Understanding Regulation 28: How It Shapes Your Retirement Portfolio
Regulation 28 of the Pension Funds Act limits how much your retirement savings can be invested in equities, offshore assets, and alternative investments. Here is a clear breakdown of the rules and how a fee-transparent adviser structures portfolios within — and alongside — Reg 28 constraints.
This article is for educational purposes only and does not constitute personalised financial advice under the FAIS Act. Consult a licensed financial services provider for advice specific to your circumstances.
Most South Africans contributing to a retirement annuity, pension fund, or provident fund are investing within the constraints of Regulation 28 of the Pension Funds Act — without realising it. These rules limit the types and concentrations of assets that retirement funds may hold, and they have a direct impact on the portfolio construction choices available to your adviser and fund manager.
The Key Limits
The most consequential Regulation 28 limits are:
- Equities: Maximum 75% of the portfolio may be held in listed equities (domestic and offshore combined).
- Offshore assets: Maximum 45% may be invested in assets outside South Africa. This was increased from 30% in 2022 — a meaningful liberalisation that many retirement funds have not yet fully utilised.
- Property: Maximum 25% may be held in property (listed and unlisted).
- Hedge funds and private equity: Maximum 10% combined.
- Unlisted instruments: Maximum 15% of any single issuer; maximum 35% in unlisted instruments overall.
Practical Implications
The 45% offshore allowance is the most strategically significant limit for most investors today. Prior to the 2022 increase, retirement funds were constrained to 30% offshore — limiting the rand-hedging potential of the retirement portfolio. Now, a well-structured retirement portfolio can have nearly half its assets in global equities, global bonds, or foreign property, providing meaningful currency diversification within the tax-advantaged retirement wrapper.
The 75% equity limit means that a growth-oriented retirement portfolio can still maintain a predominantly equity allocation — but the cap prevents the all-equity allocation that some aggressive investors might prefer. For investors within 5–10 years of retirement, this constraint is generally appropriate from a risk management perspective, as it enforces some level of diversification.
What Lies Outside Reg 28
Assets held outside retirement funds — in a discretionary investment account, a living annuity post-retirement, or a trust — are not subject to Regulation 28 constraints. This is where a complementary investment strategy can add flexibility. If your goals require higher offshore exposure or alternative asset classes than Regulation 28 permits within your RA, those exposures can be built in the non-retirement portion of your portfolio.
A coordinated approach — treating your retirement fund and discretionary investments as a single portfolio with different tax and regulatory profiles — is more effective than managing each in isolation. This is where a fee-transparent adviser, who sees your full financial picture, adds the most value.
Want advice specific to your situation?
General principles are a starting point. A licensed, fee-transparent adviser can model how these rules and structures apply to your specific assets, goals, and tax position.