Ever since labour federation Cosatu last year forced the withdrawal of legislation that would have allowed for the division of pension fund surpluses, there has been a void. Effectively it is being left to the Financial Services Board (FSB), the courts and the Pension Fund Adjudicator, John Murphy, to sort out the mess.
Cosatu's argument is that any surplus belongs to the members and not to the employer.
The withdrawn legislation, set up by a committee representing the regulators, employers, the life assurance companies and organised labour, provided for a negotiated division of the surplus.
The impasse is allowing employers to take contribution holidays without providing improved, equivalent benefits to members; or to fund company contributions to their medical care associations.
Some cases are before the courts, with one precedent setting case, known as the Tek judgement on appeal. But the courts take time in reaching decisions.
I suggest the Minister of Finance steps in now and declares a moratorium on all withdrawals of pension fund surpluses, including contribution holidays, unless they are solely for the benefit of members.
Contribution holidays by employers, and employers' use of pension fund surpluses to escape their medical funding liabilities in particular, should be stopped with immediate effect. The current impasse could take years to resolve by which time surpluses may have been drained. The only beneficiaries will be the lawyers who fight case after case through the courts.
Jeremy Andrew, the chief actuary at the FSB, is concerned about the situation. He says it may be left to the courts to set the precedents - and this may not provide the outcome the government, or even the pension fund members, want.
In recent years there has been a dramatic change in the regulation of retirement funds, which in many cases were run in the employers' rather than the members' interests.
By amending the Pension Funds Act at the end of last year, Government has given members a lot more power. The problem is that many employers are stalling the implementation of the changes.
Andrew says the FSB is currently working on a policy document to deal with the surpluses.
He says a rough-and-ready investigation of the surplus position shows that funds in surplus are limited and in most cases are larger funds.
He would like to see fund trustees divide any surplus between an employer reserve account and a member reserve account to be used for the benefit of members, pensioners and former members.
"In doing this, the trustees must exercise their fiduciary duties independently of any loyalty to the stake holder group, which appointed or elected them."
On this issue of fiduciary duty I think a lot of trustees still have learn what this means. In simple terms it means they have to act in the best interests of all the fund's members. This means they cannot only vote for benefits of a particular group, say pensioners, without taking all members into account. And it definitely means that no weight should be given to any pressure brought by either employee representatives or management.
Andrew says that if the employer and employees agree in a negotiating forum that they will, for example, divide up the surplus in a particular way to their mutual benefit, they must then get the agreement of the trustees, and the trustees must, before they agree, look to see if any other class of potential beneficiary is disadvantaged.
Disadvantaged beneficiaries could apply particularly to former members and pensioners.
"If a class of members not represented in the negotiating forum is disadvantaged, the trustees should refuse agreement."
However Andrew says both "employer and employees must understand that they cannot make a binding agreement without the active participation and agreement of the trustees".
In the meantime if you believe your trustees are not protecting your interests as members you should take up the issue with the FSB or John Murphy.
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Recently the country's two biggest consulting actuaries to pension funds, Alexander Forbes and Sedgwick Noble Lowndes (formerly Ginsburg Malan & Carsons) announced a merger. What got into the Competitions Board to approve the deal leaves me flabbergasted.
Already the stranglehold on the retirement industry of the two companies working separately is bad enough. Both companies not only advise pension fund trustees but they also use their considerable access to trustees to sell financial services products to retirement funds and their members.
Some of these products are not even in the members' best interests. Soon after Personal Finance launched three years ago we zapped Alexander Forbes for an endowment-type product called a 3D, which it was hawking to retirement fund members. In most cases the commissions earned meant the product was more in Alexander Forbes' interest than in that of the members. Thankfully after the intervention of the FSB, the product was withdrawn.
The two companies may talk about fire walls between their different divisions, but I know, as many other retirement fund trustees do, that these so-called firewalls are often gossamer thin.
This marriage is not in the interest of anyone apart from the two companies involved. It definitely is not in the interests of the retirement industry. Government should not only consider stopping the marriage but also passing legislation prohibiting any company (with any associated company) from both giving advice and selling investment products to the same fund. This is a major conflict of interest.