What is Regulation 28?
Regulation 28 is a rule under the South African Pension Funds Act that sets strict legal limits on how retirement funds are allowed to invest your money.
Its primary purpose is to protect your long-term savings by forcing diversification, ensuring that asset managers cannot expose your retirement capital to excessive risk.
Preventing concentration risk
When you save for retirement, the money is invested in the financial markets to grow over several decades. If a fund manager allocated a pension fund entirely into a single volatile sector or high-risk asset class, a targeted market crash could wipe out the retirement savings of thousands of people.
Regulation 28 prevents this scenario by enforcing a diversified approach. It sets maximum ceilings on how much of a retirement portfolio can be allocated to riskier asset classes. By doing this, the law limits concentration risk — the danger of a portfolio suffering catastrophic losses because it relied too heavily on one investment type.
The maximum asset limits
The regulation dictates the absolute maximum exposure a retirement portfolio can hold in specific investment categories. The most important statutory limits include:
- Equities (shares): a maximum of 75% of the portfolio can be invested in the stock market (local and global combined).
- Offshore exposure: a maximum of 45% of the total fund can be invested outside of South Africa.
- Property: limited to a maximum of 25%.
- Alternative investments: private equity is capped at 15%, and hedge funds are capped at 10%.
- Crypto-assets: the regulation strictly prohibits direct or indirect investment in cryptocurrencies, keeping exposure at 0%.
The trade-off: protection vs growth
Because equities have historically provided the highest long-term growth, the 75% cap on equity exposure is often debated. Younger investors with decades until retirement frequently prefer a 100% equity portfolio to maximise their returns, as they have the time to recover from short-term market volatility.
However, the regulation does not allow investors to waive this protection based on age. The 75% limit forces even the most aggressive retirement funds to keep at least 25% of their capital in safer, income-generating assets like cash and bonds to stabilise the portfolio during severe market crashes.
Which accounts fall under the rules?
Regulation 28 applies to all approved retirement funds governed by the Pension Funds Act. This includes company pension funds, provident funds, preservation funds, and private Retirement Annuities (RAs).
The South African Revenue Service (SARS) provides significant tax benefits to encourage the use of these specific structures. Individuals are allowed to deduct their contributions from their taxable income up to 27.5% (capped at R430,000 per year). To claim this tax break, the capital is legally required to sit inside a Regulation 28-compliant portfolio.
When the limits fall away
Because Regulation 28 governs the accumulation phase of retirement savings, it does not apply to standard discretionary investments. If an individual invests their after-tax salary into a normal unit trust, they are free to allocate 100% of their money to offshore equities.
Crucially, Regulation 28 also stops applying the moment a person formally retires. When retirement savings are used to purchase a living annuity to draw a monthly income, the Pension Funds Act limits fall away. The retiree gains the legal freedom to restructure that capital without restrictions, including moving up to 100% of it into offshore funds.
Terms used on this page
- concentration risk
- The risk created when too much of a financial life depends on one company, asset, sector or economy — so a single event can hit income and investments at the same time.
- volatility
- How much and how quickly an investment's price swings up and down. Higher volatility means a rougher ride along the way — not necessarily a different destination.
- taxable income
- The income tax is calculated on, after allowed deductions. For most salaried people it is roughly gross salary minus retirement contributions.
- unit trust
- A pooled fund divided into units. Investors buy and sell units at one price set daily, based on the value of everything the fund holds.
- living annuity
- A retirement income product where the pot stays invested and you choose a yearly drawdown between 2.5% and 17.5%. The income isn't guaranteed — the pot can run out.
Sources
Reviewed July 2026