The deadlock is broken: workers and employers will have equal representation on the pension fund board, reports Lynda Loxton
The parliamentary joint standing committee on finance broke the deadlock on the question of worker representation on pension fund boards on Tuesday.
It was finalising the Pension Funds Amendment Bill aimed at, among other things, implementing the Mouton Commission recommendation that pension funds be managed by boards.
After hearing the views of both business and labour again, it decided to back demands by the Congress of South African Trade Unions (Cosatu) that at least 50% of board members should be elected by pension fund members.
This decision, Business South Africa (BSA) representative Barry Shipman told Reuters afterwards, could lead to a move away from defined benefit funds, because employers would have to submit to arbitration in the case of a disagreement about, for example, where pension funds would be invested.
Financial Services Board deputy executive officer Andre Swanepoel had warned the committee of this possibility earlier on, but chairwoman Gill Marcus said some decision had to be taken to resolve the issue and finalise the legislation.
“That is a possible consequence … we are assuming that matters will be addressed in discussions and in the normal procedures of electing the fund committees,” she said.
Shipman had told the committee that BSA supported the Pensions Fund Amendment Bill and was “not opposed to equal representation or majority representation by employees … but the bill should set a minimum and not be prescriptive”.
The Labour Relations Act already provided for a comprehensive framework for collective agreements on retirement provision and should be given a chance to work.
Life Officers Association representative Chris Newall said the employer bore the financial risk with defined benefit funds and the issue of investments was “quite crucial in order to provide the appropriate level of funding at the lowest cost to the employer.
“For that reason we believe that it is right for the employer to have a say with regard to the investments of the fund, because they impact directly on the contribution that the employer makes in order to meet the promises in terms of the defined benefit fund.”
But Cosatu representative Neil Coleman said the trend in the Katz and Smith commissions was to remove the differences between defined benefits and defined contribution pensions funds, “so we do not feel that is a legitimate point”.
“In any event, there are a number of abuses that take place with workers’ contributions in those defined benefit funds … it is also incorrect to assume that if you have 50/50 representation … that worker trustees will be reckless on the issue of investment decisions,” he said.
Marcus said this highlighted the need for workers and employers to “thrash this out” between themselves in the best interests of the pension fund as a whole.
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