Trustees stuck in surplus mess
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