Key regulations on the distribution of the R80 billion pension fund surplus are due to be published after a meeting between the government and the Financial Services Board (FSB) next month.
A team from the National Treasury and the FSB is to meet with the Deputy Minister of Finance, Mandisi Mpahlwa, in April to get clarity on the government's view on issues holding up the release of the regulations.
Last month draft legislation was released setting out the broad parameters of how pension fund members, pensioners and employers can share the surplus of a fund, but the details, which will be contained in the regulations are still awaited.
The draft legislation will force pension funds to meet prescribed minimum benefits such as keeping pensions level with inflation, before employers will be allowed to dip into a surplus.
After the minimum benefits have been met, any remaining surplus must be shared out by negotiation.
Jeremy Andrew, the FSB's chief actuary, says the team had hoped to release the regulations with the draft legislation but in the light of positions adopted by business and labour at the negotiating body, Nedlac, the team felt it needed "political direction in a number of areas" before it could finalise the regulations. Andrew was speaking at a Pension Lawyers Association workshop on fund surpluses this week.
At issue is who will get a share of existing surpluses, how much you can expect and what happens if the surplus is insufficient to pay former members and pensioners the proposed minimum benefits.
Who gets a share?
One of the major sticking points between labour and business on the surplus issue, is that labour wants all former pension fund members, including those who have withdrawn or transferred to another fund, to be included in any distribution of the surplus, while business is opposed to retrospective claims.
Andrew says there is a social need to go back 15 to 20 years because often payments to people who transferred out of funds or were retrenched were not fair. This was because members and employers' bargaining positions were unequal. Employers dominated the pension funds' boards of trustees and many funds' boards only included member-elected trustees shortly before they were compelled to do so by regulations at the end of 1998.
The decisions of boards which did have member- elected trustees at the time the transfers or retrenchments took place, were also often unfair because the member-elected trustees lacked education on retirement matters, lacked understanding of financial services, lacked access to professional advisers and, in all likelihood, were concerned about their job prospects if they openly opposed their employers.
But however laudable this social need, funds will face practical difficulties if the legislation is introduced retrospectively, Andrew says.
The data required to calculate claims may not be available and it may be difficult to trace former fund members. The regulations will have to be sensitive these practical difficulties, he says.
If no surplus is left
If the Bill's proposals become law, employers may have to pay in so that the fund can pay former members the proposed minimum benefits. If there is insufficient surplus money in the fund, there will have to be an investigation into how much of the surplus has been used for the benefit of the employer.
If retrospective claims are allowed, employers could be asked to pay either the amount of the surplus the employer used, or the amount needed to pay former members the minimum benefits. This is one of the issues on which the team drafting the regulations wants direction from government.
How much can you expect?
The formula for calculating your share of surplus still has to be spelt out, but it will take into account how long you were in the fund, your present salary and possible future salary had you stayed in the fund, the investment growth you would have enjoyed had you received the minimum benefit when you left the fund and the number of years you have to go to retirement.