The union federation has put forward seven principles it deems necessary for informing the Bill to equitably reimburse pension-fund members
Ngwako Modjadji
The Congress of South Trade Unions (Cosatu) is calling for the estimated R80-billion pension “surplus” to be restituted to beneficiaries, backdated to the 1980s when the federation advocated a “migration” from pension to provident funds.
The bulk of the amount represents assets that defined pension funds set aside to meet members reasonable benefit expectations.
The call was made by Cosatu during its submissions to the finance portfolio committee last week as part of the deliberations of the Pension Funds Second Amendment Bill.
In the early 1980s retirement funds became a bone of contention as workers sought to control their own assets at a time when they mistrusted management and wanted to attract lump-sum benefits in the context of high unemployment.
When members switched from pension to provident funds, Cosatu argues, benefits were “deliberately calculated in a way that a significant portion of the assets that were supposed to secure their retirement benefits were left behind. These assets were thus not given to members as they should have been, but instead kept in defined benefit funds by employers, with the intention of laying their hands on this ‘surplus’.”
Cosatu maintains that the Pension Funds Second Amendment does not address its concerns by elevating employers to the position of beneficiary of a fund when it provides for employers, as trustees, to act in the interest of non-members. “The Bill [thus] gives the employer the same right as members to benefit from extraordinary and ordinary surplus arising in the past and in the future adversely affecting a fund’s ability to meet members’ reasonable benefit expectations.”
The Bill also allows employers to have “contribution holidays” (to pay contributions later when it suits them) an unprecedented development in the management of retirement funds.
Cosatu argues that the argument that an employer can have a claim to the assets of a retirement fund is defective in that the same analogy could be used to argue that an employer has a claim to an employee’s bank account on the grounds of making salary deposits. The same argument holds that one cannot claim repayment for making additional contributions, in monthly premiums, to an insurer. On this basis, the federation submitted that employers have no claim or legal ground on the pension “surplus”.
The first amendment to the Pension Funds Act was tabled in Parliament in June 1998, but was withdrawn after Cosatu raised objections to provisions that gave employers “easy access to repatriate ‘surplus’ assets in retirement funds”. The ensuing deadlock was taken to the National Economic Development and Labour Council, subjecting the process to months of delay that raised concerns in labour circles that by the time the issue was resolved the value of the surplus assets would be greatly reduced.
Business South Africa’s (BSA) submission on the Bill centres on the economic consequences of pension restitution or repayment of the surplus. BSA argues that “‘disadvantaged persons’ should rather be helped through taxation and social assistance”.
The federation has put forward seven principles it deems necessary for informing the Bill in its attempt to resolve the matter. These are:
l A pension fund belongs to its members and no third party should have a legal or equitable stake in the fund;
l Every pensioner is entitled to inflation-related benefits;
l Every member is entitled to a proportional share of what he/she would have been entitled to as a pensioner in the fund;
l Any ordinary surplus remaining after satisfying the entitlements of pensioners and early leavers should be apportioned to pensioners and early leavers in equal shares;
l The same principles that will apply to future benefits should apply to the past and should benefit all former members and pensioners since 1980;
l Any deficit must be made good by the employers over time, with members receiving what was due to them at the time to prevent any negative destabilising effects on retirement funds; and
l Dispute resolution regarding future minimum benefits and restitution of minimum benefits to past members should be dealt with on the basis of the same principles.
The document tabled before Parliament says members and former members of retirement funds face bleak future financial risks without a source of income. This would leave government to provide for their social needs.