Employer attempts to raid pension fund surpluses have been placed on hold
with a key decision to be made by the Financial Services Appeal Board.
Employers are eagerly eyeing the R80 billion in surplus funds sitting in
retirement funds around the country.
The Registrar of Pension Funds has received several requests to approve
amendments to the rules of pension funds which will allow funds to transfer
any surplus to the employer on liquidation of the fund.
The Registrar has placed a moratorium on such transfers pending the passage
of the Pension Funds Amendment Bill through Parliament.
After taking legal advice, the Registrar has decided that no repatriation of
surpluses is allowed on liquidation of a fund to the employer until the
legislation is changed to make it permissible.
The Paarl Municipal Widows and Orphans Pension Fund is not happy with the
Registrar`s decision and has appealed against it to the Financial Services
Appeal Board. The ruling of this Board, under the direction of Judge Gerald
Friedman, is expected next week.
The legal advice to the Registrar is that:
- The assets of the pension fund are owned by the pension fund which is a
legal body in its own right;
- These funds are held for the benefit of members of the fund and their
dependants by way of lump sum benefits and pensions on retirement or death;
- If a fund is liquidated the assets still belong to the fund, even if there
is a surplus; and
- Until the Pension Funds Act is amended the Registrar has no power under
the Pension Funds Act to allow any repatriation of surplus to your employer
on liquidation of your fund and he has to refuse to register any rule
amendments which would allow this.
The amendment which the Registrar is proposing to the Pension Funds Act will
permit distribution of the surplus among all stakeholders, including the
employer, under conditions designed to prevent abuse and to protect the
interests of members.