Regulation 28 of the Pension Funds Act: The Full Rules South African Investors Need to Know

What Is Regulation 28 of the Pension Funds Act?

Regulation 28 of the Pension Funds Act is the investment rulebook for South African retirement funds. It sets hard limits on how much of your retirement savings can sit in equities, property, offshore assets, hedge funds, and since 2022, even cryptocurrency. The core goal is simple: diversification protects your capital.

If you’re a member of a pension fund, provident fund, or retirement annuity in South Africa, Regulation 28 directly shapes how your contributions are invested. It does not apply to every savings product—living annuities fall outside its scope entirely—but it governs most of the registered retirement fund structures South Africans use.

The most recent overhaul came in 2022. Those amendments raised the offshore limit, introduced crypto for the first time, and clarified how infrastructure and private equity fit into the framework. If you’re trying to understand why your retirement fund won’t let you allocate 60% offshore, or why it caps crypto at 2.5%, this regulation is the answer.

One quick clarification: if you’ve searched for “Regulation 30” and landed here, those are two separate animals. Regulation 30 deals with financial reporting. Regulation 28 deals with where your money can and cannot go. This article covers Regulation 28.

For a practical walkthrough of how these rules affect your specific situation, the article on Regulation 28 explained for retirement fund investors is a useful companion to this one.

What Does Regulation 28 Require?

Regulation 28 requires retirement funds to invest member assets prudently, within specific asset class limits, and backed by a written investment policy statement. It’s the primary tool regulators use to prevent funds from concentrating too much capital in any single asset class or company.

The Legal Foundation

The legal basis sits in Section 36 of the Pension Funds Act 24 of 1956. That section gives the Minister of Finance power to set investment conditions for registered funds. Regulation 28 is the practical instrument that makes those conditions real. The Financial Sector Conduct Authority (FSCA) enforces it. Fund trustees carry the legal responsibility for compliance, not individual members.

The underlying principle is sometimes called the “prudent investor” standard. This doesn’t mean the most conservative possible approach. It means disciplined, diversified investing that balances growth against the risk of permanent capital loss. The regulation recognises that most retirement fund members can’t assess individual investment risk themselves, so the rules create a floor of protection at the fund level.

Which Funds Are in Scope?

Regulation 28 applies to pension funds, provident funds, preservation funds (both types), and retirement annuity funds. If you hold a retirement annuity with Allan Gray, Ninety One, Sygnia, PSG Wealth, or any FSCA-registered provider, the underlying portfolios available to you must comply with Regulation 28.

Employer-sponsored pension and provident funds are in scope too. Understanding how provident fund trustees manage member assets gives useful context for how these rules work in day-to-day fund management.

Living annuities sit outside Regulation 28 entirely. Once you retire and move your capital into a living annuity, these investment limits no longer apply, though you face a different set of risks around sustainable drawdown. If you’re unsure what a living annuity is and how it differs from other retirement income products, that distinction matters considerably when you approach retirement.

A Quick Word on Regulation 28 Versus Regulation 30

Many people search for “Regulation 30” when they actually want the investment limits here. Regulation 30 covers annual financial statements and reporting obligations. Important, yes, but if your question is about where your money can go, Regulation 28 is what you need.

What Are the Investment Limits Under Regulation 28?

Regulation 28 caps the percentage of a retirement fund’s assets in each major asset class. No single asset class may exceed its maximum. No single issuer may represent more than 5% of total fund assets in most cases.

Here’s what the limits look like following the 2022 amendments:

The Per-Issuer Sub-Limit

The 5% per-issuer rule is one of the most practically significant constraints inside Regulation 28. It means that even if a fund wanted to put all its equity allocation into one company, the regulation stops it cold. No more than 5% of a fund’s total assets can sit with any one issuer. The goal is clear: a single corporate failure cannot devastate a member’s retirement savings.

There are limited exceptions, mostly for South African government bonds, where the concentration limit is more generous given the sovereign nature of the issuer.

The Africa Carve-Out

Within the 45% offshore limit, there’s a specific allowance for African investments outside South Africa. The practical effect is meaningful: a fund can allocate up to 10% of assets to the rest of Africa within the offshore cap, rather than competing with global allocations for the same bucket. In rand terms, for a fund worth R10 million, that means up to R1 million could sit in Kenyan, Nigerian, or other African market instruments, with a separate pool of up to R4.5 million available for broader global exposure.

Maximum Limits Are Not Targets

Here’s a critical point: Regulation 28 sets ceilings, not recommended allocations. A fund that invests 74% in equities is compliant, but that doesn’t mean it’s appropriate for every member. Building a diversified retirement portfolio that suits your specific time horizon and risk tolerance is a separate exercise that works within these limits. Why concentration risk matters for long-term investors also deserves attention, because Regulation 28 addresses concentration at the fund level, not at the individual member level within a multi-option fund.

What Changed Under the 2022 Amendments to Regulation 28?

The 2022 amendments made three significant moves: they raised and restructured the offshore investment limit, recognised cryptocurrency as a new asset class, and clarified the treatment of infrastructure and private equity.

The Offshore Limit Restructure

Before 2022, the offshore limit was lower and structured differently. The revision raised the overall offshore cap to 45% and separated the Africa allowance within that ceiling. For members wanting more global diversification in retirement savings, this was a meaningful improvement. It aligned the investment limits more closely with what financial planning research suggests is appropriate offshore exposure for long-term South African investors. For more on offshore investing options for South African retirement investors, the practical implications are explained in detail.

The increase also reflected broader policy direction. South Africa’s exchange control framework was being eased, and the retirement fund offshore limit moved in the same direction. You can read about how recent South African policy changes affect retirement planning for context on the wider regulatory environment.

Cryptocurrency: Recognised but Tightly Capped

The 2022 amendments introduced cryptocurrency as a recognised asset class for the first time. The maximum allowable allocation is 2.5% of fund assets. This is a narrow window, deliberately so. Cryptocurrency remains highly volatile, and the regulator’s intent was to permit limited exposure for funds that choose it, not to encourage it as a core retirement asset.

In practice, most South African retirement funds have not rushed to use the 2.5% crypto allowance. The operational complexity of holding digital assets in a regulated retirement fund structure is significant, and many trustees have concluded the risk-return profile doesn’t justify it. But if you’re researching whether your retirement fund can hold Bitcoin or similar assets, the answer is yes, up to 2.5%, provided the fund’s trustees elect to use that allowance.

Infrastructure and Private Equity Clarification

The 2022 revision also brought clearer rules around infrastructure and private equity. These asset classes had previously existed in a grey area. The amendments defined qualifying infrastructure investments precisely and raised the private equity limit to 15%. The intent was to encourage retirement funds to direct capital toward productive economic assets, particularly large infrastructure projects in South Africa.

For the authoritative current text of Regulation 28 and its 2022 amendments, consult the Government Gazette or the FSCA’s official publications. Official sources should always take precedence over any secondary summary, including this one.

Which Retirement Funds Must Comply With Regulation 28?

Regulation 28 applies to all funds registered under the Pension Funds Act 24 of 1956: pension funds, provident funds, pension preservation funds, provident preservation funds, and retirement annuity funds. If your retirement savings are held in one of these structures, the fund must comply.

Retirement Annuity Funds by Name

Retirement annuity funds are common for self-employed individuals and employees who want to save outside their employer’s fund. Providers like Allan Gray, Ninety One, Coronation, Sygnia, PSG Wealth, Discovery, and Old Mutual all offer retirement annuities that must invest in Regulation 28-compliant portfolios. How Sygnia structures its retirement annuity portfolios illustrates how different providers approach the constraints differently.

When you select an underlying portfolio inside a retirement annuity, you’re choosing from Regulation 28-compliant options. You cannot choose a portfolio that allocates 60% offshore, even if such a portfolio exists for discretionary savings, because it would breach the 45% offshore cap.

What Falls Outside Regulation 28?

Living annuities fall outside Regulation 28 entirely. Once you reach retirement and convert your retirement fund savings into a living annuity, you’re free to invest in portfolios without these asset class limits. That freedom comes with a trade-off: you bear the full investment risk and the risk of outliving your capital. Understanding moving from accumulation to income in retirement is critical when making that transition.

Tax-free savings accounts, unit trusts held in your own name, and discretionary investment accounts are also outside Regulation 28. The regulation applies only to registered retirement fund structures.

How Regulation 28 Affects Your Retirement Fund Investments in Practice

In practice, Regulation 28 shapes the portfolios available to you inside a retirement annuity or pension fund, limits your offshore exposure to 45%, and influences how providers label and market their options.

Portfolio Labelling

When you log into a retirement annuity platform and see portfolios described as “Regulation 28 compliant,” it means the portfolio manager has confirmed the underlying asset allocation doesn’t breach any limits. This label is not a quality guarantee. It simply means the portfolio is eligible for inclusion in a retirement fund. Two compliant portfolios can have very different risk profiles.

Allan Gray’s Regulation 28 Calculator

Allan Gray offers a Regulation 28 calculator on its platform that lets you check whether a particular combination of underlying funds in your retirement annuity stays within permitted limits. It’s genuinely useful if you hold multiple portfolios and want to understand your aggregate offshore or equity exposure. Search for “Allan Gray Regulation 28 calculator” and the tool is accessible through their website. It doesn’t replace professional advice, but it gives you a transparent view of where your combined allocation stands against the regulatory ceilings.

PSG Wealth’s Regulation 28 Equity Portfolio

PSG Wealth’s Regulation 28 equity portfolio deliberately targets the equity ceiling permitted under the regulation. It aims to hold the maximum allowable exposure to listed equities while staying within limits on offshore, property, and other asset classes. Choosing such a portfolio makes sense for investors with a long time horizon who want equity-like growth without breaching the rules. It doesn’t guarantee returns, and equity concentration at the permitted range brings meaningful volatility.

ETF options available inside South African retirement funds are worth reviewing if you prefer a passive approach within a Regulation 28 framework. Using currency diversification within a Regulation 28 framework and dividend investing strategies within retirement funds can help you think through how to optimise within the permitted limits.

How Fund Trustees Must Manage Regulation 28 Compliance

Fund trustees are legally responsible for ensuring continuous compliance with Regulation 28. The obligation isn’t a once-a-year check; it’s an ongoing duty that forms part of the board’s fiduciary responsibilities to members.

The Investment Policy Statement Requirement

Every retirement fund covered by Regulation 28 must maintain an Investment Policy Statement (IPS). The IPS documents the fund’s investment objectives, risk tolerance, asset allocation strategy, and the processes by which compliance is monitored. It’s not a public document in most cases, but as a fund member, you have the right to request information about your fund’s investment approach.

The FSCA can request the IPS during supervisory reviews, and funds without an adequate one are in breach of their compliance obligations.

What Happens When Market Drift Causes a Breach?

Markets move, and a portfolio that was fully compliant yesterday can drift beyond a limit due to asset price changes. Trustees aren’t immediately penalised for a drift breach that results from market movements, provided they act promptly to restore compliance. The expectation is that trustees monitor allocations regularly and rebalance when limits are approached. Deliberate or sustained breaches are treated more seriously.

As a fund member, if you believe your fund isn’t complying with Regulation 28, you can raise a complaint with the FSCA or the Pension Funds Adjudicator. How industry provident funds manage trustee responsibilities gives a useful example of how trustee governance works. For members wanting to understand investment options available to provident fund members, trustee oversight of these choices is directly relevant.

Regulation 28 and Offshore Diversification: What the Limits Mean for You

The 45% offshore limit means that up to nearly half your retirement fund savings can be invested in assets outside South Africa. This is a significant allowance, but it’s also a hard ceiling that applies regardless of your personal view on the rand or global markets.

This Is Not Your Personal Exchange Control Allowance

It’s important to understand that the 45% offshore limit inside a retirement fund is entirely separate from your personal foreign investment allowance as an individual taxpayer. Your personal allowance, which allows you to move capital offshore in your own name, doesn’t interact with or reduce the amount your retirement fund can invest globally. These are two parallel systems.

The Honest Trade-Off

The 45% ceiling means your retirement fund will always have meaningful South African exposure. For some investors, that feels like a constraint, particularly during periods when the rand weakens or South African equities underperform. For others, it provides a natural anchor to local growth, dividends, and assets that pay out in rands, which is the currency you’ll ultimately spend in retirement.

The trade-off is real and worth acknowledging. Maximising your offshore allocation inside a retirement fund up to 45% and supplementing with offshore exposure in your discretionary savings is a strategy many South African investors use. Offshore unit trust options for South African investors and why currency diversification matters for retirement savings both address this in more detail.

Frequently Asked Questions About Regulation 28 of the Pension Funds Act

What does Regulation 28 of the Pension Funds Act require?

Regulation 28 requires South African retirement funds to invest member assets within specific asset class limits, maintain an Investment Policy Statement, and ensure diversification that protects members against concentration risk. It’s enforced by the FSCA under Section 36 of the Pension Funds Act 24 of 1956. Fund trustees carry the legal responsibility for compliance, not individual members.

What are the investment limits under Regulation 28?

The key limits are: equities up to 75%, listed and unlisted property combined up to 25%, offshore assets up to 45%, hedge funds up to 10%, private equity up to 15%, cryptocurrency up to 2.5%, and no single issuer may represent more than 5% of fund assets. Infrastructure investments are permitted up to 45%. Cash and money market instruments have no upper cap but are subject to per-issuer concentration limits.

How does Regulation 28 address cryptocurrency investments?

Cryptocurrency was added as a recognised asset class in the 2022 amendments, with a maximum allowable allocation of 2.5% of fund assets. Prior to 2022, there was no explicit provision for crypto in retirement funds. The 2.5% cap reflects the regulator’s cautious approach to digital assets given their volatility. Most fund trustees have not yet chosen to use this allowance.

What diversification rules does Regulation 28 impose?

Regulation 28 imposes diversification through asset class ceilings that prevent any single category from dominating a fund’s assets. It also applies a per-issuer limit of 5% to prevent concentration in any single company or entity. The Africa carve-out within the offshore limit encourages regional diversification within the broader 45% offshore allowance. The cumulative effect is a broadly diversified portfolio by design.

Which version of the Pension Funds Act applies to Regulation 28?

Regulation 28 operates under the Pension Funds Act 24 of 1956, which remains the governing legislation. The regulation has been amended several times since its original publication, with the most significant recent revision taking effect in 2022. The 2022 amendments are published in the Government Gazette and represent the currently applicable version. Always consult official FSCA publications for the authoritative text.

What amendments have been made to Regulation 28?

The most significant amendments came in 2022, covering three main areas: raising the offshore limit to 45% and restructuring the Africa allowance within it, recognising cryptocurrency as an allowable asset class at up to 2.5%, and clarifying the treatment of infrastructure and private equity investments. Earlier amendments adjusted various limits incrementally, but the 2022 revision was the most comprehensive overhaul in recent memory.

How do I access a full text copy of Regulation 28?

The authoritative text of Regulation 28 is available through the Government Gazette and the FSCA’s official website. Search for “Regulation 28 of the Pension Funds Act” on the FSCA site or on the Government Printing Works gazette portal. The 2022 amended version is currently applicable. Be cautious of secondary summaries, including this article, for regulatory precision; always verify against the official gazette.

What is the difference between Regulation 28 and Regulation 30?

Regulation 28 sets the investment limits for retirement funds, covering how member assets may be allocated across equities, bonds, property, offshore, and other asset classes. Regulation 30 sets the requirements for the annual financial statements and reporting obligations of retirement funds. They address entirely different aspects of fund management. If you’re researching where your retirement fund can invest, Regulation 28 applies. If you’re researching financial reporting, Regulation 30 applies.

For related reading, the article on frequently asked questions about the two-pot retirement system addresses another significant recent change to how South African retirement savings work. The sequence of decisions at retirement in South Africa is also worth reviewing as you approach the point of drawing your savings.

The Bottom Line on Regulation 28

Regulation 28 of the Pension Funds Act is the core investment rulebook for South African retirement funds. It protects your retirement savings through enforced diversification, caps on individual asset classes, and limits on concentration in single issuers. If your retirement savings sit in a pension fund, provident fund, preservation fund, or retirement annuity, these rules apply.

The 2022 amendments were the most significant revision in years. The offshore limit moved to 45%, cryptocurrency entered the picture at 2.5%, and the rules around infrastructure and private equity became clearer. These changes give retirement fund investors more flexibility than before, though the limits remain meaningful constraints, particularly on offshore exposure.

Three practical steps are worth taking. First, check whether your retirement fund labels its portfolios as Regulation 28-compliant and understand what that means in terms of underlying asset allocation. Second, if you use a retirement annuity platform, use available tools like the Allan Gray Regulation 28 calculator to understand your aggregate exposure. Third, consult a CFP professional before making significant changes to your retirement fund investment elections, especially as you approach retirement.

For a deeper explanation of how Regulation 28 affects your retirement portfolio, that companion article covers the practical planning implications in more detail. If you’re also thinking about property investment within a retirement fund context, the 25% property limit under Regulation 28 is directly relevant to that decision.

This article is general information only and does not constitute personal financial advice. Your specific circumstances, fund choice, and investment time horizon will all affect which strategy is right for you.