The retirement fund industry in South Africa is standing on the edge of a meaningful shift – one that will change not just the rules, but how trustees think about their role. The Conduct of Financial Institutions (COFI) Bill is expected to be tabled in Parliament in 2026. If it becomes law, it will change how trustees and service providers must behave, especially around how decisions are made and explained to members and regulators.
Alongside this, many retirement funds and their service providers are already using artificial intelligence (AI) in areas like reporting, data analysis and communication tools. While AI can be useful, it brings new questions about how transparent and explainable our decisions are – questions COFI will force us to answer.
COFI expects trustees to act in members’ best interests and clearly explain how decisions are made. This is where AI comes into the picture.
AI can help – but only if we understand it
AI is already quietly embedded in many parts of the financial world, often working behind the scenes where we don’t always notice it. In retirement funds, AI tools can assist in digging through data, identifying trends or creating documents.
But AI doesn’t replace human judgement
It helps with the heavy lifting, but it does not replace the trustee’s responsibility to decide what is right for members, based on their and other experts’ experience and knowledge.
Many AI systems are called “black boxes.” That means they give an answer – but don’t easily explain how they arrived at it. For a trustee who must show compliance with COFI’s transparency requirements, this matters. You need to be able to explain on what basis a decision was made, especially if that decision affects members’ money.
So AI can be part of the decision process, but it cannot be the full story. Trustees must understand and explain:
- What data the AI used (with links to sources)
- What assumptions it made
- How the output supports the decision made by the board
- Who checked the results before it was used
Without that, you cannot show clear, transparent conduct.
AI should help add clarity, not hide it
A practical example: imagine you use AI to summarise a lengthy financial report. The AI might save you a lot of time, but you still need to check that summary against the original source document. You will also need to explain to other trustees and, if required, regulators what parts of the summary influenced your opinion. That’s transparency.
This is the appropriate role for AI under COFI: a decision-support tool, not a decision-maker.
AI can also help with:
- Keeping detailed records of how information was analysed
- Tracking versions of reports used in decisions
- Helping capture explanations and assumptions in writing
These capabilities can make it easier to show COFI compliance – if we use them properly.
Trustees remain responsible, always
If a decision harms members, trustees must be able to explain why they made it. Decisions cannot be justified on the basis that they were generated by an AI system. That doesn’t satisfy COFI and it doesn’t protect members.
Why this matters right now
While the COFI Bill hasn’t become law yet, regulators and industry watchers are already focused on how financial decisions are made. A recent survey by PwC in the UK found that more than 70% of pensions professionals expect AI to significantly shape the industry in the next five years.
That tells us:
1. AI use is growing fast in our sector
2. We need to start thinking seriously now about how we govern it
The retirement fund environment is highly regulated because member money is involved. COFI adds another layer by asking trustees to show how they conduct themselves, not just that they followed rules.
A practical mindset for trustees
As trustees, here are some simple principles to follow when using AI:
Start with clear aims: know what you want the AI to help you with
Document usage: write down how and why you used the tool
Ask the AI for sources and CHECK them
Keep humans in the loop: always have a person check the output, especially sources
Be transparent: write down your steps to reach a decision for future reference
But how?
Trustees can address this by including the following instruction when using AI to generate proposals:
For any recommendation you provide, please list and link all sources used, explain the reasoning process and assumptions applied in reaching your conclusions, and clearly identify any limitations, data gaps, potential biases, or uncertainties in the analysis.
COFI is pushing us to be better, clearer and more accountable. AI can help us get there, but only if we stay in control of the decisions, and keep transparency at the centre of everything we do.
