List of Commentators:


1.       Employee Benefit Studio (EBS)

2.       The Linked Investment Service Provider Association (LISPA)

3.       Institute of Retirement Funds (IRF)

4.       The Actuarial Society of South Africa: Retirement Matters Committee (ASSA)

5.       Jacques Malan Consultants and Actuaries (JMCA)

6.       Life Offices Association (LOA)

7.       Shell South Africa group of companies (SHELL)

8.       Financial Planning Institute of Southern Africa (FPI)

9.       Furniture Bargaining Council (FBC)

10.   The South African Financial Services Intermediaries Association (SAFSIA)

11.   Business Unity South Africa / Chambers of Commerce and Industry South Africa (BUSA / CHAMSA)

12.   Dries Visagie





Section 1 – Definition:  administrative penalty  (Pg 3 lines 25 – 41)


Concerned that the definition is very wide and suggests that the term “in terms of section 37” be added in the definition, since that section sets out details of the penalties

Not supported as suggestion adds no value or further clarification.

Section 1 – Definition:  audit exempt  (Pg 3 lines 35 - 37)


Replace “2(3)(a)” with 2(5)(a) as changed in recent document

Correction already reflected in the Bill.

Section 1 - Definition: board member (Pg 3 lines 42 – 43)


Definition of board member should be amended to read “ member of the board as contemplated in Section 7A of the Act"

Suggestion not supported as “board” already defined.

Section 1(e) and Section 15B (9) and (10) : Definition: contingency reserve account (Pg 3 lines 44 – 52)


Dries Visagie

·        Concerned the contingency reserve definition is inconsistent with the definition of  ‘actuarial surplus’


·        The definition of contingency reserves should be contained in the body of legislation rather than in definitions section


·        Concerned about the wide powers given to registrar when read with new section 15B(10)



Not supported as:


·       The registrar requires this discretion as a safety net to guard against instances of abuse where inappropriate contingency reserves are established to manipulate the actuarial surplus available for distribution.

·       Funds have the right to appeal a decision of the registrar.

·       There is already a history of abuse of reserve accounts and excessively strong valuation bases.

Dries Visagie/ IRF

·        The proposed amendment can be read as excluding an account which has been amended in accordance with the requirements of the registrar


·       Suggestion supported.  Recommended wording for clarification to read as follows:  “… which has been amended in accordance with the requirements of the Registrar, or which has not been disallowed by the Registrar …”


·        Points out that reserves are established at the advice of the actuary and if reduction of a reserve leads to excessive surpluses being established then it is incumbent upon the employer to finance such losses.


·        Requires clarity as to whether or not the registrar will be liable to compensate the fund if the fund becomes financially unsound as a result of the registrar rejecting a valuation and/or contingency reserve. 


·        Requires clarity as to whether or not the State or registrar should be held liable for losses in instances where the employer cannot perform.






Not supported.  The registrar can only be held liable in instances of gross negligence.

Section 1 -  Definition: contribution holiday (Pg 3 lines 53 – 60)


·         The wording “and the contribution payable by the members” should be deleted.


·         Concerned that the definition appears incorrect in terms of the new and current Act


·         Proposes that the method of funding be the Projected Unit Method. This should be specified in the definition

Supported and suggest that the phrase “and the contribution payable by the members” be deleted.





Not supported as there are various valuation methods and it should not be restricted to the Projected Unit Method.

Section 1 -  Definition: Dependant  (Pg 4 lines 25 – 41)


Suggests that reference to adopted/illegitimate child be removed

Not supported as this definition is generally used in other statutes.


Section 1  -  Definition: fund (Pg 4 lines 61 – 62)


Concerned that the term ‘Registered Fund’ has the same meaning as a ‘Fund’ and points out that this does not make sense as there are  parts of the Act which refer specifically to "unregistered Funds"

Not supported as proposed definition facilitates better reading of this legislation.


Section 1  -  Definition: fund return (Pg 5 lines 1 – 19)


Dries Visagie

·        Fund return must be expressed as a “rate”.  Substitute in (a) and (b) the word “any” by “the rate of“.


·        Provide for smoothing only once in the definition rather than throughout the Bill


·        Clarify that it is not the fund return that is smoothed, but the augmentation of benefits by virtue of fund return

Not supported as current wording is sufficient



Not supported as current wording is sufficient



Not supported as current wording is sufficient


·        Assets would usually not include cash holding of a fund

Not supported because if assets exclude cash holdings, it cannot be fund return.


Section 1 - Definition: non-member spouse (Pg 5 lines 51 – 56)


·        Concerned that the amended definition is narrow in light of the definition of ‘spouse’.  Proposes that the non-member spouse definition be expanded for those relationships which are dissolved without a court order:



Supported as the suggested change provides clarity:


“means, in relation to a member of a fund, a person who is no longer the spouse of that member due to the dissolution of the relationship or the confirmation of the dissolution of the relationship by court order and to whom the court ordering or confirming the dissolution of the relationship has granted a share of the member’s pension interest in the fund”

Section 1  -  Definition: prescribed  (Pg 5 lines 58 – 61)


·        Requires clarity as to whether all regulations issued by the registrar become prescribed by the Minister and therefore legally binding

Not supported as the wording is clear.

Section 1  -  Definition: rules (Pg 6 lines 9 – 19)


·        Suggests that the word “obligations” be substituted for “duties” for consistency in the new provision.


Supported and agree that reference to “duties” be replaced by “obligations” throughout paragraph (c) of the definition.


Concerned that additional documents (e.g. insurance policies) to be registered with the registrar as per the proposed amendment will result in substantial additional administration.

Not supported as the legislation is clear enough and does not impose an additional obligation over and above what is currently required under the existing legislation.

Section 1 – Definition of spouse (Pg 6 lines 20 – 25)


“or the tenets of a religion” to be replaced with “a union validly concluded under a system of religious law.”

Not supported as the current wording is sufficient

Section 2  -  Application of Act to bargaining councils. (Pg 6 – 7 lines 40 – 59 and lines 1 – 40)


·        Concerned that the inclusion of BC funds under the Pension Funds Act will result in conflict between provisions of the PFA and the LRA.


·        Proposes that the LRA be amended to incorporate the governance principles of the PFA

General comments


The Minister of Labour supports the inclusion of bargaining council funds under the regulatory net of the PFA and the FSB already has the capacity to regulate bargaining council funds.


To date approximately 165 funds already voluntarily registered under the Act, with some 1,5 million members.


Special circumstances (e.g. housing loans, withdrawal benefits and temporary disability benefits) have already been accommodated under the existing regulatory framework and therefore no special provisions are required.


The only special arrangement to be made in respect of bargaining council funds relates to the statutory valuation date and the following amendment is proposed in this regard (section 2(2)(b)):


insert: “(b)    Despite any other provision of this Act, the first statutory actuarial valuation of a fund registered in accordance with paragraph (a) must be undertaken at the end of the first financial year following registration.” [current (2) becomes 2(a)]


Notes  the following conflict between the two Acts:



·        Election of board of management of BC funds follow a ‘majoritarianism’  principle in terms of the LRA, while in the PFA, 50% of board members must be member elected

This is not an issue as the PFA prescribes a minimum of 50% member elected trustees


·        In terms of the PFA a fund becomes a body corporate once it is registered.  However, a BC fund established by collective agreement does not have a legal persona in terms of the LRA.

In law it is preferable for the fund to have a legal persona as it enhances protection for the members and it also allows the fund to sue and to be sued.


·        Benefits negotiated at BC include in the rules of funds: accident benefits; disability income benefits and funeral benefits, which are not permitted by the Pension Funds Act.

Already covered above.


·        BC funds are required by the LRA to have their own dispute resolution mechanisms which are governed by their own rules. Concerned that there is likely to be uncertainty as to how pension funds rules should be aligned to BC funds rules.

In practice many bargaining council employees have applied to the Pension Funds Adjudicator (PFA) for independent dispute resolution, but the PFA has refused to adjudicate on their complaints as BC funds fall outside of the ambit of the PFA.


·        In terms of the PFA trustees can amend rules, in a bargaining council this can only be done by collective agreement.  They can amend their rules to allow for this. 


This issue can be addressed in the fund rules.


·        How will statutory councils fit in, as they have similar provisions to BC's? 

Funds established by statutory councils are included in the provisions of the Bill.


·        Concerned that the proposed Bill, does not expressly amend the LRA. Indicates that Section 210 of the LRA provides that the LRA will override any conflict relating to the matters dealt with in the LRA (except the Constitution).

The Labour Relations Act regulates bargaining councils, not the funds established by bargaining councils.


Proposed wording to provide clarity that it only included funds established in terms of a collective agreement concluded in terms of the Labour Relations Act and not all other funds established by any other law. (par 3.1.2 of November submission)


Suggested the insertion of the following at the end of subsection (3):

“provided that the pension fund shall be required to furnish to the registrar only such information as relates to the conduct of its affairs in the period of three years immediately prior to the request.”


The position of BCF established after 1 January 2008 is not made clear by the amendments.

Not supported.  The legislation clearly excludes other funds established by laws other than the Labour Relations Act.  This is in any event part of the broader retirement fund reform process.




Not supported.  If necessary, the registrar requires flexibility to request information going back for more than 3 years.






Not supported, as the Labour Relations Act compels any fund established after February 1998 to be registered under the PFA and the position is also sufficiently clear in terms of section 2 of the Bill.

Section 13B:  Addresses the roles and responsibilities of administrators (Pg 8 lines 29 – 54 and Pg 9 lines 1 – 33)


Generally supports this provision, but concerned about the additional powers given to the registrar.  Clarification to be clarified in regulation.

Not supported as the registrar requires these powers due to historical abuses and to align with international best practice.  In any event, funds have the right to appeal a decision of the registrar.


Clarification is needed in respect of the appointment of sponsor (administrator) appointed trustees in the instances of umbrella funds.

Not supported as the appointment of trustees is addressed in the rules of umbrella funds.  Also, the reform of this aspect is being considered as part of the overall retirement reform process.

Section 13B(5):  Requirements for an administrator (Pg 8 lines 39 – 43) 


-Concerned that the words “endeavour”,   “conflict” and “responsible manner” in the provision are rather vague.  Proposes that the Register should clarify what he deems to be “responsible” and or constitutes “conflict”. (par. (a))


Not supported as similar wording already used in other legislation.


Powers of the registrar must be justifiable

Not supported. Process of appeal available against any decision of the Registrar.


-Concerned that the cost of administration will increase because of increased controls on administrators  (par. (b))







Not supported as these requirements formalise what is already required of a fit and proper administrator.




Requires guidelines on minimum requirement for qualification regarding what would constitute “adequate trained staff”. (par. (d))


States that powers of the registrar should be justifiable

(par. (e))


Requires guidance from the registrar on what constitutes “well-defined procedures” (par. (e))


-Concerned that the financial requirements may result in termination of a number of small providers and limit the number of small participants to enter this market.



guidance on what constitute “adequate financial resources”

(par. (f))

Section 14: Amalgamation and Transfers ( Pg 9 lines 47 – 52)


Section 14(1)(a):  Provides that a scheme for  a proposed amalgamation or transfer of a business of a registered fund must be submitted within 180 days of the date of the transaction


Welcomes the provision, however points out that members must also be provided with reasonable period within which to object to the transfer.

Not supported as proposed amendment in line with current practice and appropriate consultation would already have taken place with members.


180 – day time period to be prescribed by regulation

Not supported as it is important to clarify time frames upfront in the legislation.  The registrar is empowered to extend time frames for any valid reason in terms of section 33 of the PFA.

Section 14(6)  :  Amend or withdraw a certificate (Pg 10 lines 10 – 16)


Problem of unravelling transfers that were made on the approval of the registrar are not addressed.

Not supported as it will be done on application by a fund on a case by case basis.


Time periods should be set out in regulation.



The 60 day period should also be applicable to transactions exempt from section 14 requirements.

Not supported as it is important to clarify time frames upfront in the legislation.  The registrar is empowered to extend time frames for any valid reason in terms of section 33 of the PFA.


Not supported as already addressed in sub-section 8(iii).

Section 14(7)(a) and (b): Transfers between Retirement annuities (pg 10)


Welcomes the proposal to stop churning, but proposes that administrative fees should be permitted to be charged by the RA Administrator for the cost of transfer.

Not supported. The risk of a "tsunami" of transfers from underwritten RA funds to non-underwritten RAs is overstated. National Treasury is concerned about regulatory arbitrage resulting from different remuneration models in across different industries in the financial sector. However, this issue is currently being addressed by reviewing the various remuneration models for intermediaries in the financial sector.


The threat of a "tsunami" is based on the supposition that the Financial Advisory and Intermediary Services Act ("FAIS") is ineffective, and that the majority of intermediaries lack integrity and will seek to violate its provisions thereby risking the licence granted to them to operate in terms of FAIS. Further motivation by National Treasury is contained in the document submitted to PCOF titled: Response to comments on section 14(7)


Concerned about the possibility of members making uninformed choices that may not be in their interest.


 Should state that where a member transfers his/her interest, the/she will take full responsibility for any negative consequences that may follow upon a member exercising his decision to transfer.

(Neither a trustee nor fund should be held liable)

A requirement should exist that members should be duly informed.


Supports the introduction of this provision and proposes the word "request" in section 8(7)(a): be changed to "written request".


Concerned that playing fields are not level as underwritten funds may not pay trail commission, whilst non-underwritten funds can.


Proposes  that this provision be extended to prohibit trail commission

post the transfer  to no more than what would have been permissible without the transfer for pension fund.


The LOA further propose that a  requirement be added  in section 14(1) that in the case of individual transfers, the registrar must be satisfied that members and non-member spouse concerned  have been duly informed of the prohibition and limitation of fees and commission that may be paid in respect of the transfers .


- Should include a restriction on payment to any party to the transfer or by any agent or mandatory of such party (see LOA follow up e-mail on 16 May).


Supports transferability from one retirement annuity fund to another.  The ad hoc curtailment of fees and commissions which are duly disclosed should be regulated under the FAIS Act and not the Pension Funds Act, if Parliament is confident that the FAIS Act is effective.  A level playing field between competing service providers is as important as full disclosure to potential consumers.

Section 14(8) - Requires agreement of  75% of members affected by proposed transaction  (Pg 10 lines 26 – 44)


Requirement to obtain agreement from 75% of affected members is not practical.  It should be sufficient if members were duly informed and allowed opportunity to object.


Assets transferred must be increased or decreased by fund return.  Provision must be made to smooth fund return.


Similar mechanism outlined in new subsection (8) should be allowed for the application of a similar deeds registry procedure in relation to a transaction contemplated in new subsection (8), as no subsection 1(e) certificate is issued.

Supported.  The following wording is suggested:

“… where the affected members were duly informed of a transaction and any objection they may have had, has been resolved to the satisfaction of the board of the fund concerned.”


Not supported.  Once the transfer value has been quantified, any subsequent return must be full fund return without any smoothing.



Not supported.  Already addressed in legislation.

Section 14B(2)(a)(ii): Determining the minimum individual reserve of a member in a DB Fund (Pg 12 lines 25 – 41)

Dries Visagie

It is an administrative burden to add fund return from date of joining since data may not be available.  Suggest that you take the existing withdrawal benefit in terms of rules plus net contributions and fund return thereafter.


The wording may imply that each contribution to be augmented from date of joining irrespective of when they were paid.


Minimum individual reserve applies to all exits and must be the same in each case.  In terms of some rules minimum individual reserve would be less on transfers, liquidations, death or retirement.  The reason for this is that you add amounts to minimum individual reserve in terms of the rules of the fund.

Not supported.  This is already covered in the existing legislation.





Supported.  Replace “as from the date the member joined the fund” with “as from the date of payment of contribution”.



Not supported, as rules should provide for all benefits payable.

Section 14B(4)(b):  Determining the minimum pension increase (Pg 13 lines 26 – 63 and Pg 14 lines 1 – 2)


Suggests that fund returns be added to values obtained in section 14B(4)(b)(i) so as to be compatible with that in section 14B(4)(b)(ii)

Supported.  Suggest wording be amended as follows:

Section 14B(4)(b)(i) – “accumulating with fund return the liabilities …” (line 26)


It further adds clarity and ensures consistency throughout the Bill.

Section 15B:  Apportionment of existing surplus

Section 15B(1)  Provides that every fund that commenced prior to 7 March 2002 shall submit to the registrar a surplus apportionment scheme plus the details regarding any surplus utilised improperly by the employer as defined in section 15B(6) ( Pg 14 lines 28 – 34)


The requirement of including the details of any surplus utilised improperly proposed in s15B(1), read with s37 would be unconstitutional in that an employer would be guilty of an offence based on retrospective legislation, which contravenes section 35 of the Constitution.

Refer to the section on retrospectivity. (40B) 



Section 15B(2)  Provides that a surplus apportionment scheme shall comply with such conditions as may be prescribed (Pg 14 lines 53 – 59 and P15 lines 1 – 4)


The National Assembly has the power to pass legislation or to assign some of its legislative powers to other legislative bodies.  It does not have the power to assign its legislative powers to the executive.  When applying this principle to section 15B(2), it is recommended that Parliament sets criteria to determine the conditions set by regulation.  Otherwise there is a danger that the executive will be usurping the functions of the National Assembly.

Not supported as the ability of Parliament to delegate legislative authority to the executive has been confirmed by the Constitutional Court.


Section 15B(5)(d) Authorises the registrar to set requirements relating to the method for and timing of the repayment of any surplus utilised improperly. (Pg 16 lines 29 – 41)


Concerned that the risk of paying members benefits based on outstanding amounts due from the employer is not being addressed in the Bill

Not supported.  This will apply only in a few instances and the registrar will consider these on a case by case basis.

Section 15B(6):  Clarifies what constitutes improper uses and confirms that improper use investigations must go back to at least 1 January 1980. (Pg 17 lines 15 – 31)


Requested clarification / insertion of following definitions to be considered:


Definition of “cost” – when does the improper utilisation occur?


Definition of “employer” – where there is more than one employer participating in the fund, the definition should be limited to those employer(s) who benefited from the improper use of surplus









Not supported.  Legislation is clear.



Supported. A revised definition is proposed to better reflect the intention of the legislation:

“employer” means the employer or employers participating in the fund at the time of the improper utilisation of surplus and whom benefited from the improper use: Provided that where a subsequent employer or employers by contract or law became liable for the employee-related liabilities of the previous employer or employers, the debt must be redeemed by such subsequent employer or employers;” 

Section 15B(6)(b):  Improper use investigation (Pg 17 line 32 – 36)


-Proposes that the date of commencement of improper use of surplus should read “...the period from the later of 1 January 1980 or the date of the fund's commencement...”

Not supported as legislation is clear.


Require clarification of the term “additional” as it is subject to various interpretations (pg 17)


Registrar should allow deductions against improper use with regard to any over contributions made by the employer at any time prior to the SAD but after 1 Jan 1980

Not supported as already exists in current legislation.



Not supported. Addressed in the amendment bill.


If legislation is made retrospective, exclude surplus which was properly communicated and approved by trustees.

Not supported.  The result would be that the former members who are stakeholders in the surplus apportionment will be excluded.

Section 15B(6)(c)(iii):  executive benefit


- Requires clarification as to what the term ‘executive’ is in the amended sections.


-Proposes that an executive be a person  who reports to a CEO


Concerned that the phrase “ improper use of surplus” implies wrongdoing on the part of the employer despite that it is completely legal and thus cannot be deemed “improper”. Proposes that the phrase be replaced with “ Employer use of surplus “ or Prior use of surplus”


- the date should read "... has existed in the fund in its current form since the later of 1 January 1980 or the inception of the fund."

Not supported as the proposed definition is far too narrow. It is not possible to have one definition of an "executive" that is appropriate across all employers.






Not supported.  There must be consistency in language between the principal Act and the proposed amendment.





Not supported as improper usage will not be applicable prior to 1 January 1980 and is already covered in the primary Act (PFA).


It seems unfair that executive benefits since inception of a fund are condoned but, when benefits improvements are made, only the executives are to be identified. At the same time ordinary members could also have received major benefit improvements

Not supported.  If from inception the cost is built into the contribution rate payable by the employer, whereas if it is done subsequent to inception, the additional benefits would have been paid for by surplus.

Section 15B(6)(e):  Fund return on improper uses (Pg 18 lines 5 – 7)


Proposes that a common rate for all employers be considered, e.g. a bank deposit rate plus a margin. This implies that all employers will face similar cost for “improper” returns.

Not supported as the fund must be placed in the position that it would have been in had improper uses not occurred.


The value of any improper use should not be increased by fund return from the surplus apportionment date.

Not supported as it prejudices other stakeholders to the benefit of the employer.

Section 15B(9)(a):  Requires that an apportionment be of no effect until the registrar is satisfied that actuarial valuation has been prepared on actuarially sound principles. (Pg 18 lines 16 – 22)


Gives the registrar a different discretion in respect of valuations than that which is already contained in section 16.  It is not appropriate or proper to introduce new powers in addition to those contained in section 16.

Not supported.  Surplus apportionment in terms of section 15B is a unique one-off occurrence and therefore requires a greater degree of scrutiny to ensure that all stakeholders are treated fairly.

Section 15B(10) (Pg 19 lines 18 to 29)


The words “is unacceptable to the registrar” introduces a third criterion for valuations which is inappropriate.

If this is retained, the word” unacceptable” is vague. Valuation can rather be rejected by the registrar rather than to refer the surplus scheme to a Tribunal.

Not supported.  Surplus apportionment in terms of section 15B is a unique one-off occurrence and therefore requires a greater degree of scrutiny to ensure that all stakeholders are treated fairly.

Section 15B(11) (Pg 19 lines 30 – 56)


Can be construed to require all funds that have already submitted nil schemes to do so again.

Not supported.  Matter dealt with under the retrospectivity section (40B).


Technical point: A nil scheme needs to be recognised as a scheme.

Not supported.  Matter dealt with under the retrospectivity section (40B).

Section 15F -  Existing employer reserve accounts (Pg 20 lines 14 to 23)

Dries Visagie

The proposed amendment to section 15F allows for transfer of existing contingency reserves which would not be allowed by the registrar.

Not supported as the proposed wording is clear.

Section 15K – Referral to Tribunal (Pg 20 lines 26 – 48)


The appointment of a special ad hoc tribunal to perform the functions in section 15B seems like an unmanageable task.  Can the section be successfully implemented?

Cost for the tribunal?

Process should be left in the hands of members or even the registrar to pursue errant funds through the office of the PFA.

Not supported as the process is manageable.  If the matter is put in the hands of the members, it will not be resolved.  The PFA has no jurisdiction over surplus apportionment schemes.


One problem with s 15K (1)(b)(i) is that there exist no criteria to determine when the registrar's dissatisfaction is warranted and when not.  Section 15K(1)(b)(v) is also very vague and may cause problems as good reason is not required or defined.

The tribunal's functions should at the very least be narrowly tailored to conform to strict criteria in order to prevent it from falling foul of s25 of the Constitution (property clause).

Expressions like “equity”, “equitable” and “reasonable” used in sections 15B and 15K must be defined by criteria set by Parliament to dovetail with the Constitution.

Not supported as it is our view that the proposed legislation is not unconstitutional. There has been no Constitutional Court challenge to the Pension Funds Second Amendment Act since promulgation in 2001.






Not supported as the proposed wording is clear.

Section 18(5):  Funds not in sound financial position : Authorises the registrar to require an audit and inspection (Pg 20 lines 51 – 55 & P 21 lines 1 – 9)


Suggests that this section should be deleted

Not supported as the registrar requires these powers due to historical abuses and to align with international best practice.

In any event, funds have the right to appeal a decision of the registrar.

Section 25 – Powers of inspection and investigations (Pg 21 lines 13 – 36)


Powers to the registrar is wide and no longer subject to scrutiny of the court.  Not clear if this section will be subject to the Promotion of Administrative Justice Act.

Not supported as the comment is incorrect.  The Promotion of Administrative Justice Act applies and legislation allows for access to courts.

Section 26 – Registrar may intervene in the management of a fund (Pg 21 lines 40 – 54 and Pg 22 lines 1 – 19)


The IRF has also expressed concern with this provision. See submission dated 2/11/2006.

Not supported. The registrar requires these powers and to align with international best practice.


Section 30A: Submission and consideration of complaints(Pg 22 lines 38 – 50)


Suggests deletion of the wording “for consideration by the board of the fund” as complaints against employer are also envisaged.  It is not clear how the Board of a fund would consider complaints against the employer.

Not supported.  However, we believe that the complaint should be lodged with the fund only.  Therefore, we suggest the deletion of the following words in section 30A(1)(a):


“(or employer who participates in a  fund)”

Section 30C: Appointment of Pension Funds Adjudicator (Pg 23 lines 5 – 40)


Proposes that appointment of Adjudicator/Deputy/Acting be subject to consultation with the PF Advisory Committee not the FSB to be consistent with the FAIS Act.


Proposes that section 30C should provide a time limit as to the appointment of the Acting Adjudicator pending the appointment of the Adjudicator.

Not supported.  The amendment reflects current convention.  




Not supported. The need for flexibility in this regard is illustrated by recent difficulties.

Section 30J  -  Procedure for conducting an investigation

(not currently part of the amendment bill)


Section 30J(1) should be amended in accordance with the provisions of sections 27(4) and (5) of the FAIS Act.




Section 30J(3) should be significantly amended or deleted in its entirety to ensure that the Adjudicator can be regarded as an “independent and impartial tribunal” as per section 34 of the Constitution.


Disputes should be resolved by a conciliated settlement, as per FAIS Ombud and determinations only issued where such settlement cannot be achieved. 

Not supported. The office of the Adjudicator together with the other Ombuds offices in the financial services sector is the subject of review as part of the longer term retirement fund reform process.



Not supported. Does not impede the independence and impartiality of the Adjudicator.




Not supported. In practice, the Adjudicator currently employs a conciliatory approach to complaint resolution. Determinations are only issued failing agreement between the parties.

Section 30P: Access to Court - Permitting appeal or review of decision of the Adjudicator (Pg 24 lines 5 – 17)







Do not support the proposed amendment as the power of the High Court to accept new evidence is limited.


Not supported. This concern has been addressed in the certified version of the Bill by the introduction of section 30P(3), which encourages  all parties to put all facts before the Adjudicator. The amendment bill provides that the High Court may still admit new evidence at its discretion.

Section 33A: Directives (Pg 24 lines 26 – 45)


Concerned about directives that may be made retrospective. These "legislative powers" are very wide.

Not supported as the registrar requires these powers due to historical abuses and to align with international best practice.

In any event, funds have the right to appeal a decision of the registrar.


Objects to the section, as it provides the registrar with the power to legislate, without following a due process in effecting such legislation.

Not supported as the issuing of directives constitute administrative action necessary to enable the registrar to exercise his/her regulatory obligations.

Section 37(1): Administrative penalties (Pg 25 lines 13 – 17)


The proposed maximum penalty of R5m per day appears unjustifiably high.

Not supported.  This is a maximum penalty and its imposition by the registrar is subject to appeal to the FSB appeal board and review by the High Court.

Section 37C: Disposition of death benefits upon the death of a member (Pg 25 line 44)


Ensures that a dedicated pension (a spouse’s and dependant’s pension) is not subject to the discretion of the trustees in the allocation of death benefits and cannot be re-directed to other beneficiaries.


Concerned that if the proposed amendment is legislated,  death benefits will not be regarded as pensions in terms of  section 37C of the Act


Rules of most DC funds provide that the death benefit is a pension payable to the dependents / nominees, which pension may on application be commuted.  The current wording of the Bill will remove all these benefits from the ambit of section 37C, which is not the intention.  The Bill should only exclude specifically the spouse’s and children’s pensions provided for in terms of fund rules.

Supported.  The phrase “one or more dependants” must be replaced by “the spouse’s and children’s pension as provided for …”


Section 37D: Deductions from  pension benefits  (Pg 26 lines 21 – 45)


Comments on insertions (d) and (e)


-Proposes that the definition of non-member spouse should be limited to cases where a court order has been issued in terms of the Divorce Act



Concerned that the wording of this section is arguably wide enough to also include maintenance orders


-Requires clarity on whether the date of the benefit deemed to accrue

Applies to divorces concluded before the resultant Amendment Act  comes into effect


-Notes that the Income Tax Act should be amended to allow for the option of a transfer of the non-member spouse to be tax free


Further  notes that the amendment to this section should distinguish  the tax situation in terms of orders  made before and after the date on which the Bill is enacted


The proposed amendment precludes disinvestment of the non-member spouse allocated portion upon receipt of a valid order  in the case of members leaving service


-Requires clarity on whether or not it would be appropriate to provide for the accrual of interest rather than fund return in the case of a DB fund


The clean break principle should be extended to existing divorce orders










Not supported as all court orders must be honoured.





Not supported as all court orders must be honoured.



These issues will be addressed in amendments to the Income Tax Act, which are expected later this year as part of the Taxation Laws Amendment Bill 2007 (Money Bill).











Not supported.  Comment incorrect.




Not supported.  Fund return leaves the fund in a neutral position, whereas any other rate would create a mismatched position leading to prejudice.


Supported as it is just and equitable that fund interest be added to the non-member spouse’s portion.  It is proposed that the wording be amended as follows:  (Insert on P26 after line 45)


“(f) (i)  Any pension benefit held in a pension fund on behalf of a non-member spouse in accordance with a court order granted prior to the commencement of the Pension Funds Amendment Act, 2007 are for purposes of section 7(8)(a) of the Divorce Act, 1979 deemed to accrue on the commencement date of the Pension Funds Amendment Act, 2007 and must be paid to the non-member spouse in accordance with paragraph (e)(iii) within 90 days from the said commencement date.

(ii)  The benefit referred to in paragraph (i) shall include fund return from the effective date of the divorce order until the date of payment or transfer.”


The Divorce Act should be amended so that there is no uncertainty

Not supported as there is no contradiction or uncertainty.


Supports the provision, but suggest consideration of the following:


-Whether the definition for  a "pension interest" in the Divorce Act applies sufficiently to preservation funds since the definition only allows  for the division of a pension interest that becomes payable if membership of the preservation fund is terminated on date of divorce.


-Indicates that a large number of divorce cases are currently noted against pension interest. Proposes that the amendment  be made applicable to such interest as are currently noted


- The term "beneficiary" is probably incorrect and should read "dependant"




Not supported as this is not a concern.






Not supported. This concern has been dealt with above.





Not supported as beneficiary includes dependant.


Non-member spouse should only be allowed to elect payment in the event that the amount falls within the recently suggested framework for early withdrawal.  The non-member spouse must be obliged to transfer the divorce payment to an approved fund.

Tax dispensation must be clarified by SARS

See comments on amendments to the Income Tax Act above.

Dries Visagie

Subpar (e) - The reference to Section 7(8)(a) of the Divorce Act should be referenced to section 37D(1)(d) of  the principal Act. This provides for other orders as well.


Subpar. (ii) – the statement does not go far enough as in a defined benefit fund since in DB funds benefits are not simply expressed as accrued benefits.


Subpar. (iii) to be extended to include the other person.


Not supported as the Divorce Act specifies how benefits will be dealt with.  All other orders (i.e. other than divorce orders) will be dealt with in the relevant court order. 


Not supported. The intention is clear in the legislation.




Not supported.  It is instead suggested that “or other person” in section 37D(1)(e)(iv) and (v) be deleted.

Section 40B: Retrospectivity (Pg 27 lines 8 – 19)


Opposes the application of retrospectivity and note that  the amendments will alter what has legitimately been given effect in terms of the law in the past


Notes that a fund that was advised that improper use of surplus provision do not apply before 7 December 2001 and had its scheme approved will not be affected by this section. However, a fund that received the same advise and obtained a declaratory order  to confirm this will be affected


Proposing the addition of the following proviso:

“Provided further that in the case of funds that have prior to the effective date made submissions stating that the funds had no actuarial surplus to apportion in terms of section 15B, the registrar must inform each fund whether or not its submission satisfies the requirements of this amendment and, if not, grant such fund a reasonable period of time to review its submission and submit a nil return or a scheme, as may be appropriate”

The following comment applies to all the submissions:


Not supported.  It is recognised that there is a risk of constitutional challenge, like any piece of legislation. However, it may be challenged by employers to further protect ill-gotten gains to avoid repaying surplus utilised improperly.


The proposed amendment only clarifies the intention of the Pension Funds Second Amendment Act of 2001.



An amendment is proposed to clarify the retrospectivity of nil returns.

"The definitions in section 1(1) of "actuarial surplus", "contingency reserve account", "contribution holiday", "defined benefit category of a fund", "employer surplus account", "fund return" , "member surplus account", "minimum individual reserve" and "surplus apportionment date", and sections 14A, 14B, 15B, 15C, 15E, 15F and 15K, are deemed to have come into operation on 7 December 2001, for funds whose surplus apportionment schemes have not been approved or whose nil returns referred to in section 15B(11)(b) has not been received by the registrar: Provided that -

(i)     in the case of funds whose surplus apportionment schemes have been submitted but not yet approved on the effective date of this amendment;

(ii)    in the case of a nil return referred to in section 15B(11)(b) that has been received on the effective date of this amendment but in respect of which the Registrar is not satisfied that the requirements of section 15B(11) have been met,

the registrar must inform such funds of the instances where their schemes do not comply with requirements of the Act and grant the funds a reasonable period of time to review and resubmit their schemes for approval or noting.


The fairness of retrospectivity is debatable



Opposes retrospectivity of surplus amendments


-Notes that they have in the past acted entirely lawfully on advice from legal and other professional advisors in the application of surplus benefits. However, they are concerned that retrospective application of the surplus will cost them approx R200m.



-There may be constitutional challenges to the validity of retrospectivity.


Proposes that:


-Improper use of surplus should not be made retrospective




The retrospective clause should be amended to state that the registrar must be satisfied that any use of surplus was approved by  the  Board exercising its fiduciary duties and avoiding any conflict of interest .



Aims to change certain provisions of the legislation with retroactive effect.  Retroactive legislation which is aimed at correcting previous legislative or administrative errors found by courts to be legitimate.  Courts have found that it is essential that the legislature acts promptly to ensure only a short period of retroactivity.  The legislation aims at making changes in 2007 in respect of legislation passed on 7 December 2001.  This is not a reasonable period.


Current legislation does not require funds with no surplus to submit a surplus scheme.  Requirement for nil scheme is retrospective, funds already submitted nil schemes before will be required to re-submit on different requirements as per the proposed legislation, causing significant costs.


Funds with no surplus will now be required to investigate improper uses and distribute surplus.


Calculation of improper use has changed significantly.



Retrospectivity flies in the face of the Rule of Law.  The inevitable cost that retroactivity would entail needs to be quantified and measured against the potential benefits.  They called for a cost benefit analysis to be done to avoid embroiling the private sector (funds) and the regulator in unduly costly corrective action after the legislation has been passed.