Pension funds are racing against time to submit their surplus schemes to the Financial Services Board ahead of the March 31 deadline, or face costly penalties.
An estimated R80 billion in the accounts of pension funds has to be distributed to current and former contributors (members of pension funds). Between three and five million South Africans are owed money they contributed to these pension funds.
The delay by the funds means the contributors will have to wait longer before getting their slice of the multibillion-rand surpluses.
According to pension fund experts these surpluses emanate from a number of factors. These include the fact that fund rules were structured to discourage people from resigning and leaving them before their retirement time.
This meant that many pension fund members who left these funds before retirement age only got their contributions and forfeited their employers' contribution, as well the accumulated interest.
These vast amounts of cash were left dormant in pension fund accounts for years until the Pension Fund Act amendment came into effect in 2001. The Act states that these funds should be equitably shared between current members, pensioners, former members and employers who contributed.
Pension funds were given 18 months from their first statutory valuation date after December 7, 2001, to submit their surplus schemes. They also had to give full details as to how they were going to distribute these funds and try to locate all beneficiaries. So far more than 70% of pension funds have not submitted their details to the registrar of the Financial Services Board.
From April 1 they will face the possibility of referral to a special tribunal by the registrar if they have not met the deadline.
Financial Services Board Chief Actuary, Mike Codron, said fewer than 7 000 of the 16 000 registered pension funds had submitted their financial records.
Codron said the delay in submissions made it difficult for the board to know the exact figure that was to be distributed.
"We encourage people who contributed to the pension funds to contact these funds to check if there are surpluses to be distributed and when they will release the money," he said.
Alexander Forbes senior legal adviser Leanne van Wyk said the deadline of March 31 was sending shivers across the pension fund industry.
She said many in the industry felt the importance of giving surplus funds to former members and others as quickly as possible was paramount. The registrar of pension funds recently issued a circular to the retirement funds industry concerning the late submission of surplus schemes.
In this circular, he stated that if a fund did not submit its surplus scheme on time he had the power to refer the scheme to the Special Tribunal (set up under the Pension Funds Act), which would then establish the surplus scheme for the fund (at the fund's cost).
"The spectre of being referred to the Special Tribunal to do what the funds themselves should be doing is naturally of concern to funds," said Van Wyk.
The penalty will come into effect in April.
Richard Stride, of Benefit Recovery Services (a company that locates former members of pension funds), echoed van Wyk's sentiment that the greatest urgency in pension fund circles was to submit the surplus schemes before the deadline.
"This would set in motion a process of distributing these billions of rand to their rightful owners ," he said.
"Motor industry and engineering sector pension funds alone have more than R10 billion in surpluses."
The money not distributed by the deadline would be transferred into the proposed National Unclaimed Benefits fund to be established by the Financial Services Board.
"Clearly, this would not be in the interest of former members, so we encourage people to register and claim their slices," said Stride.
So what's all this about a surplus?
Here are some commonly asked questions, as supplied by Alexander Forbes . . .
What is the purpose of the Pension Funds Second Amendment Act?
1 It tells retirement funds the they must apportion any surplus that they have to stakeholders;
2 It means that retirement funds have to pay a minimum benefit to members where:
(i) Members leave the fund (this will apply on different dates for different funds);
(ii) Where a fund is liquidated;
(iii) Where a fund is changed from a defined benefit funding basis to a defined contribution funding basis; and
(iv) As pension increases to pensioners.
Who stands to benefit from these surplusses?
If there is a surplus then the following people could possibly stand to benefit:
Active members;
Pensioners and deferred pensioners;
Employers participating in the fund; and
Former members of the fund - that is members of the fund who left the fund after January 1, 1980, due to resignation, dismissal, retrenchment or transfer out of the fund to another fund.
What should you do if you are a former member of a retirement fund?
1 Contact your previous retirement fund trustees, its administrator or your previous employer and make sure they have your correct contact details. If you are not sure who to contact, call the Financial Services Board Call Centre toll free number, 0800 110 443 or 0800 202 087.
2 Let the fund trustees, its administrator or your previous employer know of any changes in your contact details as ongoing changes need to be advised.
Look out in the press for adverts asking former members of a particular fund to contact specific persons.
When will the surplus be paid?
Each fund will have a different date on which it has to apportion surplus. For most (but not all) funds the surplus apportionment date will be the fund's first statutory valuation date after December 7, 2001. The fund has 18 months from its surplus apportionment date to give its surplus apportionment scheme to the Registrar of Pension Funds for approval.
The scheme can, in certain circumstances, be sent to a Special Tribunal who will then be responsible for doing the apportionment of surplus.
If you have queries concerning your fund contact the Financial Services Board's surplus hotline at 0800 202 087, or Benefit Recovery Services at 011 844 6000 or 086 727 7002.
By Chris Makhaye |
