Regulation 28 Explained: What It Means for Your Retirement Fund Investments in South Africa

What Is Regulation 28?

Regulation 28 is a legal rule under the Pension Funds Act that sets maximum limits on how much of a retirement fund’s assets can be invested in each asset class. The purpose is to prevent catastrophic loss from overexposure to a single investment type, a single company, or a single currency.

If you have a retirement annuity, pension fund, provident fund, or preservation fund in South Africa, Regulation 28 governs how your money is invested, whether you realise it or not. The practical effect is clear: you cannot put 100% of your retirement annuity into equities or park all of it offshore. The regulation sets specific ceilings by asset class, and fund managers are legally required to stay within them.

If you have savings across several vehicles, say a pension fund from a previous employer, an active retirement annuity, and a preservation fund you rolled over during a career change, Regulation 28 applies to each of those structures separately. The allocation limits are not blended across your entire estate. That distinction matters when you are thinking about where to hold specific asset classes and how much offshore exposure you actually carry in total.

Here is a worked example. Say you have R20,000,000 in retirement savings split across three structures: R10,000,000 in a pension fund, R6,000,000 in a retirement annuity, and R4,000,000 in a preservation fund. Each fund can hold up to 45% offshore independently, which means your maximum permitted offshore capital across all three is R9,000,000. If each fund is sitting at 40% offshore, your blended offshore position is R8,000,000, which is a meaningful currency exposure that only becomes visible when you look across the full picture.

Understanding these limits matters because they shape every investment choice inside your fund. They influence which unit trusts and ETFs are available to you, how much global exposure you can access, and how your portfolio shifts as you approach retirement. Use a retirement planning tool to see how your current allocation maps against these constraints, and consider reading about how inflation erodes your retirement savings to understand why asset allocation decisions inside a Regulation 28 framework carry real long-term consequences.

Which Funds Does Regulation 28 Apply To?

Regulation 28 applies to all registered retirement funds in South Africa: pension funds, provident funds, preservation funds, and retirement annuities. If your money sits in any of these vehicles, the asset class limits apply automatically.

A registered retirement fund is any fund registered under the Pension Funds Act and overseen by the Financial Sector Conduct Authority. The registration is what triggers the regulation. It is not about the investment itself; it is about the wrapper holding that investment.

What Regulation 28 does not apply to is equally important. Once you retire and move your savings into a living annuity, the regulation no longer governs your investments. A living annuity is a post-retirement product, not a registered retirement fund, so you can allocate 100% to equities or offshore assets if you choose. This is one of the most misunderstood distinctions in South African retirement planning, and it has real consequences for how you structure your drawdown.

Discretionary investments, tax-free savings accounts, and endowment policies also fall outside Regulation 28. Only the accumulation-phase vehicles, those designed for building retirement capital, trigger these rules.

For someone with savings across several structures, this distinction creates a planning opportunity. Your retirement annuity and preservation funds are Regulation 28-constrained during the accumulation phase. But the moment you retire and convert any of those funds into a living annuity, that portion of your capital moves outside the regulation. If you are ten years from retirement and holding R15,000,000 across a pension fund, an RA, and a preservation fund, it is worth mapping which structures will convert to living annuities and when, because the investment freedom available to you changes at that transition.

If you contribute to a provident fund through your employer, your fund trustees and the appointed asset manager handle compliance on your behalf. You do not need to calculate it yourself. But knowing which vehicle you are in, and what rules govern it, helps you make better decisions about supplementary saving and post-retirement planning.

One more practical point: if you use a retirement annuity with a linked investment service provider that allows you to choose your own underlying funds, the individual funds you select must collectively comply with the limits. The platform provider typically enforces this automatically, but it is worth confirming with your administrator.

The Regulation 28 Asset Class Limits Explained

Regulation 28 sets a ceiling, not a floor, for each asset class. The limits specify the maximum percentage of a fund’s assets that may be invested in each category, and they apply to the fund as a whole rather than to individual member accounts.

Here are the key asset class limits, with the arithmetic shown for a R5,000,000 portfolio and a R10,000,000 portfolio:

Equities (shares): Maximum 75% On R5,000,000, that is R3,750,000 in shares at the outer limit. On R10,000,000, it is R7,500,000. No single listed company may represent more than 10% of the fund, so on a R5,000,000 portfolio, no individual share holding may exceed R500,000.

Offshore assets (total): Maximum 45%, plus 10% in African markets outside South Africa On R5,000,000, that is R2,250,000 in international assets and up to R500,000 in African markets, for a total foreign exposure of R2,750,000. On R10,000,000, the numbers are R4,500,000 offshore and R1,000,000 in African markets.

Listed property: Maximum 25% in any single listed property company or REIT Total property exposure is not capped at 25%, but single-issuer concentration is. A fund can hold multiple REITs, provided no single one exceeds the 25% threshold.

Hedge funds: Maximum 10% in total, with a maximum of 2.5% in any single hedge fund On R10,000,000, that means no more than R1,000,000 in hedge funds overall, with a maximum of R250,000 in any one fund.

Private equity: Maximum 15% This includes unlisted instruments. On R10,000,000, the ceiling is R1,500,000.

Single bond issuer: Maximum 25% South African government bonds are exempt from this cap. All other bond issuers are subject to the 25% single-issuer limit.

For someone with savings spread across a pension fund, a retirement annuity, and a preservation fund, looking at the offshore and equity allocation across all three structures together gives a more useful picture of actual risk than reviewing each fund in isolation. Regulation 28 applies per fund, so each can technically carry up to 45% offshore and 75% equity, but the blended position across R15,000,000 or R20,000,000 in retirement capital is what determines your real concentration.

Balanced funds and life-stage funds are designed to stay within these limits automatically. When you invest in a fund labelled multi-asset high equity inside an RA, the fund manager is already managing the allocation to comply. You do not need to monitor the limits yourself when using these products.

Confirm current limits with your fund administrator or a qualified adviser, particularly if you are building a diversified retirement portfolio across multiple vehicles. Understanding how unit trusts are structured in South Africa also helps clarify how compliance works at the underlying fund level.

Regulation 28 Limits at a Glance

The table below summarises the main asset class ceilings under the Pension Funds Act, current as of 2026. These are legal maximums, not investment recommendations.

These are ceilings, not targets. A well-constructed fund will rarely sit at the legal maximum in any single category. If you want to understand what your specific fund’s allocation looks like against these limits, speak to a financial adviser about your fund’s allocation before making any changes.

The Regulation 28 Offshore Limit: How Much Can You Invest Abroad?

Under Regulation 28, a retirement fund may invest up to 45% of its assets in offshore markets, with an additional 10% allowed in African countries outside South Africa. The maximum total foreign exposure is therefore 55% of the fund’s assets.

On a R10,000,000 retirement portfolio, those limits translate to:

• Offshore (global): Up to R4,500,000 in international assets such as global equities, offshore bonds, or foreign-denominated unit trusts.
• African markets (ex-SA): Up to an additional R1,000,000 in markets such as Kenya, Nigeria, or Namibia.
• Total foreign exposure: Up to R5,500,000 out of R10,000,000, with the remaining R4,500,000 in South African assets.

For a larger portfolio, say R20,000,000 across all your retirement structures, the arithmetic is the same per fund. If your pension fund holds R10,000,000 at 45% offshore, your RA holds R6,000,000 at 40% offshore, and your preservation fund holds R4,000,000 at 35% offshore, your blended offshore position is R4,500,000 plus R2,400,000 plus R1,400,000, totalling R8,300,000. That is 41.5% of your total retirement capital sitting in foreign currency. Knowing that number matters before you decide to increase offshore weighting in any one structure.

The offshore limit was increased from 30% to 45% in 2022, a meaningful policy shift that gave retirement fund investors significantly more access to global diversification. This change acknowledged that South Africa represents a small fraction of global market capitalisation, and that restricting offshore exposure too heavily was working against long-term retirement savers.

The rationale for having any offshore limit at all is twofold. First, it ensures that retirement capital continues to contribute to South African capital markets rather than flowing entirely abroad. Second, it provides some protection against the risks of being fully exposed to rand depreciation or concentrated emerging market volatility.

The limit does mean your retirement savings carry ongoing currency and concentration risk on the South African side. If you want to understand how to use the 45% allocation thoughtfully, investing offshore as a South African covers the key strategies and vehicles available. You can also explore using ETFs for currency diversification within the permitted limits, and offshore unit trusts available to South Africans for specific product options that qualify within a Regulation 28 portfolio.

One practical point: the 45% offshore limit applies to the fund’s total assets, not to each individual member’s notional account. In practice, most balanced and multi-asset funds manage to a comfortable buffer below the ceiling, so you are unlikely to hit the hard cap unless you are specifically selecting high-offshore unit trusts inside a self-directed RA.

How Regulation 28 Affects Your Retirement Annuity

Regulation 28 affects your retirement annuity directly because every fund or portfolio you hold inside your RA must comply with the asset class limits. This is what makes retirement annuity investment limits in South Africa materially different from investing in a discretionary account.

The most visible consequence is that pure 100% equity funds are not available inside a retirement annuity. Because Regulation 28 caps equity exposure at 75%, any fund marketed for use inside an RA cannot legally run a fully-invested equity portfolio. This surprises many investors who compare their RA options to the broader unit trust universe.

What you will find available instead:

• Multi-asset high equity funds, which typically run 60-75% in equities and the balance in bonds, property, and cash.
• Life-stage or target-date funds, which automatically shift the equity/bond split as you approach retirement.
• Balanced funds, which maintain a moderate equity allocation with diversification across asset classes.

Life-stage investing deserves a clear explanation. It is a strategy where the fund automatically reduces equity exposure and increases defensive asset exposure as you age, typically stepping down in the five to ten years before your target retirement date. The logic is that the closer you are to drawing income, the less time you have to recover from a sharp market drop. Life-stage funds execute this shift without requiring any action on your part.

Here is a worked example of how this plays out. If you are 55 with R8,000,000 in a retirement annuity and ten years from your planned retirement date, a life-stage fund might currently hold 65% in equities (R5,200,000) and shift to 40% equities (R3,200,000) by the time you reach 65, increasing bonds and cash as it goes. That automatic reduction in risk is built into the product and stays within Regulation 28 at every stage.

If you have multiple retirement structures, the life-stage logic does not automatically blend across them. You could have your RA on a life-stage glide path while your pension fund preservation account sits in a high-equity portfolio with no automatic adjustment. Reviewing the allocation across all your structures together, rather than fund by fund, is one of the most useful conversations to have in your fifties. Someone with R5,000,000 in a life-stage RA and R10,000,000 in a high-equity preservation fund is carrying far more equity risk than the RA alone suggests.

If you prefer to self-select funds inside your RA, you can, within the limits. Most linked platforms allow you to combine funds from their approved list, provided the total allocation complies with Regulation 28. The platform generally enforces this automatically, rejecting any instruction that would push the portfolio out of compliance.

For investors interested in building an RA portfolio from underlying ETFs available for South African retirement investors, the key is ensuring that the selected ETFs, taken together, do not breach any single asset class ceiling. And if you are weighing up timing equity exposure in your retirement portfolio as you approach retirement, the Regulation 28 constraints are part of the framework shaping your options.

Does Regulation 28 Help or Hinder Your Retirement Savings?

Regulation 28 has genuine benefits and genuine costs. The honest answer is that it does both, and the balance depends on your circumstances, your time horizon, and the quality of the underlying fund management.

The case for Regulation 28

The regulation protects retirement savers from extreme concentration risk. Without it, a poorly governed fund or an unsophisticated investor could place retirement savings almost entirely in a single asset class, a single company, or a single currency. The Steinhoff collapse and other corporate failures in South Africa’s recent history are reminders of what happens when pension money concentrates too heavily in any single holding. Diversification requirements reduce, though do not eliminate, this risk.

For investors who are not closely engaged with markets, the enforced diversification that comes from Regulation 28-compliant balanced funds is genuinely useful. The fund manager is required by law to manage concentration risk, which is a structural protection that benefits members who would not otherwise manage it themselves.

The case against Regulation 28

The 75% equity ceiling and the offshore limit mean that long-term investors, particularly those with fifteen or more years until retirement, cannot access the higher expected returns of a fully-invested global equity portfolio inside their RA. Why staying invested over time matters more than market timing is well established, and capping equity exposure does constrain growth potential over long horizons.

The offshore limit, even at the increased 45%, still forces meaningful allocation to South African assets in a market that represents a small fraction of global economic output. For investors with a substantial portion of their wealth already tied to South Africa through property, a business, or a defined benefit pension, the additional forced local exposure inside an RA adds to a concentration they may already be carrying.

A practical illustration: if you own commercial property worth R5,000,000, have a pension fund benefit of R10,000,000, and are building a retirement annuity of R5,000,000, you already carry significant rand and South African asset exposure through the property and the pension fund. The RA’s offshore limit forces you to keep at least 55% of that R5,000,000 in South African assets, adding to an already locally-concentrated total portfolio. This is where reviewing Regulation 28’s effect across everything you own, not just each fund in isolation, produces the most useful insights.

The Shari’ah-compliant investing dimension

Shari’ah-compliant funds can be structured within Regulation 28 limits. Compliant equity funds, sukuk instruments in place of conventional bonds, and compliant property holdings all fit within the asset class framework. The regulation does not distinguish between conventional and compliant instruments in a way that disadvantages Shari’ah-compliant investors, provided the underlying assets meet both the Shari’ah screening criteria and the asset class concentration limits.

Whether the 2026 budget affects your retirement and investment planning is worth reviewing alongside this, because tax changes can interact with your allocation strategy inside an RA.

What Happens if a Fund Breaches the Regulation 28 Limits?

If a retirement fund breaches Regulation 28 limits, the fund manager, not the individual member, is responsible for identifying the breach and rectifying it. As an ordinary fund member, a temporary breach in a well-managed fund should have minimal direct impact on you.

Breaches can occur in two ways. The first is an active breach, where an investment decision is made that knowingly or carelessly takes the fund outside the permitted limits. The second is a passive breach, where market movements cause an allocation to drift beyond the ceiling without any deliberate decision being made. If equities rally sharply, for example, the equity portion of a balanced fund could temporarily exceed the 75% ceiling purely through price appreciation.

To make the passive breach concrete: consider a fund with R10,000,000 in assets, holding R7,000,000 in equities (70% of the fund). If the equity portion rises 10% while bonds and cash stay flat, the equity value becomes R7,700,000 against total fund assets of approximately R10,700,000, which is 72%. Still within the 75% ceiling. If equities rise a further 5%, the equity value becomes R8,085,000 against roughly R11,085,000 in total, which is 73%. The manager is watching this number and would rebalance before it approaches 75%.

The fund manager is required to report significant or persistent breaches to the Prudential Authority, which oversees retirement fund regulation in South Africa. The Prudential Authority can take supervisory action where it finds that a fund is not being managed in accordance with the regulation.

For the individual member, the more immediate concern in a prolonged breach is not regulatory penalty but investment risk. If a fund is consistently running above the equity or offshore limits without correction, it is carrying more concentration risk than the regulation permits. During a sharp equity drawdown or a rand rally, that excess exposure is exactly what the limits were designed to prevent. Checking your fund fact sheet annually, and confirming with your adviser that the allocation is within bounds, is a reasonable precaution.

In practice, reputable asset managers monitor allocations continuously and rebalance when allocations drift toward the limits. The built-in buffer that most managers maintain below the ceilings means passive breaches are typically corrected before they become reportable events.

For someone with savings in multiple funds, a breach in one structure does not trigger action in another. Each fund is assessed independently. If your preservation fund is passively breaching the equity limit during a strong equity run, your RA is unaffected from a regulatory standpoint, though your overall equity exposure across both funds is something to watch.

Frequently Asked Questions About Regulation 28

Does Regulation 28 apply to living annuities?

No. Living annuities are post-retirement products and are not registered retirement funds under the Pension Funds Act. Once you have retired and purchased a living annuity, you can allocate 100% of the capital to any compliant investment, including 100% equities or high offshore exposure, without Regulation 28 constraints applying. This is one of the most practically significant distinctions in South African retirement planning.

Can I invest 100% in equities in a retirement annuity?

No. Regulation 28 caps equity exposure at 75% of the fund’s assets in a retirement annuity. This is why you will not find a pure equity fund available inside an RA. The closest options are multi-asset high equity funds, which typically run 60-75% in shares and balance the remainder across other asset classes.

What is the offshore limit under Regulation 28?

The offshore limit is 45% of the fund’s total assets in international investments, plus an additional 10% in African markets outside South Africa. This gives a maximum total foreign exposure of 55%. The 45% limit was increased from 30% in 2022. On a R10,000,000 fund, the maximum offshore allocation is R4,500,000 in global assets and R1,000,000 in African markets.

Does Regulation 28 apply to a Tax-Free Savings Account?

No. A Tax-Free Savings Account is not a registered retirement fund under the Pension Funds Act, so Regulation 28 does not apply. You can invest a TFSA in 100% equities or 100% offshore assets, subject only to the fund’s own mandate and the annual and lifetime contribution limits.

Who is responsible for Regulation 28 compliance?

The fund manager and the fund trustees are legally responsible for ensuring that the fund stays within the Regulation 28 limits. Individual members are not required to monitor or enforce compliance. The Prudential Authority oversees this at a regulatory level.

What happens if a retirement fund exceeds Regulation 28 limits?

The fund manager must identify the breach, report material breaches to the Prudential Authority, and rebalance the portfolio back into compliance. For ordinary members, a temporary passive breach caused by market movements and promptly corrected should have no significant direct impact. Persistent or deliberate breaches can trigger regulatory action against the fund manager.

Can I use Regulation 28-compliant funds if I follow Shari’ah principles?

Yes. Shari’ah-compliant funds can be structured to meet Regulation 28 requirements. Many platforms offer compliant equity funds, sukuk-based fixed income instruments, and compliant property holdings within the asset class limits. Confirm with your fund provider that your chosen products meet both regulatory and Shari’ah requirements.

Does Regulation 28 apply separately to each retirement fund I hold?

Yes. The limits apply per registered fund, not across your combined retirement assets. Each pension fund, preservation fund, and retirement annuity is assessed independently. If you hold three retirement structures, each can technically carry up to 45% offshore and 75% equity. Your blended position across all three is something to review with an adviser, because it determines your actual concentration in any one asset class or currency.

The Bottom Line on Regulation 28

Regulation 28 sets the outer boundaries of how your retirement fund money can be invested, covering asset class concentration, offshore exposure, and single-issuer limits. Three things are worth keeping in mind: the limits apply to pension, provident, preservation, and retirement annuity funds, not to living annuities or tax-free savings accounts; the main ceilings are 75% equities, 45% offshore, and 10% additional African markets; and compliance is the fund manager’s legal responsibility, not yours.

Knowing these rules helps you ask better questions when reviewing your fund fact sheet or speaking with a financial planner. If your RA feels more conservative than you expected, Regulation 28 is often the explanation. If you are approaching retirement and wondering how your constraints change once you move into a living annuity, the answer is that they largely fall away.

The regulation is not perfect, and the trade-offs around the equity cap and offshore limit are legitimate points of debate. For most retirement savers, being in a well-managed Regulation 28-compliant fund is a far better outcome than an unregulated one. But the rule applies fund by fund, which means the picture across all your retirement structures combined is the one that actually describes your risk.

For someone with R15,000,000 or R20,000,000 spread across a pension fund, a retirement annuity, and one or more preservation funds, the most useful exercise is to pull together the fact sheets from each, check the asset class breakdown in each, and calculate the blended offshore and equity exposure across all of them. That is the number that tells you whether your overall allocation matches your time horizon, your income needs, and your view on the rand.

Your practical next step is to pull your fund’s fact sheet and check what asset classes it is actually invested in. If you have savings across multiple structures, look at the allocation picture across all of them together, not fund by fund. You might also consider property as part of a South African retirement strategy as one of the asset classes available within the regulation’s framework, and use a retirement planning tool to assess whether your current allocation fits your time horizon and income goals.

For a broader view of how Regulation 28 fits into your overall retirement readiness, the preparing for retirement guide is the right place to continue. If you would like to review how the limits apply across your specific funds and structures, get in touch for a private consultation.

This article is general information and does not constitute personal financial advice.