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 straightforward: prevent the kind of catastrophic loss that happens when a fund becomes overexposed 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 this: 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.

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.

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.

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 more informed 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 practical examples translated into rand amounts for a R1,000,000 portfolio:

Asset class limits:

• Equities (shares): Maximum 75% of the fund. On a R1,000,000 portfolio, that is R750,000 in shares at the outer limit.
• Offshore assets (total): Maximum 45%, with an additional 10% allowed in African markets outside South Africa. On a R1,000,000 portfolio, that is R450,000 offshore plus up to R100,000 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.
• Hedge funds: Maximum 10% in hedge funds in total, with a maximum of 2.5% in any single hedge fund.
• Private equity: Maximum 15% in private equity.
• Single bond issuer: Maximum 25% in bonds from any single issuer (except South African government bonds, which have no limit).
• Single listed equity: Maximum 10% in any single listed company’s shares.

The practical effect on a R1,000,000 portfolio is that you can hold up to R750,000 in shares, but no single company can represent more than R100,000 of that. You can send up to R450,000 offshore, but the remaining R550,000 must stay in South African or African-market assets.

Balanced funds and life-stage funds are specifically designed to stay within these limits automatically. When you invest in a fund labelled “balanced” or “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.

I recommend confirming 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. These are legal maximums under the Pension Funds Act, 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. That means the maximum total foreign exposure is 55% of the fund’s assets.

On a R2,000,000 retirement portfolio, those limits translate to:

• Offshore (global): Up to R900,000 in international assets such as global equities, offshore bonds, or foreign-denominated unit trusts.
• African markets (ex-SA): Up to an additional R200,000 in markets such as Kenya, Nigeria, or Namibia.
• Total foreign exposure: Up to R1,100,000 out of R2,000,000.

The remaining R900,000 must be invested in South African assets.

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 limiting offshore exposure too severely was working against long-term retirement savers’ interests.

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.

That said, 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 intelligently, 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 generally 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 are:

• 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 straightforward: 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 for you without requiring any action on your part.

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 serve as reminders of what happens when pension money is too concentrated in any single holding. Diversification requirements reduce, though do not eliminate, this risk.

For investors who are not deeply 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 twenty 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 concerned about rand depreciation or South African political and economic risk, this constraint is a real cost.

The Shari’ah compliant investing dimension:

Shari’ah compliant funds can absolutely be structured within Regulation 28 limits. Compliant equity funds, sukuk instruments instead 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.

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

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.

What this means for you: check that your fund is managed by a licensed and reputable asset manager, review your fund fact sheet at least annually, and ask your adviser if you are unsure whether your current portfolio is compliant.

Frequently Asked Questions About Regulation 28

Q: Does Regulation 28 apply to living annuities?

A: 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.

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

A: 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.

Q: What is the offshore limit under Regulation 28?

A: The offshore limit under Regulation 28 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.

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

A: 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, 100% offshore assets, or any other allocation, subject only to the fund’s own mandate and the annual and lifetime contribution limits.

Q: Who is responsible for Regulation 28 compliance?

A: 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.

Q: What happens if a retirement fund exceeds Regulation 28 limits?

A: 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.

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

A: 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.

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. But for the majority of retirement savers, being in a well-managed Regulation 28-compliant fund is a far better outcome than an unregulated one.

Your practical next step is to pull your fund’s fact sheet and check what asset classes it is actually invested in. Then use the retirement planning tool to assess whether your current allocation fits your time horizon and income goals. If the numbers raise questions, finding a financial adviser for retirement planning is the most reliable way to get answers specific to your situation. 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.

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