THE FINANCIAL SERVICES LAWS GENERAL AMENDMENT BILL
18 Nov 2014
GIB Employee Benefits summarises the proposed changes to the Pension Funds Act.
Trustees
Trustees must attain (within 6 months of appointment) and retain such levels of skills and training as may be prescribed.
Section 7C will be amplified to provide that the board of trustees must act independently and comply with prescribed requirements. The fiduciary duties of the board to members, beneficiaries and the fund will also be confirmed.
The trustees will be allowed to delegate any of their functions to a person or group of persons or a committee of the board. Delegation of the duty to distribute death benefits (Section 37C) should therefore also be possible. The trustees are however not divested or relieved of a function that is delegated.
A new Section, 7F will provide that where a trustee acted in accordance with his/her fiduciary duties, he/she may be relieved from joint and several liability by a court.
The Registrar will be able to prescribe disclosure, communication and other relevant requirements that the trustees must comply with.
Whistle blowing
Whistle blowing duties will be imposed on trustees, valuators and fund administrators. On becoming aware of any matter that could prejudice the fund or members, the trustees, valuator and fund administrator must inform the Registrar.
Duty to pay contributions
As was the case until a few years ago, a contravention of certain sections of the Act including section 13A (payment of contributions) will be a criminal offence.
Every director of a participating employer who is regularly involved in the management of the company’s overall financial affairs is personally liable for payment of fund contributions. The fund must request the participating employer to notify the fund of the identity of persons that are so personally liable. If the employer should fail to do so, all the directors of the company will be personally liable.
Administrators
It will no longer be required that investment administrators obtain section 13B approval, since they are regulated in terms of other legislation.
Fund administrators will be required to maintain prescribed financial resources to meet their commitments and manage their risks.
Deputy principal officer
Provision has been made for a fund to appoint a deputy principal officer. The principal officer may in accordance with the rules delegate any of his/her functions to the deputy principal officer.
Registrar’s powers
The Registrar may declare a specific practice unacceptable, irregular or undesirable and that the fund, administrator or relevant person must refrain from conducting such practice.
The Registrar’s powers with regard to inspections and investigations relating to funds or administrators will be clarified.
The Registrar will be able to issue directives or prescribe conditions in terms of the Act by means of a notice on the FSB’s website.
No business before registration
A new retirement fund must, prior to commencing business, apply to the Registrar for registration and be provisionally or finally registered under the Act.
Rule amendments
If the Registrar requests additional information with regard to an application for registration of a rule amendment and the fund fails to furnish the information within 180 days, the application will lapse.
Unclaimed benefits
The definition of “unclaimed benefit” will be amended to include (a) a death benefit payable under section 37C and not paid within 24 months from the date when the fund became aware of the death and (b) a benefit due to a non-member spouse not paid within 24 months from the date of election or expiry of the election period (120 days).
The Registrar may authorise the liquidator of a fund to pay benefits that the liquidator is satisfied are and will remain unclaimed, to an unclaimed benefits fund.
Beneficiary funds may accept unapproved benefits
The definition of “pension fund organisation” will be amended to allow beneficiary funds to also receive and administer benefits paid in terms of unapproved group life insurance policies on the death of a member.
Shareholding by a fund
A fund may not without prior approval of the Registrar hold shares or any other financial interest in another entity which results in the fund exercising control over that entity.
Business rescue
It is proposed that the business rescue provisions contained in the Companies Act will, subject to the necessary changes, apply to retirement funds.
Payment of benefits to third parties
A fund will be allowed to direct that a member’s (or beneficiary’s) benefits may be paid to a third party if the member or beneficiary submitted sufficient proof that he/she is unable to open a bank account. Currently, such practice is effectively prohibited by section 37A.
Divorce orders
A non-member spouse to whom a member’s pension interest is awarded in terms of section 7(8) of the Divorce Act will be entitled to fund returns from the date of election (cash or transfer) by the non-member spouse or, failing an election, from a date 120 days after the non-member spouse was requested to make an election.
In future, funds will have to deduct amounts awarded to non-member spouses not only in terms of divorce orders in terms of section 7(8) of the Divorce Act, but also “in terms of any order made by a court in respect of the division of assets of a marriage under Islamic law pursuant to its dissolution”.
These deductions may be made from “a member’s or deferred pensioner’s benefit, member’s interest or minimum individual reserve or the capital value of a pensioner’s pension after retirement”.
Contingency reserve account
The definition of “contingency reserve account” will be amended to clarify that (a) it may only be established if provided for in the rules and (b) a separate account must be established for each specific category of contingency.
Fund return
The definition of “fund return” will be amended to provide that the trustees may use a reasonable approximation to allocate a fund return if there are sound administrative reasons why an exact allocation cannot be effected.