolio at retirement?
Bottom line: Portfolios must serve members’ needs, not default industry products.
5. My Investment Manager Says We Performed Well. Compared to What?
If a fund targets inflation + 4%, but the manager delivers inflation + 3% and claims victory because they beat a lower benchmark, your fund still missed its goal. Lowering targets to make report cards look better doesn't put money back in your pocket and your retirement plan may fall short.
Ask your trustees:
- Over the past 5 and 10 years, what was the fund’s actual net return after all costs compared to its original investment policy and portfolio objectives?
- Have investment targets or benchmarks been changed or lowered in the past 5 years—and if so, what was the net impact on reported performance?
Ask your trustees:
- Over the past 5 and 10 years, what was the fund’s actual net return after all costs compared to its original investment policy and portfolio objectives?
- Have investment targets or benchmarks been changed or lowered in the past 5 years—and if so, what was the net impact on reported performance?
Bottom line: The fund's real objective must guide the manger - not the manager's performance - by changing the objective.
6. Where May My Money Be Disappearing Without Anyone Calling It a Loss?
Unnecessary and unknown fees, alongside administrative blunders can cost you a lot over time. Just R1,710 lost to unnecessary fees today, could have grown to over R6,618 over 20 years at 7% growth.
Ask your trustees:
- What did it cost to run and invest my retirement savings last year, in percentage terms and in rands?
- Please include investment, administration, advice and other fund costs?
- What specific administrative errors or unallocated transactions occurred last year, and were members fully compensated for any loss?
Ask your trustees:
- What did it cost to run and invest my retirement savings last year, in percentage terms and in rands?
- Please include investment, administration, advice and other fund costs?
- What specific administrative errors or unallocated transactions occurred last year, and were members fully compensated for any loss?
Bottom line: Mistakes happen, but repeating a preventable fee mistake is a governance failure. Funds must maintain transparent reporting.
7. What Am I Getting for Expensive Active Management?
Active management usually costs more than passive investing and is often justified by the promise of better returns or better risk management. Yet long-term SPIVA data show that the great majority of active South African equity funds have failed to beat their benchmark. (S&P SPIVA research shows 95.07% of active South African equity funds underperformed a basic index over 10 years.)
Ask your trustees:
- What percentage of the fund’s assets is allocated to active management versus passive index tracking?
- After accounting for higher active fees, what net outperformance did active managers deliver over 5 and 10 years compared to a standard, low-cost market index?
Ask your trustees:
- What percentage of the fund’s assets is allocated to active management versus passive index tracking?
- After accounting for higher active fees, what net outperformance did active managers deliver over 5 and 10 years compared to a standard, low-cost market index?
Bottom line: If an expensive strategy repeatedly fails to beat a basic index, members should call it out.
8. My Investment Doubled. Why Did My Adviser's Fee Double?
If your R1.5 million living annuity grows to R3 million, a 0.5% annual percentage fee jumps from R7,500 to R15,000—for the exact same amount of advice.
Ask your adviser:
- What was the exact total Rand amount paid to you in advice fees from my account over the past 12 months?
- Can you provide an itemised breakdown of the specific services delivered for that fee, and do you offer a fixed-rand or hourly fee model as an alternative to a percentage of my assets?
Ask your adviser:
- What was the exact total Rand amount paid to you in advice fees from my account over the past 12 months?
- Can you provide an itemised breakdown of the specific services delivered for that fee, and do you offer a fixed-rand or hourly fee model as an alternative to a percentage of my assets?
Bottom line: Fees should reflect work performed, not automatically double just because the market went up.
Part 3: the reality check & the finish line
9. How Much Am I Really Saving—and Against Which Salary?
Contributions are quoted as a percentage, but they are often calculated against a smaller "pensionable salary." If you earn R40,000 a month and contributions are based on 12/13ths of salary, a 10% contribution puts about R3,692 less into your fund each year.
At 7% annual growth, that difference could amount to roughly R151,000 over 20 years.
Ask your employer & trustees:
- Is my contribution calculated on my total cost-to-company remuneration or a pensionable salary base (e.g., 12/13ths)—and what is the exact monthly rand amount going into my fund?
At 7% annual growth, that difference could amount to roughly R151,000 over 20 years.
Ask your employer & trustees:
- Is my contribution calculated on my total cost-to-company remuneration or a pensionable salary base (e.g., 12/13ths)—and what is the exact monthly rand amount going into my fund?
Bottom line: A contribution percentage is meaningless until you know the exact base salary behind it.
10. Only 6% Can Retire Comfortably? Where Is the Evidence?
Industry rules like "only 6% can retire" or "you need 75% salary replacement" are arbitrary generalisations. A debt-free homeowner needs far less income than someone paying rent. One percentage cannot tell everyone how much they need. It may frighten some people and give others false comfort.
Ask your adviser:
- Is my projected retirement income based on a standard industry assumption (like 75% salary replacement) or on a detailed model of my actual projected living expenses?
- What specific inflation and net investment return assumptions were used to calculate my projection, and how does the outcome change if returns drop by 2%?
Ask your adviser:
- Is my projected retirement income based on a standard industry assumption (like 75% salary replacement) or on a detailed model of my actual projected living expenses?
- What specific inflation and net investment return assumptions were used to calculate my projection, and how does the outcome change if returns drop by 2%?
Bottom line: Proper planning starts with your actual personal expenses, not arbitrary industry percentages.
11. Why Does My Plan End on the Day I Retire?
Retirement can last 30 years. Popular drawdown rules (like taking 4% a year) are mathematical calculations, not personal income plans. Lower withdrawals also leave more money invested, which means percentage-based fees continue to be charged on a larger balance.
Ask your adviser:
- Does my recommended post-retirement drawdown strategy model changes in health, housing, and living costs over a 30-year horizon, or does it apply a fixed percentage calculation?
- What is the total combined fee (advice, platform, and asset management) on the proposed annuity product, and how does that compare to drawing income directly from the fund?
Ask your adviser:
- Does my recommended post-retirement drawdown strategy model changes in health, housing, and living costs over a 30-year horizon, or does it apply a fixed percentage calculation?
- What is the total combined fee (advice, platform, and asset management) on the proposed annuity product, and how does that compare to drawing income directly from the fund?
Bottom line: A withdrawal percentage is a calculation, not a plan. Your income structure must serve your life, not standard formulas.
12. When Things Go Wrong, Who Is Accountable to Me?
When administrative errors or governance failures occur, administrators point to instructions, managers point to mandates, and trustees point to advisers. Members are left holding the loss.
Ask your trustees:
- When service provider errors, admin delays, or mandate breaches occur, what specific contractual penalty or clawback mechanisms exist to recover lost growth?
- In the past three years, what funds or interest were successfully recovered from service providers for the benefit of members?
- Who Bears the Ultimate Cost?
• Responsibility = Who was supposed to act.
• Accountability = Who must answer for failure.
• Liability = Who is legally on the hook.
• The Reality = When money vanishes, you pay the price through a permanently smaller retirement.
Ask your trustees:
- When service provider errors, admin delays, or mandate breaches occur, what specific contractual penalty or clawback mechanisms exist to recover lost growth?
- In the past three years, what funds or interest were successfully recovered from service providers for the benefit of members?
- Who Bears the Ultimate Cost?
• Responsibility = Who was supposed to act.
• Accountability = Who must answer for failure.
• Liability = Who is legally on the hook.
• The Reality = When money vanishes, you pay the price through a permanently smaller retirement.
Bottom line: If an expensive strategy repeatedly fails to beat a basic index, members should call it out.
Two Essential Realities
1. Government Funds (e.g., GEPF):
The GEPF is a defined-benefit fund, with benefits set by law and its rules. Members therefore face a different risk structure from members of ordinary defined-contribution funds. But the principle remains: poor governance always imposes a cost somewhere. Could that eventually be the taxpayer?
2. Spotting a Well-Run Fund:
When you find a fund with excellent administration, strong systems, and professional managers focused on members—stay put. Drawing your retirement benefit directly from a well-run fund is generally far more cost-effective than transferring to individual retail products.
The GEPF is a defined-benefit fund, with benefits set by law and its rules. Members therefore face a different risk structure from members of ordinary defined-contribution funds. But the principle remains: poor governance always imposes a cost somewhere. Could that eventually be the taxpayer?
2. Spotting a Well-Run Fund:
When you find a fund with excellent administration, strong systems, and professional managers focused on members—stay put. Drawing your retirement benefit directly from a well-run fund is generally far more cost-effective than transferring to individual retail products.
Your Money, Your Questions, Your Future
You do not need to be a financial expert to protect your future. Demand clear answers, transparent cost disclosures in rands, and concrete evidence of trustee oversight.
Your fund exists for you, the member. Protecting your interests must guide every decision.
BetterLived explores retirement through seven connected areas of life and the changing circumstances we experience as we grow older. Its purpose is to help people ask better questions, understand their choices and remain involved in decisions about their lives.
This article provides general information about retirement and life planning. It does not constitute personal financial advice. Discuss financial decisions with an appropriately authorised adviser.