South Africa’s financial regulatory landscape is on the cusp of a significant transformation with the introduction of the Conduct of Financial Institutions Bill (COFI), expected to be promulgated in 2026. While early industry debate has largely centred on implementation and compliance mechanics, pension funds, trustees, and long-term retirement savings stakeholders should also consider the broader implications: how COFI will reshape governance standards, member protection, and engagement with asset managers and service providers.
Why COFI matters for pension funds
At its core, COFI seeks to consolidate South Africa’s fragmented conduct focused financial legislation into a single, principle based, activity focused regulatory framework. Rather than regulating by institutional type (such as banks, insurers, or retirement funds), COFI regulates financial activities, ensuring consistent conduct standards across the financial sector.
COFI is widely viewed as the practical culmination of South Africa’s Twin Peaks regulatory reform, strengthening market conduct supervision alongside prudential oversight. Under this regime, the Financial Sector Conduct Authority (FSCA) will have enhanced powers to supervise and enforce conduct outcomes, with a strong emphasis on fairness, transparency and good client outcomes.
For pension funds and retirement savings vehicles, this means that aspects of conduct regulation currently embedded in the Pension Funds Act and other sectoral laws will increasingly be absorbed into COFI’s broader framework.
Implications for trustees and governance
One of COFI’s most important implications is the higher governance standard it sets for pension fund boards and trustees. While elected trustees will not be directly licensed under COFI, professional and independent trustees will be expected to meet fit-and-proper standards aligned with its principles.
COFI’s emphasis on governance culture, accountability, and ethical conduct means that trustees must be able to demonstrate not just procedural compliance, but a deep understanding of how their decisions affect member outcomes. Boards of funds will be expected to ensure:
- Fair treatment of members and clear, transparent communication
- Robust and actively enforced conflict of interest policies
- Decisions that align benefits structures with member profiles and expectations
- Systems that eliminate unnecessary barriers to members’ access to benefits or lodging complaints
For institutional trustees, this raises the bar on stewardship. Engagement with asset managers, administrators, and consultants will need to be more deliberate and outcomes-focused, ensuring that service providers are aligned with COFI standards on disclosure, fees, performance reporting, remuneration practices, and member communication.
Enhanced member protection and accountability
COFI introduces comprehensive member protection principles, extending many retail customer protections to pension fund members when a financial institution provides services to a fund or acts on behalf of members.
These protections are expected to include clearer, plain language disclosure of fees, risks and expected outcomes; reduced friction in accessing benefits or transferring between products; and enhanced transparency around total fund expenses and investment outcomes.
Importantly, the FSCA has signalled that retirement fund expenses and governance will receive closer scrutiny – with potential consequences for trustees and administrators where oversight is weak or member interests are compromised.
COFI’s potential benefits for pension funds
Although COFI introduces additional compliance demands, it also offers meaningful long-term benefits for the retirement industry:
First, a more coherent regulatory environment should reduce duplication and uncertainty, supporting stronger and more consistent governance across institutions servicing pension funds.
Second, improved transparency and increased understanding among members should strengthen trust in the retirement system. A positive result would be more members remaining invested over the long term, improving their retirement outcomes.
Third, COFI’s principle-based approach encourages institutions to embed ethical behaviour and client-centric decision making into their culture, rather than relying on box ticking compliance. This aligns closely with global trends in fiduciary duty and long-term value creation.
Finally, because COFI applies to all institutions conducting similar activities, pension funds should benefit from more consistent standards across asset managers, consultants and administrators, particularly in relation to fit-and-proper requirements, remuneration practices, conflicts of interest and reporting.
Preparation: From awareness to action
While COFI is expected to be implemented with a transitional period following promulgation, early preparation is encouraged. Pension funds and trustees could consider conducting high level gap analyses against anticipated COFI expectations, engaging with service providers to understand their readiness, investing in trustee training, and reviewing governance processes, reporting frameworks and member interfaces.
Key takeaway
COFI represents a step change in how financial institutions – including pension funds – will be regulated in South Africa. For trustees and institutional investors, it’s not merely a regulatory hurdle, but an opportunity to strengthen governance, improve member outcomes and align long-term retirement strategies with international best practice. Those who prepare early will be well positioned not only to comply, but to derive lasting value from the new framework for the benefit of their members.