The Pension Funds Act, approved by Parliament in 1956 and amended piecemeal over the years, is to undergo a major overhaul.
The retirement fund industry has changed dramatically since 1956, affecting the way funds are established, managed and regulated.
Dube Tshidi, the Registrar of Pensions at the Financial Services Board (FSB), describes the rewrite as technical but it could see significant improvements in the protection of pension fund members.
Tshidi says reasons for the rewrite include:
* Labour law requirements for a more participative relationship between employers, employees and the trustees of retirement funds, including an onus on stakeholders to negotiate benefit and contribution structures;
* The establishment by trade unions of funds which their members can join;
* The establishment of employer-sponsored umbrella funds;
* The benefit and contribution design of funds, particularly:
- The shift from defined benefit to defined contribution funds, and pension to provident funds;
- Moves away from paying pensions from the fund towards purchasing annuities from insurers;
- The need for improved benefits on resignation and retrenchment as people are more likely to change jobs during their careers;
- The moves towards a package approach to remuneration;
- Employee benefits being available from outside retirement funds; and
- Difficulties surrounding the provision of disability benefits and the funding of post retirement medical obligations;
- Questions about the fiduciary duties of trustees with members expecting better communication and disclosure, together with increased decision taking;
- The degree to which funds such as retirement annuity funds and preservation funds need to be catered for separately must be thought through carefully;
* Increased specialisation of services offered to the fund and the consequent need to deal with the management of service providers to protect funds; and
* Provisions for an ombudsman to handle complaints need to be refined.
Tshidi says on top of this questions are being asked about the risks members and employers face within retirement funds, how these risks can be managed and the role the regulator should play in ensuring financial soundness and fair treatment of the investor. South African practice needs to be brought up to international best standards in this regard.
Once the FSB is satisfied that we have a model which represents international best practice we will invite the participation of stakeholders in the industry.
We expect to be in a position to do this before the end of 2001, the registrar says.
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