Transnet Pension Fund Amendment Bill: briefing by Department of Public Enterprises

LABOUR AND PUBLIC ENTERPRISES SELECT COMMITTEE
13 February 2006
TRANSNET PENSION FUND AMENDMENT BILL: BRIEFING BY DEPARTMENT OF PUBLIC ENTERPRISES

Chairperson: Ms M Themba (ANC, Mpumalanga)

Documents handed out:
Department of Public Enterprises Presentation on the Bill

Audio Recording of the meeting

SUMMARY
The Committee was briefed by the department on the Transnet Pension Fund Amendment Bill, and various aspects of the Bill were recapped and explained in this second meeting. As suggested in the previous meeting, representatives of Transnet were also present. It was emphasized that the amendments formed part of Transnet’s restructuring, and that the Bill aimed to protect the benefits of current Transnet Pension and Retirement Fund members affected by this restructuring. The Bill aimed to legitimize the continued membership of the fund by State Owned Enterprise employees. Members asked questions on the consultative process, the appointment of Board members, who was covered in the funds, and the impacts on new employees. Further discussions related to matters covered by the Pension Fund Act and the general position on insurance as collateral for housing loans. The Bill was adopted in its entirety.

MINUTES
Transnet Pension Fund Amendment Bill: Department of Public Enterprises (DPE) briefing
The Chairperson emphasised that the Portfolio Committee had already discussed the proposed amendments at length. Its mandate had been to simplify the Transnet Pension Fund Amendment Billn (the Bill), and to check that the Bill was constitutional.

Ms Ursula Fikelepi, Chief Director: Legal, DPE briefly recapped on the rationale, principles and purpose behind the Bill; and also discussed the proposals to limit the impact of the amendments on the employees concerned. Ms Fikelepi discussed the achieved and prospective results of the amendments in more detail, as outlined in the presentation.

By way of background, Ms Fikelepi explained that two separate Transnet pension funds were merged in 1990 in terms of the Transnet Pension Fund Act. In 2000 an amendment was effected that established two new funds known as the Transnet Second Defined Benefit Fund (TSDBF), intended for pensioners previously employed by Transnet, and the Transnet Retirement Fund (TRF) respectively. The former was closed to new members, whilst the latter was opened to new employees. It was stressed that the vast majority of Transnet employees voluntarily transferred from Transnet Pension Fund (TPF) to the Transnet Retirement Fund,with effect from 1 November 2000.The TPF, which was still in existence, therefore consisted of all those members who were not pensioners and who did not transfer to the TRF. The TPF had had no new members since 2000. Ms Fikelepi also explained that tax benefits that pertained to the Transnet funds, as they were established by statute.

Ms Fikelepi stated that the TPF was to remain a defined benefit fund, to be changed into a multi-employer fund. It was also emphasized that the TPF would be one legal entity, and would have independent sub-funds. The sub funds would have clearly defined “ring-fenced” liabilities and assets.TRF would remain a defined contribution fund, and current members would be permitted to retain fund membership despite the transfer of the business of Transnet to a State Owned Enterprise (SOE). This fund would not be a multi-employer fund. Ms Fikelepi maintained that existing SOE employers could also join the TRF but no new employees of the SOE would be eligible to join the TRF. The TSDBF would remain unchanged as a closed defined benefit fund.

Each clause of the Bill was then tabled and discussed in detail.

Discussion:
Ms N Ntwanambi (ANC, Western Cape) emphasised that the Bill should mention all parties consulted. She also enquired whether the South African Rail Commuter Corporation (SARCC) included Metrorail and Shosholoza shareholders; and asked what happened in respect of non-passenger or freight-rail employers.

Ms Carla Prentice, Executive Manager, Transnet replied that workshops, which stretched over a 3 month period, were held with employees. The Transnet board had approved the amendments, and the consultation processes were set out in the explanatory memorandum. In accordance with standard procedure, the Portfolio Committee had also published the Bill in the Government Gazette and held public hearings. It was also explained that Portnet was still a division of Transnet, was thus not a separate legal entity and was therefore included under the ‘umbrella’.

Ms Ntwanambi also asked who appointed Board members.

Ms Prentice explained the trustee appointment process. In the sub-fund, four individuals were elected to the board of trustees from each sub-fund, creating a current minimum of 12 trustees.

Mr N Hendricks (UIF, Western Cape) asked who the ‘certain employees’ were as mentioned in the presentation.

Ms Fikelepi stated that the Bill arose out of a specific agreement. The TPF was closed in 2000, and she emphasized that no new employees were permitted to join that fund, and therefore TPF had absolutely no bearing on those employed after 1 November 2000. With regard to these new employees, the TRF was an open fund. New employees of SOEs were to join SOE pension funds. Therefore the ‘certain SOE employers’ were those that participated under the ‘umbrella’ – that bought businesses or companies from Transnet. She highlighted that this had been defined under ‘alternate employer.’

The Chairperson asked what the effect on the other employees would be, in regard to the amendments to Section 14A, (Clause 16 of the Bill). She was also concerned as to the impact of the Bill on new employees of Transnet or other SOEs.

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Mr Hendricks asked He also enquired why separate legislation was necessary, and why this was not being dealt with as part of the Pension Fund Act.

Ms Prentice emphasized that there was currently large-scale reform in this regard. The Transnet Fund would probably have to fall under the Pension Fund Act eventually. She added that currently valuations must be submitted to the Financial Services Board (FSB), so it was not completely distinct. Ms Prentice also explained that if a fund should be out of assets, the principal employer was liable to settle the claim.

The pension fund only provided collateral. The house allowance would be paid by the employer. When a member retired and there was an outstanding amount on his mortgage bond, the balance could be settled using his pension funds. This would also apply to dismissals, in the case mentioned by the Chairperson.

Ms P Hollander (ANC, Northern Cape) asked whether the housing loan would be paid back when a person left the employ of Transnet..

The Chairperson asked what would happen in the event of death of a member.

Ms Prentice explained that the fund only provided security for the housing loan. The Transnet housing department granted the loan, and the employee repaid the loan on a monthly basis until it was finalised. The Housing department also took out insurance

Mr Hendricks asked whether legislation governed the issue of insurance for bond holders, and whether it was compulsory. He asserted that, if a pension fund was being used to cover house repayment deficits, it was surely necessary to ensure that the employee was covered by insurance.

Ms Prentice replied that an institution may not force an individual to take out insurance cover. Additionally, the Pension Fund Act has resulted in a common practice which, in fact, provided for more than just insurance, including physical loans. She concluded that, provided the employee had paid diligently, he or she should not have a problem upon death or dismissal.

Mr Hendricks expressed strong discomfort with this aspect of the amendment, and stressed that the employee must be protected.

The Chair felt that insurance was a side-issue and was not one which needed to be discussed at this meeting.

The Objects of the Bill were then tabled and Ms Ntwanambi proposed that the Bill be adopted in its entirety. Members approved the Bill in its entirety and expressed gratitude to the Department for an informative and well documented presentation.
 
The meeting was adjourned.