The big debate on the division of surpluses held by many pension funds
appears to be nearing conclusion, although there are still some significant
obstacles still to be resolved.
The issue is currently being debated at Nedlac (the body established to
resolve differences between trade unions, business and government).
The initial legislation, drawn up by the Financial Services Board (FSB), is
under-going a major redraft. The trade unions, which blocked the draft
legislation, are now close to agreement with the FSB, but organised
business is concerned about the possibility of retrospective claims.
Agreement on how the surplus issue should be handled in the future, is
apparently close. It is the past that is bedevilling the agreement.
Business South Africa has expressed fears that the legislation
could leave
room for retrospective claims on transfer values, going back to the
eighties, when members transferred from defined benefit to defined
contribution funds.
Anusha Makka, of Nedlac, says that if agreement cannot be reached by early
next month the issue will be referred to government for a political
decision.
The Actuarial Society of South Africa (ASSA), whose members have been under
criticism for the manner in which they value funds and the assets and
liabilities of individual members within the funds, has over the past week
also had a relook at the situation.
Criticisms have focussed particularly on the manner in which assets have
been valued when members withdraw from a fund before retirement and how
valuations have been set when individuals have switched from a defined
benefit pension fund to a defined contribution fund.
The trade unions are understood to have moved from their initial stance
that surpluses belong to members.
Paul Truyens, president of the ASSA, says that actuaries favour the
drafting of a guidance note that will provide a more consistent methodology
for valuing the transfer benefits of members. He says that the retirement
committee of the society will be asked to draft guidelines. The guidelines
will probably be debated at the society`s annual convention later this
year. Part of the guidelines will probably also have to be legislated.
This week actuaries said that in most cases the current methods used to
value transfer benefits favour members rather than employers. If the
principles used in Britain were followed, transfer values would have been
less favourable.