30 Jan

AMENDMENTS TO THE PENSION FUNDS ACT

Written by: Henry Dul

The President signed the General Laws Amendment Act on 16 January 2014.  The amendments to the Pension Funds Act have thus now come into effect.  A couple of important aspects of the amendments are listed below. 

Defined Contribution Funds

The definition of a ‘defined contribution’ fund has changed, so has the calculation of a member's individual account (member's share) in the fund.  The change allows for ‘reasonable’ expenses to be deducted from contributions received i.e. both member and employer contributions.

Boards of Trustees

Section 7A(1A) was added to the Act which has the effect that the composition of the board shall always comply with the requirements in the rules and a vacancy must be filled within such period as prescribed.  

Section 7C now requires trustees, in pursuing the object of the board, to have a fiduciary duty to the fund and members and beneficiaries in respect of accrued benefits.

Section 7D now allows the Registrar to prescribe communication requirements (the current PF circulars in place provide a guideline in respect of fund communication and can now be prescribed by the Registrar).  

Section 7D(2)(a) now allows the board to delegate certain of its functions to a person, group of persons or a committee of the board e.g. a sub-committee.

Section 7F provides some protection to trustees in that a court of law may excuse an individual board member of responsibility.   Trustees were previously individually and severely liable.

A board member must, within six months of appointment/election, attain such levels and skills as may be prescribed by the Registrar by notice in the Gazette.  To date, no levels and skills have been prescribed by the Registrar, but the Registrar did establish a working committee that is in the process of drafting a curriculum for trustees.

Principal Officer and Deputy Principal Officer

An amendment to Section 8 allows the board to appoint a Deputy Principal Officer.  The Principal Officer may delegate some of his/her functions to the Deputy Principal Officer.

Note:

The duties of the Principal Officer include:

 

           Ensuring that decisions of the board are executed;

           Ensuring that the fund complies with the formal requirements of the law, including directives from the Registrar, SARS and other relevant regulatory authorities;

           Liaising on behalf of the board with service providers to the fund;

           Contributing at board meetings even though Principal Officer has no voting rights;

           Ensuring that governance of fund complies with applicable legislation;

           Meeting regularly with the chairperson of the board of trustees to enable the chair to monitor the operations of the fund.

 

In summary, the Principal Officer has to ensure compliance with the legal requirements and otherwise.  The Principal Officer should have a sound knowledge of the employee benefits environment in order to ensure that all compliance requirements are met.  The Financial Services Board and other role players are currently discussing the professionalization of the role of the Principal Officer. 

 

The Act now allows for the appointment of a Deputy Principal Officer.  Boards should consider appointing a Deputy Principal Officer.  It is suggested that such Deputy Principal Officer specialises in compliance and is independent from the board, employer and service providers.

 

Disclosure (whistle blowing)

Certain disclosures made to the registrar by a trustee, principal officer, deputy principal officer, valuator, or other officer of the fund or employee of the fund or an administrator will be protected.

The administrator and each individual trustee now have a whistle blowing responsibility on any matter which in their opinion may prejudice the fund or its members.

Payment of contributions

The following persons will be personally liable for compliance with section 13A (contributions and schedules) -

o                         every director of a company that is regularly involved in the management of the company's overall financial affairs, or every member of a CC who controls or is regularly involved in its financial affairs; and

o                         if not a company or CC, every person on whose instructions the body acts or who controls or is regularly involved in the management of its financial affairs 

 

·       Disclaimer:   The information contained in this document does not constitute professional advice.    The contents should be used at your sole discretion and Independent Trustee Services is not liable for damages that may be caused by the use of this note.   The information is intended as a guideline only and it is recommended that you discuss your benefits with your personal financial planner.

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