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Status of private equity schemes in pension fund portfolios
Tuesday, July 31, 2012
Private equity fund managers and pension funds that invest in private equity funds have been through some rough times in recent years. In 2010 the registrar of pension funds indicated that he was about to issue a notice declaring all investments by pension funds in private equity funds unlawful because the custodians of the assets of those schemes were not authorized by section 5(2) of the Pension Funds Act, 1956, (the PFA) to hold pension fund assets on their behalf. If the registrar’s interpretation of section 5(2) was correct, pension funds could have been compelled to terminate their investments in private equity schemes prematurely and to suffer the considerable penalties that would have been applicable as a result.
Legislative changes that should be made in order to more properly reflect the pension promise that an employer makes to its employees and to better protect retirement savings (a personal view).
Friday, June 15, 2012
South African law does not require employers to provide their employees with occupational retirement funding or even access to occupational retirement funding arrangements such as pension and provident funds. Nonetheless, a significant percentage of formal sector employers do. Traditionally this has taken the form of membership of defined benefit pension funds but, since the 1980’s, there has been a big shift towards defined contribution funds and few employers offer membership of defined benefit funds anymore. Many of those that do are now considering whether or not they should follow the general trend, particularly in the light of the onerous new provisions of the Pension Funds Act.
Legal issues that arise in the context of valuations of retirement funds as at their surplus apportionment dates
Friday, June 15, 2012
In the old days occupational retirement funds were as bad as retirement savings vehicles as retirement annuity funds are now – many members did not know that they would be penalised on early withdrawal and for many early withdrawal was not a matter of choice – the members were retrenched, dismissed or transferred. Remedial legislation was appropriate, as was legislation designed to achieve greater fairness in occupational retirement funding in the future. Unfortunately the Pension Funds Second Amendment Act of 2001 (“the surplus legislation”) was drafted in a hurry and changed by Parliament in a hurry and, as a result, it is worded so poorly that many of the objectives of the legislation have not been achieved.
Jurisprudential Role Played by the Pension Funds Adjudicator in South African Law
Friday, June 15, 2012
The term Jurisprudence, loosely translated, means the theory and philosophy of law. When one talks about jurisprudence, one is usually referring to the nature of law, its purpose, structure, and application. At a practical level, we are dealing with what the law is, what it ought to be, and how it actually operates. The law in this context means legislation, common law and case law, that is, the body of law created and established through decisions of a particular court or the court system as a whole. Jurisprudence therefore implies creating a body of law and methods for interpreting and applying the law.
Challenges to Service Providers
Friday, June 15, 2012
Service providers have played a major role over the years by doing the outsourced function of the administration of funds. With time, unfortunately, they have become administrators of trustees. What is needed is a clear regulatory regime to regulate the relationships between trustees and administrators and not to rely only on the service agreement between the two parties . . . Many service providers have everything in-house –administration services, investment managers, actuarial services, insurance etc. Therefore, service providers could influence trustees to keep all business in the same house
The urgent need for the transformation of local government occupational retirement funding arrangements
Friday, June 15, 2012
The retirement funding problems associated with the rationalization of local authorities have been exacerbated by the corporatisation and outsourcing of various of their functions and will be further accentuated if government achieves its objective of having a single, mobile, public service. Employees whose employment contracts have been assigned from one employer to another may have ceased to be eligible for membership of their former funds in terms of their rules and may yet have been entitled in terms of section 197 of the Labour Relations Act to the maintenance of their previous conditions of service.
Prudence is process, not performance - Legal issues associated with retirement fund investments
Friday, June 15, 2012
Our governing statute, the Pension Funds Act, says very little about the duties of trustees in relation to investments. In essence, it says that a board of trustees must direct, control and oversee the operations of the fund and take all reasonable steps to ensure that the interests of the members in terms of the rules of the fund are protected at all times .The Financial Institutions (Protection of Funds) Act puts things a little more strongly in that it requires all persons who invest, keep in safe custody, control or administer fund assets to observe the utmost good faith and exercise proper care and diligence in doing so.
Retirement Funds minimum benefits and surplus legislation: The regulations, board notices and PF Circulars
Friday, June 15, 2012
Most importantly, the Registrar has complied with his obligation in terms of section 14A(1)(a) of the Act to prescribe by notice in the Government Gazette the assumptions to be used by a fund’s actuary in determining the fair value equivalent of the present value of a member’s accrued deferred pension. This calculation is to be performed both in relation to current in-service member whose service terminates at least 12 months after the fund’s surplus apportionment date and in relation to former members who claim their minimum benefit top-ups in terms of section 15B(5) of the Act.
Address to the Annual Labour Law Conference
Friday, June 15, 2012
Address to the Annual Labour Law Conference Sandton Convention Centre 4 July 2002
Errors and Omissions in The Drafting Of The Pension Funds Second Amendment Act 2001
Friday, June 15, 2012
The provisions of the Pension Funds Act which are potentially most onerous for employers, namely section 15B(5)(a) read with section 15B(6) are neither and for this reason they are likely to be subject to constitutional challenge. Section 15B(1) requires the board of management of a fund to submit to the registrar of pension funds a scheme for the proposed apportionment of any actuarial surplus in the fund as at the effective date of the statutory actuarial valuation next following the commencement of the Act. The term “actuarial surplus” is defined without reference to the value of amounts -in respect of “past improper use of surplus” by employers.
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