Assembly by the honourable Deputy Minister of Finance, Mr Jabu Moleketi,
MP
14 June 2007
Madame Speaker, the Pensions Funds Amendment Bill, 2007, being debated in
this House today addresses urgent technical and regulatory issues in the
Pension Funds Act, 1956.
The House will remember that in 2001, the Pension Funds Second Amendment Act
was passed. That Act primarily dealt with two important issues that of the
apportionment of surplus in a pension fund and minimum benefits for pensioners
and members on withdrawal. The Second Amendment Act took a number of years to
finalise given the emotive issues concerning the use of pension fund surpluses
over the past few decades.
This House will also remember that the Act was vigorously debated at
National Economic Development and Labour Council (Nedlac) and it was recognised
that in many instances the former members of pension funds were important
contributors to the build up of pension fund surpluses over time. As a matter
of equity, in any distribution of surplus, the former members would have to be
considered. An equitable apportionment of surplus therefore involves all the
stakeholders in a fund: former members, current members, pensioners and
employers.
This process naturally involves large sums of money, which in some cases
could require an employer to repay surplus utilised improperly by the fund. The
vast majority of pension funds have complied with the spirit and intention of
the 2001 Act in apportioning the fund surplus. But not unexpectedly, given the
sums involved, some legal challenges have been brought forth since 2001 as
quick legal minds and those seeking to avoid liability, scoured the Act for
legal loopholes.
Madame Speaker, in many ways these challenges seek to subvert the spirit of
the original legislation passed by this House by interpreting the law in the
narrowest sense possible. We would not do this House justice if we did not seek
to reinforce and entrench the provisions and spirit of the 2001 legislation
with regards to surplus apportionment, thereby protecting the most
disenfranchised in our society.
The Bill before this House therefore attempts to close the legal loopholes
by clarifying certain provisions related to surplus utilised improperly in the
past by employers and other provisions relating to surplus generally. The
proposed changes contained in the Bill follow the same principle ratified by
this House in 2001, namely that surplus apportionment is not a so-called
"witch-hunt" against employers but rather a process of correcting for abuse and
applying fairness in the surplus apportionment process. It is about ensuring
that a proper balance of interest is struck between stakeholders.
I should add that although the Bill primarily involves a clarification of a
variety of the provisions relating to surplus, it also addresses a number of
other important issues including:
* Bringing bargaining council funds within the ambit of the Act, thereby
affording their members the protection and oversight offered by the Registrar
of Pension Funds and recourse to the Pension Funds Adjudicator.
* Codifying the duties of pension fund administrators which follow debates
and investigations into so-called "secret profits" retained by
administrators.
* Changes to the provisions governing the Pension Funds Adjudicator which
seek to clarify the jurisdiction and operation of that office.
* A more equitable treatment of a non member spouse in the case of divorce.
This will see an end to the inequitable treatment of divorcees whereby little
or no growth is attached to the portion of the pension monies allocated to them
by an order of court. The Bill also incorporates relationships recognised under
the recently promulgated Civil Unions Act and makes allowances for other orders
of court, such as maintenance orders. These changes therefore provide further
protections to dependants and other beneficiaries.
* Importantly, Madame Speaker, the Bill significantly increases the powers
of the Registrar of Pension Funds including the power to impose administrative
penalties. This House is well aware of the several instances of abuse in the
pensions and insurance sectors which have been exposed in the past few years.
Such abuse is often due to lax governance, inadequate disclosure, conflicts of
interest and poor trusteeship. In the face of such difficulties, not only do
these problems need to be addressed but the regulator requires sufficient
powers to intervene where necessary to protect the interests of members. The
provisions of this Bill will bring the supervisory powers of the Registrar in
line with international standards and best practice.
In conclusion, this Bill is an important step forward in the continuing
effort to protect the monies members faithfully contribute towards their
retirement over their working lives. It will ensure that the original intention
of this House in 2001 is adhered to and that all stakeholders, including former
members will be treated fairly in the apportionment of pension fund surplus. We
also owe it to members to build not only a sound governance and legal framework
but also to provide those who police participants in the industry, in this case
the Registrar of Pension Funds, sufficient powers whereby they can efficiently
execute their duties.
These are urgent improvements to the regulatory architecture that can be
instituted now for the benefit of all while we simultaneously set about the
broader social security and retirement fund reform process.
Before closing, may I convey my thanks once again to Minister Trevor Manuel,
the Director-General of National Treasury, Lesetja Kganyago and his team and
the Portfolio Committee on Finance under the chairmanship and steady hand of Mr
Nhlanhla Nene.
Madame Speaker, I hereby request that the House pass the Pension Funds
Amendment Bill, 2007.
Issued by: National Treasury
14 June 2007
Source: National Treasury (http://www.treasury.gov.za/)
