Trustees stuck in sur­plus mess

Finweek English Edition - - Focus on retirement fund trustees -

WHAT WAS INI­TIALLY greeted more than five years ago as a wel­come move to eq­ui­tably share pos­si­ble re­tire­ment fund sur­pluses among past and present mem­bers ap­pears to have col­lapsed into a con­fus­ing mess – and trustees are caught in the mid­dle of fund mem­bers ex­pect­ing money and leg­is­la­tion that seems un­work­able.

Amend­ments were made to the Pen­sion Funds Act (24 of 1956) on 7 De­cem­ber 2001 to al­low for pos­si­ble sur­plus dis­tribu- tions. All funds with a sur­plus were re­quired to sub­mit a sur­plus ap­por­tion­ment scheme to the Regis­trar of Pen­sion Funds, at dates that have con­tin­u­ally been ex­tended.

The Fi­nan­cial Ser­vices Board (FSB) is start­ing to make threat­en­ing noises, com­plain­ing that up to 80% of an es­ti­mated 1 500 to 2 000 funds with sur­pluses have not yet made sub­mis­sions.

But lis­ten­ing to re­tire­ment fund ex­perts, it’s not hard to un­der­stand why sub­mis­sions have been so slow. The un­der­ly­ing prob­lem ap­pears to be badly writ­ten amend­ments to the Act in 2001.

“It con­tains anom­alies that have cre­ated un­cer­tainty since 2001. The FSB has not dealt with the prob­lem,” says De­siree Par­tridge, vice-chair­per­son of the SA Fi­nan­cial Ser­vices In­ter­me­di­aries As­so­ci­a­tion and chair of its em­ployee ben­e­fits ex­ec­u­tive com­mit­tee. Par­tridge is also a di­rec­tor of pen­sion projects at Stan­dard Bank.

She says sub­mis­sions were made to the FSB re­gard­ing the amend­ments, and it re­sponded by is­su­ing reg­u­la­tions and pen­sion cir­cu­lars. “But th­ese can­not change the law, and it seems the FSB has re­alised this. Ret­ro­spec­tive changes to the Act have been drafted and may be heard in Par­lia­ment in March, but there will be ob­jec­tions.”

Par­tridge says the end re­sult is that many re­tire­ment funds have been left in limbo, with trustees not know­ing which way to turn.

But FSB chief ac­tu­ary Mike Co­dron seems to take a dif­fer­ent view. “Clearly it is a very com­pli­cated piece of leg­is­la­tion. How­ever, it would ap­pear that the main prob­lem could be a non-com­pli­ance at­ti­tude of many trustees. An­other prob­lem is that trustees of­ten do not un­der­stand their obli­ga­tions or du­ties and rely on their ser­vice providers even though the re­spon­si­bil­ity rests with them.”

So what can trustees do? “They re­ally have lit­tle choice but to get le­gal ad­vice – and that’s a cost to the fund,” Par­tridge says.

Many re­tire­ment funds have been left in limbo. De­siree Par­tridge

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