Speech by Mr H J Bekker MP
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The retirement industry in South Africa is a very large one with hundreds of billions of rand invested in it. Most formally-employed people use these funds and their products to save for their post-employment retirement. In this manner, these citizens provide privately for their retirement and should, therefore, as a rule, not become a financial burden to the State. However, regulation of the industry has not always been as tight as it could have been and, as Treasury puts it, some very creative legal interpretations have been used to circumvent the spirit and letter of the law. Some of the more glaring problems in the industry have been identified as high costs, skimming of investment returns, investment losses and misappropriation of funds. And, while government is busy with the ongoing long-term review of social security and the retirement fund industry, the bill before the House was considered necessary as an urgent interim measure to address concerns about the implementation of the 2001 Act. Key challenges for government in the regulation of the retirement fund industry include lowering costs, improved governance, improved performance by trustees, the correct application of the surplus legislation, improving the supervisory powers of the Financial Services Board and encouraging a culture of compliance. The Bill aims to address these challenges and the IFP therefore supports it. Turning to the detailed amendments, we want to express our support for the provision to bring bargaining council funds into the regulatory net. This will give these funds protection under the Act and oversight by the Registrar. Members of these funds will also now have access to the Pension Funds Adjudicator which is vital to further protect their interest. We also support this provision coming into effect on 1 January 2008 only to give the relevant funds time to adjust to the new regulatory environment they will face. The IFP agrees that the duties of administrators had to be codified in law and we support the provision that they must have properly trained staff, well-defined compliance procedures and must disclose and manage conflicts of interest. The bill also provides for remedies in the event that administrators do not comply with the law and we also support this. Most importantly, the bill clarifies the existing law dealing with surplus apportionment, in particular the period from which past improper uses should be considered. This would have to be from at least 1 January 1980 to avoid prejudice to former fund members. We support this.
The IFP also supports the amendments to bring the Pension Funds Adjudicator in line with the Prescription Act, that the Minister of Finance may appoint one or more deputy adjudicators and that an acting adjudicator would improve operational efficiency in that office. We also welcome the amendments to increase the powers of the Registrar to enable him / her to intervene in the management of a fund if the interests of fund members are compromised. The IFP does have one concern about the bill, and that is its retrospective application. In general terms, retrospective application of legislation can be construed as being against the fundamental principles of the rule of law and the certainty of the legal environment that it creates. We accept that the Minister and Treasury have used retrospectivity in this case to increase the protection afforded by the law to former members particularly as it is alleged that cases of abuse took place well before 7 December 2007. At the same time, the bill could well be challenged in a court of law on this basis. While it is the right of any person to ask a court to review legislation, we urge the industry to carefully consider the consequences of challenging this legislation, especially in light of the comprehensive review of the retirement industry that is still ongoing. The IFP will support the bill. I thank you. |