Although the changes to pension rules that come into effect on March 1 will arguably affect employees in minor and only positive ways, there is likely to be a sea change in the financial services sector. The biggest threat to individuals has been misinformation about members' access to money built up in provident funds.Most provident fund members will now have more take-home pay from next month as their contributions to provident funds begin to benefit from the same tax treatment as contributions to pension funds.Another benefit that came into effect last year is that employees taking early retirement are allowed to defer annuitisation until they are ready to receive that retirement income.In lay terms, all these changes are aimed at stopping individuals from taking their retirement savings as lump sums and running out of money before they die.story_article_left1Michelle Acton, principal consultant at Old Mutual Corporate Consultants, said the tax changes would lead to an increase in the savings rate, with more money being kept in the retirement fund industry, which should lead to members having more money at retirement."The big losers will be those acting on incorrect information who take their money out of the system ... But it will be a long time before we see the impact of the annuitisation rules coming through," said Acton.She added that the movement of the minimum threshold for compulsory annuitisation from R75,000 in retirement fund savings to R247,500 may have a potential negative impact."That's cash leaving the system where it wasn't before. Analysing our provident fund from last year, two-thirds of people in the fund had benefits of less than R150,000."The threshold applies at fund level - if a member belongs to several funds with less than R247,500, those can be withdrawn without annuitising."However, what is likely to prevent people doing just that is the R500,000 lifetime - in other words, cumulative - tax-free withdrawal threshold, over which withdrawals will be subject to punitive tax rates.Francois du Toit, director at Renaissance Capital, agreed that the retention of savings for longer in institutional pension or provident funds - which are the cheapest places for employees to save for retirement - is a positive for individuals.He said South Africa's savings market was highly unusual in global terms in that most retirement savings ended up with life insurance and unit trust companies - a consequence of too much pre-retirement access to pension funds by global standards.This means savers are paying higher fees and incurring higher taxes on investment returns.A local habit of shifting pension funds, when changing jobs, to annuities or preservation funds offered by life companies or to unit trusts was the main reason the local retail savings market was so big, Du Toit said.According to Du Toit, the local unit trust industry has grown from nothing 20 years ago to handling 30% of savings.That phenomenal growth stands to slow down and possibly turn negative as pension money now stays invested for longer."We expect that people who change jobs will elect to keep the old money preserved in pension funds along with the new money because pension funds are the cheapest and most tax-efficient place to save."Asset managers like Coronation, which handle institutional pension funds, will be the winners in this scenario.Du Toit said two-thirds of life company premiums came from pension products.When money stays in pension funds, life companies such as Old Mutual, Momentum and Liberty will lose out, even if they still handle the annuitised two-thirds portions of individuals' retirement funds.Institutional assets will begin to grow more quickly than retail assets and pension funds' bulk buying power will benefit members. Consolidation in the pension fund industry will likely continue due to increased administration and compliance burdens, including separating the old funds from new money.story_article_right2That growth in assets under management should compensate for any reduction in margins at institutional asset managers like Coronation Fund Managers and Allan Gray, Du Toit said.The switch from defined benefit funds to defined contribution funds has meant a decline in demand for complicated life insurance products and competition based on price and solid track records, he said.This would leave life companies changing strategies and competing for institutional business.Some of the life companies' previous advantages in commissions and tax benefits had also dried up thanks to recent changes in legislation like the impending Retail Distribution Review, Du Toit said.In his view, listed companies like Coronation and Alexander Forbes, which had suffered outflows in the past year and had "been priced with hindsight, not foresight", would benefit along with other pension managers like Foord...