Company scheme pensioners will not get a bite at any retirement fund surplus before any other group does, Parliament's Portfolio Committee on Finance decided this week. This is despite appeals to the committee to speedily deliver what is due to pensioners.
The committee is deliberating controversial proposed legislation - the Pension Funds Second Amendment Bill - which seeks to share out the R80 billion worth of surplus assets sitting in retirement funds around South Africa.
The Bill also introduces, for the first time, the concept of minimum benefits, and gives former fund members who did not receive proper benefits when they left a fund the right to share in the surplus.
The intention of the Bill is that, if there is a surplus in a fund, former members and pensioners should have their benefits topped up to minimum levels first. Only then should the remaining surplus be shared among pensioners, active fund members and the employer.
Although the Bill proposes a minimum pension increase, if the fund can afford it, for those who are already on pension, these people may have to wait for up to four years to receive their benefits.
The Association of Retired Persons and Pensioners argued before the committee two weeks ago that pensioners are struggling because the purchasing power of their pensions is not being maintained.
In many funds, 60 percent of pensioners receive pensions under R3 000 a month - less than the minimum salary many employers pay their lowest-paid staff members.
A delay in pension increases would result in pensions falling further behind in real economic levels, the committee was told.
Jeremy Andrew, the chief actuary of the Financial Services Board, told the committee that determining the amount of surplus in a fund would require a full actuarial valuation of the fund. Funds have to have a valuation every three years. The Bill gives funds more time to come up with a surplus apportionment scheme.
It would be extremely expensive for retirement funds to do a valuation just to be able to top up the benefits of pensioners. This cost would ultimately be borne by all the members of the fund. Also, paying out pensioners before anybody else would give one group of stakeholders an advantage over the others.
Barbara Hogan, the chairperson of the Parliamentary Portfolio Committee on Finance, says the committee is not happy that pensioners' immediate needs cannot be accommodated, but accepts the practical difficulties involved.
The committee hopes to complete its deliberations on the Bill by the end of next week. A key outstanding decision is whether employers are entitled to share in the surplus at all. Organised labour is opposed to employers getting any share of the surplus, saying that a retirement fund exists solely for the purpose of providing benefits to its members - any assets in it belong to the members.
The business sector claims that it is entitled to the surplus. It says the main reason for the surplus is that employers had paid in more than they needed to, to take care of falls in investment markets.
Government's view is that all members, former members and employers should be able to share in any surplus because they all contributed to it.