An amendment to the Pension Funds Act stating that a pension fund should be allowed to invest a certain percentage of its assets normally five percent in the business of an employer and that it be allowed to lend money to the employer, will be considered by the Parliamentary Finance Committee after the September recess.
At the moment employers and companies cannot automatically draw on retirement funds as an extra source of finance without permission from the Registrar of Pension Funds.
The amendment would also apply to any subsidiaries of the employer company.
The Financial Services Board (FSB) yesterday presented the Bill to the Parliamentary Finance Committee which accepted the bulk of the proposals contained in the Pension Funds Amendment Bill and decided not to entertain further discussion on them.
These proposals include:
* That employers should pay pension fund contributions deducted by employers from members' salaries over to the fund in full within seven days of the end of the month for which the contribution is due.
This applies where contributions are payable either by the members themselves or by their employer on their behalf.
The proposed change in the legislation will close a loophole which has enabled employers to hold back employees' pension fund contributions.
* The Registrar will in future have a set of regulations prescribing minimum levels of information that employers will have to provide to employees regarding payment of contributions to their retirement fund.
* The Bill also contains a proposal intended to protect the members of a fund that is in the process of being liquidated.
It calls for the disclosure of the liquidator's preliminary accounts and records, a report by an independent valuator should the Registrar require this, procedures for inspection of accounts and records by interested persons and procedures to handle objections.
The Bill states that these safeguards do not apply where a fund is only partially terminated due to an employer's withdrawal from it.
In such a case members simply leave the fund with payments made to them.
The FSB pointed out to the committee that the proposed legislation was aimed at protecting members' contributions.
Another important amendment to the Pension Funds Act currently under discussion relates to giving companies the right to withdraw surplus assets from pension funds.
This proposal is aimed particularly at defined benefit funds that have generated huge cash surpluses.
Until now surpluses have been used to increase benefits to members, decrease employers' contributions or hold the cash over for the future security of the fund.