DEPARTMENT OF NATIONAL TREASURY
SUMMARY OF COMMENTS ON THE PENSION
FUNDS AMENDMENT BILL, 2007
List of Commentators:
1.
Employee Benefit Studio (EBS)
2.
The Linked Investment Service Provider Association (LISPA)
3.
4.
The Actuarial Society of
5.
Jacques Malan Consultants and Actuaries (JMCA)
6.
Life Offices Association (LOA)
7.
Shell
8.
Financial Planning Institute of
9.
Furniture Bargaining Council (FBC)
10. The South African
Financial Services Intermediaries Association (SAFSIA)
11. Business Unity
12. Dries Visagie
13. Engineering and Metal
Industries Provident Fund
SUMMARY OF COMMENTS ON THE PENSION FUNDS AMENDMENT BILL,
2007 |
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Comment |
Response |
|
Section 1 – Definition: administrative penalty (Pg 3 lines 25 – 41) |
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ASSA |
Concerned
that the definition is very wide and suggests that the term “in terms of
section 37” be added in the definition, since that section sets out details
of the penalties |
Not
supported as suggestion adds no value or further clarification. |
Section 1 – Definition: audit exempt (Pg 3 lines 35 - 37) |
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LISPA |
Replace “2(3)(a)” with 2(5)(a) as
changed in recent document |
Correction
already reflected in the Bill. |
Section 1 - Definition: board
member (Pg 3 lines 42 – 43) |
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LISPA |
Definition
of board member should be amended to read “
member of the board as contemplated in Section 7A of the Act" |
Suggestion
not supported as “board” already defined. |
Section 1(e) and Section 15B (9)
and (10) : Definition: contingency reserve account (Pg 3 lines 44 – 52) |
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ASSA / IRF / JMCA/ Dries Visagie |
·
Concerned the contingency reserve definition is
inconsistent with the definition of
‘actuarial surplus’ ·
The definition of contingency reserves should be contained
in the body of legislation rather than in definitions section ·
Concerned about the wide powers given to registrar when
read with new section 15B(10) |
Not
supported as: ·
The registrar requires this discretion as a safety net to
guard against instances of abuse where inappropriate contingency reserves are
established to manipulate the actuarial surplus available for distribution. ·
Funds have the right to appeal a decision of the
registrar. ·
There is already a history of abuse of reserve accounts
and excessively st |
Dries
Visagie/ IRF |
·
The proposed amendment can be read as excluding an account
which has been amended in accordance with the requirements of the registrar |
· Suggestion
supported. Recommended wording for
clarification to read as follows: “…
which has been amended in accordance with the requirements of the Registrar,
or which has not been disallowed by the Registrar …” |
JMCA
/ ASSA |
·
Points out that reserves are established at the advice of
the actuary and if reduction of a reserve leads to excessive surpluses being
established then it is incumbent upon the employer to finance such losses. ·
Requires clarity as to whether or not the registrar will
be liable to compensate the fund if the fund becomes financially unsound as a
result of the registrar rejecting a valuation and/or contingency
reserve. ·
Requires clarity as to whether or not the State or
registrar should be held liable for losses in instances where the employer
cannot perform. |
Not
supported. The registrar can only be
held liable in instances of gross negligence. |
Section 1 - Definition: contribution holiday (Pg 3
lines 53 – 60) |
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ASSA
/ JMCA |
·
The wording “and
the contribution payable by the
members” should be deleted. ·
Concerned that the definition appears incorrect in terms
of the new and current Act ·
Proposes that the method of funding be the Projected Unit Method. This should be
specified in the definition |
Supported
and suggest that the phrase “and the contribution payable by the members” be
deleted. Not
supported as there are various valuation methods and it should not be
restricted to the Projected Unit Method. |
Section 1 - Definition: Dependant (Pg 4 lines 25 – 41) |
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IRF |
Suggests
that reference to adopted/illegitimate child be removed |
Not
supported as this definition is generally used in other statutes. |
Section 1 -
Definition: fund (Pg 4 lines 61 – 62) |
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JMCA |
Concerned
that the term ‘Registered Fund’ has the same meaning as a ‘Fund’ and points
out that this does not make sense as there are parts of the Act which refer specifically
to "unregistered Funds" |
Not
supported as proposed definition facilitates better reading of this
legislation. |
Section 1 -
Definition: fund return (Pg 5 lines 1 – 19) |
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JMCA
/ Dries
Visagie |
·
Fund return must be expressed as a “rate”. Substitute in (a) and (b) the word “any” by
“the rate of“. ·
Provide for smoothing only once in the definition rather
than throughout the Bill ·
Clarify that it is not the fund return that is smoothed,
but the augmentation of benefits by virtue of fund return |
Not
supported as current wording is sufficient Not
supported as current wording is sufficient Not
supported as current wording is sufficient |
JMCA |
·
Assets would usually not include cash holding of a fund |
Not
supported because if assets exclude cash holdings, it cannot be fund return. |
Section 1 - Definition: non-member
spouse (Pg 5 lines 51 – 56) |
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LISPA |
·
Concerned that the amended definition is narrow in light
of the definition of ‘spouse’. Proposes
that the non-member spouse definition be expanded for those relationships
which are dissolved without a court order: |
Supported
as the suggested change provides clarity: “means, in relation to a member of
a fund, a person who is no longer the spouse of that member due to the
dissolution of the relationship or the confirmation of the dissolution of
the relationship by court order and to whom the court ordering or
confirming the dissolution of the relationship has granted a share of the
member’s pension interest in the fund” |
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Section 1 -
Definition: prescribed (Pg 5
lines 58 – 61) |
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JMCA |
·
Requires clarity as to whether all regulations issued by
the registrar become prescribed by the Minister and therefore legally binding |
Not
supported as the wording is clear. |
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Section 1 -
Definition: rules (Pg 6 lines 9 – 19) |
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IRF
|
·
Suggests that the word “obligations” be substituted for
“duties” for consistency in the new provision. |
Supported
and agree that reference to “duties” be replaced by “obligations” throughout
paragraph (c) of the definition. |
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IRF
/JMCA |
Concerned
that additional documents (e.g. insurance policies) to be registered with the
registrar as per the proposed amendment will result in substantial additional
administration. |
Not
supported as the legislation is clear enough and does not impose an
additional obligation over and above what is currently required under the
existing legislation. |
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Section 1 – Definition of spouse
(Pg 6 lines 20 – 25) |
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IRF |
“or
the tenets of a religion” to be replaced with “a union validly concluded
under a system of religious law.” |
Not
supported as the current wording is sufficient |
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Section 2 - Application
of Act to bargaining councils. (Pg 6 – 7 lines 40 – 59 and lines 1 – 40) |
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EBS
/ FPI / FBC |
·
Concerned that the inclusion of BC funds under the Pension
Funds Act will result in conflict between provisions of the PFA and the LRA. ·
Proposes that the LRA be amended to incorporate the
governance principles of the PFA |
General comments The
Minister of Labour supports the inclusion of bargaining council funds under
the regulatory net of the PFA and the FSB already has the capacity to regulate
bargaining council funds. To
date approximately 165 funds already voluntarily registered under the Act,
with some 1,5 million members. Special
circumstances (e.g. housing loans, withdrawal benefits and temporary disability
benefits) have already been accommodated under the existing regulatory
framework and therefore no special provisions are required. The
only special arrangement to be made in respect of bargaining council funds
relates to the statutory valuation date and the following amendment is
proposed in this regard (section 2(2)(b)): insert: “(b) Despite any other provision of this Act,
the first statutory actuarial valuation of a fund registered in accordance
with paragraph (a) must be undertaken at the end of the first financial year
following registration.” [current (2) becomes 2(a)] |
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|
Notes the following conflict between the two
Acts: |
|
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·
Election of board of management of BC funds follow a
‘majoritarianism’ principle in terms of
the LRA, while in the PFA, 50% of board members must be member elected |
This
is not an issue as the PFA prescribes a minimum of 50% member elected
trustees |
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|
·
In terms of the PFA a fund becomes a body corporate once
it is registered. However, a BC fund
established by collective agreement does not have a legal persona in terms of
the LRA. |
In
law it is preferable for the fund to have a legal persona as it enhances
protection for the members and it also allows the fund to sue and to be sued. |
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|
·
Benefits negotiated at BC include in the rules of funds:
accident benefits; disability income benefits and funeral benefits, which are
not permitted by the Pension Funds
Act. |
Already
covered above. |
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|
·
BC funds are required by the LRA to have their own dispute
resolution mechanisms which are governed by their own rules. Concerned that
there is likely to be uncertainty as to how pension funds rules should be
aligned to BC funds rules. |
In
practice many bargaining council employees have applied to the Pension Funds
Adjudicator (PFA) for independent dispute resolution, but the PFA has refused
to adjudicate on their complaints as BC funds fall outside of the ambit of
the PFA. |
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|
·
In terms of the PFA trustees can amend rules, in a
bargaining council this can only be done by collective agreement. They can amend their rules to allow for
this. |
This
issue can be addressed in the fund rules. |
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|
·
How will statutory councils fit in, as they have similar
provisions to BC's? |
Funds
established by statutory councils are included in the provisions of the Bill. |
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|
·
Concerned that the proposed Bill, does not expressly amend
the LRA. Indicates that Section 210 of the LRA provides that the LRA will override
any conflict relating to the matters dealt with in the LRA (except the
Constitution). |
The
Labour Relations Act regulates bargaining councils, not the funds established
by bargaining councils. |
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IRF |
Proposed
wording to provide clarity that it only included funds established in terms
of a collective agreement concluded in terms of the Labour Relations Act and
not all other funds established by any other law. (par 3.1.2 of November
submission) Suggested
the insertion of the following at the end of subsection (3): “provided
that the pension fund shall be required to furnish to the registrar only such
information as relates to the conduct of its affairs in the period of three
years immediately prior to the request.” The
position of BCF established after 1 January 2008 is not made clear by the
amendments. |
Not
supported. The legislation clearly
excludes other funds established by laws other than the Labour Relations
Act. This is in any event part of the
broader retirement fund reform process. Not
supported. If necessary, the registrar
requires flexibility to request information going back for more than 3 years. Not
supported, as the Labour Relations Act compels any fund established after
February 1998 to be registered under the PFA and the position is also
sufficiently clear in terms of section 2 of the Bill. |
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Section 13B: Addresses the roles and responsibilities of
administrators (Pg 8 lines 29 – 54 and Pg 9 lines 1 – 33) |
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IRF
/ LISPA |
Generally
supports this provision, but concerned about the additional powers given to
the registrar. Clarification to be
clarified in regulation. |
Not
supported as the registrar requires these powers due to historical abuses and
to align with international best practice.
In any event, funds have the right to appeal a decision of the
registrar. |
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FPI |
Clarification
is needed in respect of the appointment of sponsor (administrator) appointed
trustees in the instances of umbrella funds. |
Not
supported as the appointment of trustees is addressed in the rules of
umbrella funds. Also, the reform of
this aspect is being considered as part of the overall retirement reform
process. |
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Section
13B(5): Requirements for an
administrator (Pg 8 lines 39 – 43)
|
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JMCA
/ IRF |
-Concerned
that the words “endeavour”,
“conflict” and “responsible manner” in the provision are rather
vague. Proposes that the Register
should clarify what he deems to be “responsible” and or constitutes “conflict”.
(par. (a)) |
Not
supported as similar wording already used in other legislation. |
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Powers
of the registrar must be justifiable |
Not
supported. Process of appeal available against any decision of the Registrar. |
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-Concerned
that the cost of administration will increase because of increased controls
on administrators (par. (b)) |
Not
supported as these requirements formalise what is already required of a fit
and proper administrator. |
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Requires
guidelines on minimum requirement for qualification regarding what would
constitute “adequate trained staff”. (par. (d)) |
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States
that powers of the registrar should be justifiable (par.
(e)) |
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Requires
guidance from the registrar on what constitutes “well-defined procedures”
(par. (e)) |
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-Concerned
that the financial requirements may result in termination of a number of
small providers and limit the number of small participants to enter this
market. -Requests guidance
on what constitute “adequate financial resources” (par.
(f)) |
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Section 14: Amalgamation and
Transfers ( Pg 9 lines 47 – 52) Section 14(1)(a): Provides that a scheme for a proposed amalgamation or transfer of a business
of a registered fund must be submitted within 180 days of the date of the
transaction |
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JMCA
/ LISPA |
Welcomes
the provision, however points out that members must also be provided with
reasonable period within which to object to the transfer. |
Not
supported as proposed amendment in line with current practice and appropriate
consultation would already have taken place with members. |
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IRF |
180
– day time period to be prescribed by regulation |
Not
supported as it is important to clarify time frames upf |
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Section 14(6) :
Amend or withdraw a certificate (Pg 10 lines 10 – 16) |
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JMCA |
Problem
of unravelling transfers that were made on the approval of the registrar are
not addressed. |
Not
supported as it will be done on application by a fund on a case by case
basis. |
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IRF |
Time
periods should be set out in regulation. The
60 day period should also be applicable to transactions exempt from section
14 requirements. |
Not
supported as it is important to clarify time frames upf Not
supported as already addressed in sub-section 8(iii). |
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Section 14(7)(a) and (b):
Transfers between Retirement annuities (pg 10) |
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JMCA |
Welcomes
the proposal to stop churning, but proposes that administrative fees should
be permitted to be charged by the RA Administrator for the cost of transfer. |
Not
supported. The risk of a "tsunami" of transfers from underwritten
RA funds to non-underwritten RAs is overstated. National Treasury is
concerned about regulatory arbitrage resulting from different remuneration
models in across different industries in the financial sector. However, this
issue is currently being addressed by reviewing the various remuneration
models for intermediaries in the financial sector. The
threat of a "tsunami" is based on the supposition that the
Financial Advisory and Intermediary Services Act ("FAIS") is
ineffective, and that the majority of intermediaries lack integrity and will
seek to violate its provisions thereby risking the licence granted to them to
operate in terms of FAIS. Further motivation by National Treasury is
contained in the document submitted to PCOF titled: Response to comments on section 14(7) |
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LISPA |
Concerned
about the possibility of members making uninformed choices that may not be in
their interest. Should state that where a member transfers
his/her interest, the/she will take full responsibility for any negative
consequences that may follow upon a member exercising his decision to
transfer. (Neither
a trustee nor fund should be held liable) A
requirement should exist that members should be duly informed. |
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LOA |
Supports
the introduction of this provision and proposes the word "request"
in section 8(7)(a): be changed to "written request". Concerned
that playing fields are not level as underwritten funds may not pay trail
commission, whilst non-underwritten funds can. Proposes that this provision be extended to prohibit
trail commission post
the transfer to no more than what
would have been permissible without the transfer for pension fund. The
LOA further propose that a requirement
be added in section 14(1) that in the case
of individual transfers, the registrar must be satisfied that members and
non-member spouse concerned have been
duly informed of the prohibition and limitation of fees and commission that
may be paid in respect of the transfers . -
Should include a restriction on payment to any party to the transfer or by
any agent or mandatory of such party (see LOA follow up e-mail on 16 May). |
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BUSA
/ CHAMSA |
Supports
transferability from one retirement annuity fund to another. The ad hoc curtailment of fees and
commissions which are duly disclosed should be regulated under the FAIS Act
and not the Pension Funds Act, if Parliament is confident that the FAIS Act
is effective. A level playing field
between competing service providers is as important as full disclosure to
potential consumers. |
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Section 14(8) - Requires agreement
of 75% of members affected by proposed
transaction (Pg 10 lines 26 – 44) |
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IRF
/ JMCA |
Requirement
to obtain agreement from 75% of affected members is not practical. It should be sufficient if members were
duly informed and allowed opportunity to object. Assets
transferred must be increased or decreased by fund return. Provision must be made to smooth fund
return. Similar
mechanism outlined in new subsection (8) should be allowed for the
application of a similar deeds registry procedure in relation to a
transaction contemplated in new subsection (8), as no subsection 1(e)
certificate is issued. |
Supported. The following wording is suggested: “… where the affected members were
duly informed of a transaction and any objection they may have had, has been
resolved to the satisfaction of the board of the fund concerned.” Not
supported. Once the transfer value has
been quantified, any subsequent return must be full fund return without any
smoothing. Not
supported. Already addressed in
legislation. |
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Section
14B(2)(a)(ii): Determining the minimum individual reserve of a member in a DB
Fund (Pg 12 lines 25 – 41) |
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Dries
Visagie |
It
is an administrative burden to add fund return from date of joining since
data may not be available. Suggest
that you take the existing withdrawal benefit in terms of rules plus net
contributions and fund return thereafter. The
wording may imply that each contribution to be augmented from date of joining
irrespective of when they were paid. Minimum
individual reserve applies to all exits and must be the same in each
case. In terms of some rules minimum
individual reserve would be less on transfers, liquidations, death or
retirement. The reason for this is
that you add amounts to minimum individual reserve in terms of the rules of
the fund. |
Not
supported. This is already covered in
the existing legislation. Supported. Replace “as
from the date the member joined the fund” with “as from the date of payment of contribution”. Not
supported, as rules should provide for all benefits payable. |
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Section 14B(4)(b): Determining the minimum pension increase
(Pg 13 lines 26 – 63 and Pg 14 lines 1 – 2) |
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JMCA |
Suggests
that fund returns be added to values obtained in section 14B(4)(b)(i) so as
to be compatible with that in section 14B(4)(b)(ii) |
Supported. Suggest wording be amended as follows: Section
14B(4)(b)(i) – “accumulating with
fund return the liabilities …” (line 26) It
further adds clarity and ensures consistency throughout the Bill. |
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Section 15B: Apportionment of existing surplus |
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Section 15B(1) Provides that every fund that commenced prior
to 7 March 2002 shall submit to the registrar a surplus apportionment scheme
plus the details regarding any surplus utilised improperly by the employer as
defined in section 15B(6) ( Pg 14 lines 28 – 34) |
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BUSA
/ CHAMSA |
The
requirement of including the details of any surplus utilised improperly
proposed in s15B(1), read with s37 would be unconstitutional in that an
employer would be guilty of an offence based on retrospective legislation,
which contravenes section 35 of the Constitution. |
Refer
to the section on retrospectivity. (40B)
|
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Section 15B(2) Provides that a surplus apportionment
scheme shall comply with such conditions as may be prescribed (Pg 14 lines 53
– 59 and P15 lines 1 – 4) |
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BUSA
/ CHAMSA |
The
National Assembly has the power to pass legislation or to assign some of its
legislative powers to other legislative bodies. It does not have the power to assign its
legislative powers to the executive.
When applying this principle to section 15B(2), it is recommended that
Parliament sets criteria to determine the conditions set by regulation. Otherwise there is a danger that the
executive will be usurping the functions of the National Assembly. |
Not
supported as the ability of Parliament to delegate legislative authority to
the executive has been confirmed by the Constitutional Court. |
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Section 15B(5)(d) Authorises the
registrar to set requirements relating to the method for and timing of the
repayment of any surplus utilised improperly. (Pg 16 lines 29 – 41) |
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JMCA |
Concerned
that the risk of paying members benefits based on outstanding amounts due
from the employer is not being addressed in the Bill |
Not
supported. This will apply only in a few
instances and the registrar will consider these on a case by case basis. |
||
Section 15B(6): Clarifies what constitutes improper uses
and confirms that improper use investigations must go back to at least
1 January 1980. (Pg 17 lines 15 – 31) |
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IRF |
Requested
clarification / insertion of following definitions to be considered: Definition
of “cost” – when does the improper utilisation occur? Definition
of “employer” – where there is more than one employer participating in the fund,
the definition should be limited to those employer(s) who benefited from the
improper use of surplus |
Not
supported. Legislation is clear. Supported.
A revised definition is proposed to better reflect the intention of the
legislation: “employer” means the
employer or employers participating in the fund at the time of the improper
utilisation of surplus and whom benefited from the improper use: Provided
that where a subsequent employer or employers by contract or law became
liable for the employee-related liabilities of the previous employer or
employers, the debt must be redeemed by such subsequent employer or
employers;” |
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Section 15B(6)(b): Improper use investigation (Pg 17 line 32 –
36) |
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ASSA |
-Proposes
that the date of commencement of improper use of surplus should read “...the period from the later of 1 January
1980 or the date of the fund's commencement...” |
Not
supported as legislation is clear. |
||
JMCA |
Require
clarification of the term “additional” as it is subject to various
interpretations (pg 17) Registrar
should allow deductions against improper use with regard to any over
contributions made by the employer at any time prior to the SAD but after 1
Jan 1980 |
Not
supported as already exists in current legislation. Not
supported. Addressed in the amendment bill. |
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SHELL |
If
legislation is made retrospective, exclude surplus which was properly
communicated and approved by trustees. |
Not
supported. The result would be that
the former members who are stakeholders in the surplus apportionment will be
excluded. |
||
Section 15B(6)(c)(iii): executive benefit |
||||
ASSA |
-
Requires clarification as to what the term ‘executive’ is in the amended sections. -Proposes
that an executive be a person who
reports to a CEO Concerned
that the phrase “ improper use of
surplus” implies w -
the date should read "... has existed in the fund in its current form
since the later of 1 January 1980 or the inception of the fund." |
Not
supported as the proposed definition is far too narrow. It is not possible to
have one definition of an "executive" that is appropriate across
all employers. Not
supported. There must be consistency
in language between the principal Act and the proposed amendment. Not
supported as improper usage will not be applicable prior to 1 January 1980
and is already covered in the primary Act (PFA). |
||
JMCA |
It
seems unfair that executive benefits since inception of a fund are condoned but,
when benefits improvements are made, only the executives are to be
identified. At the same time ordinary members could also have received major
benefit improvements |
Not
supported. If from inception the cost
is built into the contribution rate payable by the employer, whereas if it is
done subsequent to inception, the additional benefits would have been paid
for by surplus. |
||
Section 15B(6)(e): Fund return on improper uses (Pg 18 lines 5
– 7) |
||||
JMCA |
Proposes
that a common rate for all employers be considered, e.g. a bank deposit rate
plus a margin. This implies that all employers will face similar cost for
“improper” returns. |
Not
supported as the fund must be placed in the position that it would have been
in had improper uses not occurred. |
||
SHELL
|
The
value of any improper use should not be increased by fund return from the
surplus apportionment date. |
Not
supported as it prejudices other stakeholders to the benefit of the employer.
|
||
Section 15B(9)(a): Requires that an apportionment be of no
effect until the registrar is satisfied that actuarial valuation has been
prepared on actuarially sound principles. (Pg 18 lines 16 – 22) |
||||
IRF |
Gives
the registrar a different discretion in respect of valuations than that which
is already contained in section 16. It
is not appropriate or proper to introduce new powers in addition to those
contained in section 16. |
Not
supported. Surplus apportionment in
terms of section 15B is a unique one-off occurrence and therefore requires a
greater degree of scrutiny to ensure that all stakeholders are treated
fairly. |
||
Section 15B(10) (Pg 19 lines 18 to
29) |
||||
IRF |
The
words “is unacceptable to the registrar” introduces a third criterion for
valuations which is inappropriate. If
this is retained, the word” unacceptable” is vague. Valuation can rather be
rejected by the registrar rather than to refer the surplus scheme to a
Tribunal. |
Not
supported. Surplus apportionment in
terms of section 15B is a unique one-off occurrence and therefore requires a
greater degree of scrutiny to ensure that all stakeholders are treated
fairly. |
||
Section 15B(11) (Pg 19 lines 30 –
56) |
||||
IRF |
Can
be construed to require all funds that have already submitted nil schemes to
do so again. |
Not
supported. Matter dealt with under the
retrospectivity section (40B). |
||
LOA |
Technical
point: A nil scheme needs to be recognised as a scheme. |
Not
supported. Matter dealt with under the
retrospectivity section (40B). |
||
Section 15F - Existing employer reserve accounts (Pg 20
lines 14 to 23) |
||||
Dries
Visagie |
The
proposed amendment to section 15F allows for transfer of existing contingency
reserves which would not be allowed by the registrar. |
Not
supported as the proposed wording is clear. |
||
Section 15K – Referral to Tribunal
(Pg 20 lines 26 – 48) |
||||
FPI |
The
appointment of a special ad hoc tribunal to perform the functions in section
15B seems like an unmanageable task.
Can the section be successfully implemented? Cost
for the tribunal? Process
should be left in the hands of members or even the registrar to pursue errant
funds through the office of the PFA. |
Not
supported as the process is manageable.
If the matter is put in the hands of the members, it will not be
resolved. The PFA has no jurisdiction
over surplus apportionment schemes. |
||
BUSA
/ CHAMSA |
One
problem with s 15K (1)(b)(i) is that there exist no criteria to determine
when the registrar's dissatisfaction is warranted and when not. Section 15K(1)(b)(v) is also very vague and
may cause problems as good reason is not required or defined. The
tribunal's functions should at the very least be narrowly tailored to conform
to strict criteria in order to prevent it from falling foul of s25 of the
Constitution (property clause). Expressions
like “equity”, “equitable” and “reasonable” used in sections 15B and 15K must
be defined by criteria set by Parliament to dovetail with the Constitution. |
Not
supported as it is our view that the proposed legislation is not
unconstitutional. There has been no Constitutional Court challenge to the
Pension Funds Second Amendment Act since promulgation in 2001. Not
supported as the proposed wording is clear. |
||
Section 18(5): Funds not in sound financial position :
Authorises the registrar to require an audit and inspection (Pg 20 lines 51 –
55 & P 21 lines 1 – 9) |
||||
IRF |
Suggests
that this section should be deleted |
Not
supported as the registrar requires these powers due to historical abuses and
to align with international best practice. In
any event, funds have the right to appeal a decision of the registrar. |
||
Section 25 – Powers of inspection
and investigations (Pg 21 lines 13 – 36) |
||||
FPI
/ IRF |
Powers
to the registrar is wide and no longer subject to scrutiny of the court. Not clear if this section will be subject
to the Promotion of Administrative Justice Act. |
Not
supported as the comment is incorrect.
The Promotion of Administrative Justice Act applies and legislation
allows for access to courts. |
||
Section 26 – Registrar may
intervene in the management of a fund (Pg 21 lines 40 – 54 and Pg 22 lines 1
– 19) |
||||
IRF |
The
IRF has also expressed concern with this provision. See submission dated
2/11/2006. |
Not
supported. The registrar requires these powers and to align with
international best practice. |
||
Section 30A: Submission and
consideration of complaints(Pg 22 lines 38 – 50) |
||||
LOA |
Suggests
deletion of the wording “for
consideration by the board of the fund” as complaints against employer
are also envisaged. It is not clear
how the Board of a fund would consider complaints against the employer. |
Not
supported. However, we believe that
the complaint should be lodged with the fund only. Therefore, we suggest the deletion of the
following words in section 30A(1)(a): “(or employer who participates in
a fund)” |
||
Section 30C: Appointment of
Pension Funds Adjudicator (Pg 23 lines 5 – 40) |
||||
LOA |
Proposes
that appointment of Adjudicator/Deputy/Acting be subject to consultation with
the PF Advisory Committee not the FSB to be consistent with the FAIS Act. Proposes
that section 30C should provide a time
limit as to the appointment of the Acting Adjudicator pending the
appointment of the Adjudicator. |
Not
supported. The amendment reflects
current convention. Not
supported. The need for flexibility in this regard is illustrated by recent
difficulties. |
||
Section 30J -
Procedure for conducting an investigation (not currently part of the
amendment bill) |
||||
LOA
/ FPI |
Section
30J(1) should be amended in accordance with the provisions of sections 27(4)
and (5) of the FAIS Act. Section
30J(3) should be significantly amended or deleted in its entirety to ensure
that the Adjudicator can be regarded as an “independent and impartial
tribunal” as per section 34 of the Constitution. Disputes
should be resolved by a conciliated settlement, as per FAIS Ombud and
determinations only issued where such settlement cannot be achieved. |
Not
supported. The office of the Adjudicator together with the other Ombuds
offices in the financial services sector is the subject of review as part of
the longer term retirement fund reform process. Not
supported. Does not impede the independence and impartiality of the
Adjudicator. Not
supported. In practice, the Adjudicator currently employs a conciliatory
approach to complaint resolution. Determinations are only issued failing
agreement between the parties. |
||
Section 30P: Access to Court -
Permitting appeal or review of decision of the Adjudicator (Pg 24 lines 5 –
17) |
||||
IRF LISPA LOA FPI BUSA / CHAMSA |
Do
not support the proposed amendment as the power of the High Court to accept
new evidence is limited. |
Not
supported. This concern has been addressed in the certified version of the
Bill by the introduction of section 30P(3), which encourages all parties to put all facts before the
Adjudicator. The amendment bill provides that the High Court may still admit
new evidence at its discretion. |
||
Section 33A: Directives (Pg 24
lines 26 – 45) |
||||
JMCA |
Concerned
about directives that may be made retrospective. These "legislative
powers" are very wide. |
Not
supported as the registrar requires these powers due to historical abuses and
to align with international best practice. In
any event, funds have the right to appeal a decision of the registrar. |
||
IRF |
Objects
to the section, as it provides the registrar with the power to legislate,
without following a due process in effecting such legislation. |
Not
supported as the issuing of directives constitute administrative action
necessary to enable the registrar to exercise his/her regulatory obligations. |
||
Section 37(1): Administrative
penalties (Pg 25 lines 13 – 17) |
||||
IRF |
The
proposed maximum penalty of R5m per day appears unjustifiably high. |
Not
supported. This is a maximum penalty
and its imposition by the registrar is subject to appeal to the FSB appeal
board and review by the High Court. |
||
Section 37C: Disposition of death
benefits upon the death of a member (Pg 25 line 44) Ensures that a dedicated pension
(a spouse’s and dependant’s pension) is not subject to the discretion of the trustees
in the allocation of death benefits and cannot be re-directed to other
beneficiaries. |
||||
IRF |
Concerned
that if the proposed amendment is legislated,
death benefits will not be regarded as pensions in terms of section 37C of the Act Rules
of most DC funds provide that the death benefit is a pension payable to the
dependents / nominees, which pension may on application be commuted. The current wording of the Bill will remove
all these benefits from the ambit of section 37C, which is not the intention. The Bill should only exclude specifically
the spouse’s and children’s pensions provided for in terms of fund rules. |
Supported. The phrase “one or more dependants” must be replaced by “the spouse’s and children’s pension as provided for …” |
||
Section 37D: Deductions from pension benefits (Pg 26 lines 21 – 45) Comments on insertions (d) and (e) |
||||
IRF |
-Proposes
that the definition of non-member spouse should be limited to cases where a court
order has been issued in terms of the Divorce Act Concerned
that the wording of this section is arguably wide enough to also include
maintenance orders -Requires
clarity on whether the date of the benefit deemed to accrue Applies
to divorces concluded before the resultant Amendment Act comes into effect -Notes
that the Income Tax Act should be amended to allow for the option of a
transfer of the non-member spouse to be tax free Further notes that the amendment to this section
should distinguish the tax situation
in terms of orders made before and
after the date on which the Bill is enacted The
proposed amendment precludes disinvestment of the non-member spouse allocated
portion upon receipt of a valid order
in the case of members leaving service -Requires
clarity on whether or not it would be appropriate to provide for the accrual
of interest rather than fund return in the case of a DB fund The
clean break principle should be extended to existing divorce orders |
Not
supported as all court orders must be honoured. Not
supported as all court orders must be honoured. These
issues will be addressed in amendments to the Income Tax Act, which are
expected later this year as part of the Taxation Laws Amendment Bill 2007
(Money Bill). Not
supported. Comment incorrect. Not
supported. Fund return leaves the fund
in a neutral position, whereas any other rate would create a mismatched
position leading to prejudice. Supported
as it is just and equitable that fund interest be added to the non-member
spouse’s portion. It is proposed that
the wording be amended as follows:
(Insert on P26 after line 45) “(f) (i) Any pension benefit held in a pension fund on
behalf of a non-member spouse in accordance with a court order granted prior
to the commencement of the Pension Funds Amendment Act, 2007 are for purposes
of section 7(8)(a) of the Divorce Act, 1979 deemed to accrue on the
commencement date of the Pension Funds Amendment Act, 2007 and must be paid
to the non-member spouse in accordance with paragraph (e)(iii) within 90 days
from the said commencement date. (ii) The benefit referred to in paragraph (i)
shall include fund return from the effective date of the divorce order until
the date of payment or transfer.” |
||
JMCA |
The
Divorce Act should be amended so that there is no uncertainty |
Not
supported as there is no contradiction or uncertainty. |
||
LISPA |
Supports
the provision, but suggest consideration of the following: -Whether
the definition for a "pension
interest" in the Divorce Act applies sufficiently to preservation funds
since the definition only allows for
the division of a pension interest that becomes payable if membership of the
preservation fund is terminated on date of divorce. -Indicates
that a large number of divorce cases are currently noted against pension
interest. Proposes that the amendment
be made applicable to such interest as are currently noted -
The term "beneficiary" is probably incorrect and should read
"dependant" |
Not
supported as this is not a concern. Not
supported. This concern has been dealt with above. Not
supported as beneficiary includes dependant. |
||
FPI |
Non-member
spouse should only be allowed to elect payment in the event that the amount
falls within the recently suggested framework for early withdrawal. The non-member spouse must be obliged to
transfer the divorce payment to an approved fund. Tax
dispensation must be clarified by SARS |
See
comments on amendments to the Income Tax Act above. |
||
Dries
Visagie |
Subpar
(e) - The reference to Section 7(8)(a) of the Divorce Act should be
referenced to section 37D(1)(d) of the
principal Act. This provides for other orders as well. Subpar.
(ii) – the statement does not go far enough as in a defined benefit fund
since in DB funds benefits are not simply expressed as accrued benefits. Subpar.
(iii) to be extended to include the other person. |
Not
supported as the Divorce Act specifies how benefits will be dealt with. All other orders (i.e. other than divorce
orders) will be dealt with in the relevant court order. Not
supported. The intention is clear in the legislation. Not
supported. It is instead suggested
that “or other person” in section
37D(1)(e)(iv) and (v) be deleted. |
||
Section 40B: Retrospectivity (Pg
27 lines 8 – 19) |
||||
IRF |
Opposes
the application of retrospectivity and note that the amendments will alter what has
legitimately been given effect in terms of the law in the past Notes
that a fund that was advised that improper use of surplus provision do not
apply before 7 December 2001 and had its scheme approved will not be affected
by this section. However, a fund that received the same advise and obtained a
declaratory order to confirm this will
be affected Proposing
the addition of the following proviso: “Provided
further that in the case of funds that have prior to the effective date made
submissions stating that the funds had no actuarial surplus to apportion in
terms of section 15B, the registrar must inform each fund whether or not its
submission satisfies the requirements of this amendment and, if not, grant
such fund a reasonable period of time to review its submission and submit a
nil return or a scheme, as may be appropriate” |
The
following comment applies to all the submissions: Not
supported. It is recognised that there
is a risk of constitutional challenge, like any piece of legislation.
However, it may be challenged by employers to further protect ill-gotten
gains to avoid repaying surplus utilised improperly. The
proposed amendment only clarifies the intention of the Pension Funds Second
Amendment Act of 2001. An
amendment is proposed to clarify the retrospectivity of nil returns. "The
definitions in section 1(1) of "actuarial surplus",
"contingency reserve account", "contribution holiday",
"defined benefit category of a fund", "employer surplus
account", "fund return" , "member surplus account",
"minimum individual reserve" and "surplus apportionment
date", and sections 14A, 14B, 15B, 15C, 15E, 15F and 15K, are deemed to
have come into operation on 7 December 2001, for funds whose surplus
apportionment schemes have not been approved or whose nil returns referred to
in section 15B(11)(b) has not been received by the registrar: Provided that -
(i) in the case of funds whose surplus
apportionment schemes have been submitted but not yet approved on the
effective date of this amendment; (ii) in the case of a nil return referred to
in section 15B(11)(b) that has been received on the effective date of this
amendment but in respect of which the Registrar is not satisfied that the
requirements of section 15B(11) have been met, the
registrar must inform such funds of the instances where their schemes do not
comply with requirements of the Act and grant the funds a reasonable period
of time to review and resubmit their schemes for approval or noting. |
||
JMCA |
The
fairness of retrospectivity is debatable |
|
||
SHELL |
Opposes
retrospectivity of surplus amendments -Notes
that they have in the past acted entirely lawfully on advice from legal and other
professional advisors in the application of surplus benefits. However, they
are concerned that retrospective application of the surplus will cost them
approx R200m. -There
may be constitutional challenges to the
validity of retrospectivity. Proposes that: -Improper
use of surplus should not be made retrospective Alternatively: The
retrospective clause should be amended to state that the registrar must be
satisfied that any use of surplus was approved by the Board
exercising its fiduciary duties and avoiding any conflict of interest . |
|
||
SAFSIA |
Aims
to change certain provisions of the legislation with retroactive effect. Retroactive legislation which is aimed at
correcting previous legislative or administrative errors found by courts to
be legitimate. Courts have found that
it is essential that the legislature acts promptly to ensure only a short
period of retroactivity. The
legislation aims at making changes in 2007 in respect of legislation passed on
7 December 2001. This is not a
reasonable period. Current
legislation does not require funds with no surplus to submit a surplus
scheme. Requirement for nil scheme is
retrospective, funds already submitted nil schemes before will be required to
re-submit on different requirements as per the proposed legislation, causing
significant costs. Funds
with no surplus will now be required to investigate improper uses and
distribute surplus. Calculation
of improper use has changed significantly. |
|
||
BUSA
/ CHAMSA |
Retrospectivity
flies in the face of the Rule of Law.
The inevitable cost that retroactivity would entail needs to be
quantified and measured against the potential benefits. They called for a cost benefit analysis to
be done to avoid embroiling the private sector (funds) and the regulator in
unduly costly corrective action after the legislation has been passed. |
|
||
Engineering and Metal Industries Provident
Fund
Comment |
Response |
Section 2 -
Application of the Act to Bargaining Councils |
|
Trustees have already agreed a scheme for
distribution of surplus. Once the Amendment Bill is legislated, how will it
affect the existing agreed scheme? a) the trustees have previously undertaken a surplus
apportionment exercise; and b) the amounts allocated to the reserve accounts
were properly allocated as part of that surplus apportionment exercise; and c) the surplus apportionment exercise was negotiated
and agreed between the parties to the Bargaining Council; and d) the surplus distribution was done in a m'anner
consistent with the principles underlying sections 15B and 15C. This will allow the trustees to complete the already
agreed surplus apportionment exercise. |
If an agreement was reached to distribute surplus in
a fund prior to the enactment of the Amendment Bill, the amendments should
not affect such a "surplus scheme" provided that a proper process
was followed: ie. the trustees took a resolution about such a scheme, the
decision was minuted, the rules of their fund were amended to specifically
allow such a distribution and such a scheme was implemented. Once the amendment
is legislated, any BC fund will have to comply with the requirements of
section 2. |