The employer organisation Business South Africa (BSA) has blocked retirement fund members from accessing the more than R80 billion held in surplus by many pension funds.
After months of negotiation, the National Economic, Development and Labour Council (Nedlac) - the tripartite negotiating body representing organised business, labour and government - has deadlocked and the issue has been referred to Finance Minister Trevor Manuel.
It is understood that Manuel may now lay down principles, with the approval of the cabinet, and then refer the matter back to Nedlac to work out how to apply the principles in the distribution of the surplus funds.
In the meantime, members, including many thousands of pensioners who stand to gain, will have to wait. The delay will also affect a number of funds which have already applied to the Financial Services Board (FSB) to distribute their surpluses.
Personal Finance can reveal that while organised labour has made a major concession, agreeing that employers are entitled to a share of the surpluses, BSA has dug in its heels over any legislation applying retrospectively. Retrospective legislation would allow surplus funds to be distributed to people who have previously transferred out of funds which have a surplus. If legislation is not retrospective it will mean, among other things, that employers will get a bigger share of the surplus.
When a government deadline for a resolution of the negotiations on surplus funds expired last month, none of the parties would comment on the areas of disagreement. This was apparently a result of BSA's insistence on a Nedlac secrecy clause - a clause which other parties say BSA ignores when it suits them.
Initially, the trade union federation Cosatu argued that employers were not entitled to any part of the surplus and blocked legislation, originally drawn up by the FSB, which allowed employers to claim a share of the surplus, subject to a number of conditions.
Organised labour has now conceded this point but is adamant that the contentious issue of transfer values be considered in relation to the surpluses held. Transfer values are the values of members' holdings when they transfer out of defined benefit retirement funds. Organised labour is particularly concerned about how transfer values were calculated when members of defined benefit funds transferred to trade union-sponsored funds; transferred to defined contribution funds; or were made redundant.
It has been argued that many of the transfer values were based on over-conservative actuarial valuations which contributed to the huge surpluses now being held in many of the funds. However, BSA argues that retrospective legislation could expose employers to claims, and it is particularly concerned about funds which had a surplus when members transferred out but are now in deficit. Employers would have to make up the difference.
If no retrospective legislation is allowed, the surplus pot will be bigger, giving many employers more.
Pippa Green, spokesperson for the Ministry of Finance, told Personal Finance that government has a responsibility to make the law but would like to give negotiation its best chance before intervening.