How the Law Protects Retired Property Investors

Private Property South Africa
Anna-Marie Smith

The notion of placing one’s eggs in more than one basket during retirement planning bears great meaning when relating it to property ownership.

Whereas the opposite may on occasion have enriched a small minority, the concept of all eggs in one basket is strongly associated with dire financial consequences. This has mostly been the result of a lack of legislation that neglected to address the poor qualifications of industry professionals providing inferior investment advice.

However, those wishing to guard their property investments now have so much more at their disposal in terms of legal protection than their older counterparts. This is in addition to the new consumer act offering prospective and existing owners already in possession of title deeds, with extended protection compared to just a few years ago. The issue of affordability within the residential property market has been prioritised through improved regulation of the New Consumer Protection Act.

Yet, one of the biggest issues in many a property scam, in particular that of property syndication and off-plan development schemes, has been the targeting of retirees in possession of an accumulation of retirement savings, in one form or another. When it comes to investment planning, retirees have traditionally benefited from the expertise provided by financial advisors, fund managers, and trustees presumed to be equipped to help their clients making informed choices. From a financial advisory perspective, what has also come to the rescue of any number of property buyers, specifically in the retirement segment of the market has been the requirement and implementation of all advisors holding Financial Investment Advisory (FAIS) qualifications.

This is even more fortuitous in the light of retirees whose accumulated funds have been saved in Retirement Annuities (RA). Such policy holders may remain unaware that as an indirect consequence of the investment portfolios of a fund, that they may hold additional property ownership. Depending on which fund they have selected and the proportion of property holding in a particular portfolio, they might be shareholders in property funds listed on the Johannesburg Stock Exchange. They may also, in addition or alternatively, hold direct property ownership through portfolio investments in independent companies who own private property portfolios.

The good thing about earning an income from distributions generated through a retirement fund holding property portfolio investments is that since December 2011 all investors are protected by the strict code of conduct as prescribed by the revised Regulation 28 of the Pension Funds Act. This legislation provides industry compliance to protect investors of all forms of property, from alternative property investments to listed or unlisted choices, meaning that unit trust companies and retirement fund institutions are all held by the specifications within Regulation 28.

The act stipulates that the proportion of property held in any fund may not exceed 25% of a portfolio, plus that the total of that 25% may be invested into listed property, and only 15% into non listed property. As a result of increased legislation, entry level property investments in all forms are increasingly becoming more accessible.

But, when a property offering is too good to be true, best believe it. Say investment analysts and industry experts, that greed has been known to eradicate many a family’s savings after years of careful retirement planning.

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