Pension Funds Amendment Act 11 of 2007 - SAFLII Home

1 Government Gazette REPUBLIC OF SOUTH AFRICA Vol. 506 Cape Town 29 August 2007 No. 30240 THE PRESIDENCY No. 806 29 August 2007 It is hereby notified that the President has assented to the following Act, which is hereby published for general information: No. 11 of 2007: Pension Funds Amendment Act, 2007. AIDS HELPLINE: 0800-123-22 Prevention is the cure GENERALEXPLANATORYNOTE:Words in bold type in square brackets underlined with a solid line indicate insertions inexistingenactments.(Englishtextsignedb ythePresident.)(Assentedto26 August2007.)ACTT oamendthePensionFundsAct, 1956, so as toclarify, defineorfurtherdefinecertainexpressions, toclarifycertainprovisionsin linewiththeirpracticalapplication;toupda tereferencestolegislationandinstitutions ;todeleteoutdatedprovisions;toclarifythe provisionsonthedeterminationandapportion mentofactuarialsurplusin apensionfund;toprovidefortheapplicationo fthesaidActtocertainfunds;toprovideforth eobligationsandproperconductofanadminist ra-torof apensionfundandthesanctionsformisconduct ;toregulatetheamalgamationortransferofth ebusinessofa registeredfund;toprovideforthegrantingof aminimumpensionincreasetopensioners;toex tendandclarifytheprovisionsondeductionst hatmaybemadefrompensionbenefits;tofurthe rdefineandclarifythepowersandfunctionsof thePensionFundsAdjudicator;toextendthere gulatorypowersoftheregistrar;andtoprovid eforadministrativepenaltiesfornon-compli ancewiththesaidAct.

2 IT ENACTED by theParliamentof the RepublicofSouth Africa, asfollows:-Amendmentofsection1ofAct 24of1956, asamendedbysection21ofAct 101 of1976,section9 of Act 94of1977,section10 of Act 80 of 1978,section38ofAct99of 1980,section20 of Act 54 of 1989,section29 ofAct97 of 1990,section14ofAct583 of 1992,section21 ofAct104of1993,section1ofAct 22of1996,section1 ofAct39 of 2001andsection1ofAct 65of20011. Section 1 of the Pension Funds Act, 1956(hereinafterreferred to as theprincipalAct), is herebyamended-(a)by the substitution for the definition of"actuarialsurplus"of the following10definition:"'actuarialsurplus ',in relation to a fund whichis-(a)subject to actuarial valuation, means the differencebetween-(i)the value that the valuator hasplacedon the assetsofthefund less any creditbalancesin the member andemployer15surplus accounts; and(ii)the value that the valuator has placed on the liabilities of thefund in respectofpensionable serviceaccruedby membersprior to the valuation date together with the value of theReproduced by Sabinet Online in terms of Government Pr inter s Copyright Authority No.

3 10505 dated 02 February 1998 4No. 30240 GOVERNMENTGAZETTE,29 AUGUST2007 Act No. 11, 2007 PENSIONFUNDSAMENDMENTACT, 2007amounts standing to the credit of those contingency reserveaccounts which are established or which the board deemsprudent toestablishon the advice of the valuator;(b)exempt from actuarial valuation, means the differencebetween-(i)the fair valueofthe assets of the fund less any credit5balances in thememberandemployersurplus accounts; and(ii)the sum of the values of the amounts standing to the credit ofall the accounts held for individual members, whethercontributory or paid-up, plus the value of any otherliabilities plus the[valuesof] amounts standing to the credit 10of anyinvestmentreserveaccountset up to facilitate thesmoothing of[investmentreturns] fund return credited tomember accounts and such contingency reserve accounts[as] which areestablishedor which the board deems prudentto establish:15 Provided that, for the purpose ofquantifyingthe actuarial surplus interms of section 158, the surplus utilised improperly by theemployerin terms of section 15B(6) shall be added to the differencecalculated in paragraph(a)or(b),as the case maybe;".

4 (b)by the substitution for the definition of"Adjudicator"of the following 20definition:"'Adjudicator'means the Pension FundsAdjudicatoror DeputyPension FundsAdjudicatorand any acting Pension FundsAdjudicatorappointed under section30C(1);";(e)by the insertion after the definition of"Adjudicator"ofthe following 25definitions:"'administrativepenalty',i n relation to a Pension fund , an administra-tor or other third party, means the financial penalty that may e imposedby the registrar for the failure by a Pension fund ,administratoror thirdparty to comply with anyprovisionofthis Act;30'administrator'means a person approved by theregistrarin terms ofsection13B(I);'advisorycommittee'means the Pension Funds Advisory Committeeestablished by section 3B;'audit-exemptfund'means a fund which has beenexemptedby the 35registrar in terms of section 2(5)(a)from being required to be subject toaudit;'beneficiary'means a nominee of a member or adependantwho isentitled to a benefit, as provided for in the rules of therelevantfund;'benefit',in relation to a fund , means any amount payable to amember40or beneficiary in terms of the rules of thatfund;";(d)by theinsertionafter the definition of"board"of the following definition:" 'boardmember'means anymemberof aboard;";(e)by the substitution for the definition of"contingencyreserveaccount"of thefollowing definition:45"'contingencyreserveaccount ',in relation to a fund , means anaccount of the fund , which has been amended inaccordancewith therequirementsof the registrar, or which has not beendisallowedby theregistrar, and to which shall be credited or debited such amounts as theboard shall determine, on the advice of the valuator where the fund is not 50exemptfrom actuarial valuations.

5 In order to provide forexplicitcontingencies;";(f)by the substitution forparagraph(a)of the definition of"contributionholiday"of the followingparagraph:"(a)defined benefit category of a fund , meanspaymentby theemployer55of less than[thedifferencebetween]thecontributio nrate[recommendedby] the valuatorrecommendsbe payable by theemployer, taking into account thecircumstancesofthe fund andignoring any surplus or deficit[andthecontributionpayablebymembe rs];or";60(g)by the substitution for the definitionof"court"of the following definition:"'court'means a court of theprovincialor local division of the[Supreme]High Court of SouthAfrica;";Reproduced by Sabinet Online in terms of Government Pr inter s Copyright Authority No. 10505 dated 02 February 1998 6No. 30240 GOVERNMENTGAZETTE,29 AUGUST 2007 Act No. 11, 2007 Pension FUNDSAMENDMENTACT, 2007(h]by thesubstitutionfor the definition of"definedcontributioncategory of afund"of the following definition:" 'definedcontributioncategoryofafund'mean s a category ofmembersin respect of whom the benefit onretirementhas a value equalto the valueof-5(a)the[fixed-rate]contributions paid by thememberand by theemployer[onbehalfoftbemember,wberesuc hfixedratesaredefinedintherules]in terms of the rulesofthe fund thatdeterminethe rates of both their contributions at a fixed rate;(b)less such expenses as the boarddeterminesshould be deducted from 10thecontributionspaid.)

6 (c)[augmentedbysuchinvestmentreturnsanda nyshareofactuarialsurplusortransferfroma contingencyreserveaccountastheboarddeter mines]plus any amountcreditedto themember'sindividual account upon thecommencementof the ISmember'smembershipofthe fund or upon theconversionof thecategoryofthe fund to which the member belongs from a definedbenefit category to a definedcontributioncategory of a fund or upontheamalgamationof his or her fund with any other fund ,ifany,other than amounts taken intoaccountin terms ofsubparagraph(d); 20(d)plus any other amounts lawfullypermitted,creditedto or debitedfrom themember'sindividual account, if any,as increased or decreased by fund return: Provided that the board mayelect to smooth the fundreturn;";(i)by the substitution for the definition of"dependant"of the following 25definition:"'dependant',in relation to a member,means-(a)a person in respect of whom thememberis legally liable formaintenance;(b)a person in respect of whom thememberis not legally liable for suchperson-(i)was, in the opinion of the board, upon the death of themember in factdependenton thememberfor maintenance;(ii)is the spouse of themember[,includingapartyto acustomaryunionaccordingtoBlackJawandcus tomor35to aunionrecognizedas amarriageunderthetenetsofanyAsiaticrelig ion];(iii)is a child of the member,includinga posthumouschild, anadopted child and[anillegitimate]!

7 Born out (c) a person in respect of whom thememberwould have becomelegally liable for maintenance, had themembernotdied;";(j)by the substitution for the definitionof"employersurplusaccount"of thefollowing definition:"'employersurplusaccount',in relation to a fund , means anaccount45of the fund to which shall becredited-(a)amounts allocated by the board in terms of[section]sections 15B,15C and 15F[foruse bytheemployer]ortransferredinto the fundfor the credit of the account in termsofsection15E(l)(e);(b)suchcontribut ionsas are specified in the rules tobecreditedto this 50account; and(c)[investment] fund return on thebalancein theaccountfrom time totime[ataratedeterminedbytheboardaftert akingaccountoftheearningsofthefund]:Prov idedthat the board may elect tosmooth the fund return,55and to which shall bedebited-[il(illany actuarial surplus utilised by theemployer;and[ii]!!lany actuarial surplus transferred to any otheraccountin the fundat the request of the employer ortransferredto another fund interms of section15E(l)(e);";60(k)by the substitution for the definition of" fund "of the following definition:"' fund 'means a Pension fundorganisation,and'pensionfund' or'registeredfund' has the samemeaning;";Reproduced by Sabinet Online in terms of Government Pr inter s Copyright Authority No.)]

8 10505 dated 02 February 1998 8No. 30240 GOVERNMENTGAZETTE,29 AUGUST2007 ActNo. 11, 2007 PENSIONFUNDSAMENDMENTACT, 2007(I)by the insertion after the definition of" fund "of the following definition:"'fundreturn',in relationto-(a)the assetsofa fund , means any income (received or accrued)and capital gains and losses (realised or unrealised) earned onthe assets of the fund , net of expenses and tax charges,5associatedwith theacquisition,holding or disposal of assets;or(b)any portion of the assets of a fund if the assets areseparatelyidentifiable, means any income (received or accrued) andcapital gains and losses (realised or unrealised) earned on 10those assets, net of expenses and tax chargesassociatedwiththeacquisition,hold ing or disposal of assets; or(c)the assetsofa fund , to the extent that those assetsconsistoflong-termpolicies which are ' fund memberpolicies'asdefined in Part 5 of the Regulations under theLong-term15 InsuranceAct, 1998 (Act No.)

9 52 of 1998), means the'growthrate'(as defined in thoseRegulations)applicable to thosepolicies, as determined in accordance with thoseRegulations,which in any such case maybepositive, negative ornil;";(m)by thesubstitutionfor the definition of"membersurplusaccount"of the 20following definition:"'membersurplusaccount',in relation to a fund , means an account ofthe fund to which shallbe-(a)credited-(i)amounts allocated by the board in terms of sections 2515B andl5 Cto be used for the benefit of members;[and](ii)[investment] fund return on the balance in the accountfrom time to time[ataratedeterminedbytheboardaftertak ingaccountoftheearningsofthefund]:30 Providedthat the board may elect to smooth the fundreturn; and(iii)amountsreallocatedfrom theemployersurplusaccountto the account in terms of sectionl5E;and(b)debited-35(i)the cost of any benefitimprovementsfunded from theaccount; and(ii)any expenses which would otherwisereducebenefitspayable tomembers;";(n)by the substitution for the definitionof"minimumindividualreserve"of the 40following definition:"'minimumindividualreserve'-( a)in relation to amemberof a defined benefitcategoryof a fund ,means the amountdeterminedin terms of section14B(2)(a);[and]45(b)inrelationto amemberofa definedcontributioncategoryofafund, means the amount determined in terms of section14B(2)(b);and(e)inrelationroapens ioneror a deferred pensioner, means theamountdeterminedin terms of section14B(6);".

10 50(0)by the insertion after the definition of"Minister"of the following definition:"'non-memberspouse',in relation to a member of a fund , means aperson who is nolongerthe spouse of that member due to thedissolutionor confirmation of thedissolutionof therelationshipby court order andto whom the courtorderingor confirming thedissolutionofthe 55relationshiphas granted a share of themember'spension interest in thefund;";(p)by thedeletionof the definition of"PolicyBoard";(q)by thesubstitutionfor the definition of"prescribed"of thefollowingdefinition:60"'prescribed'me ans prescribed by[orunderthisAct] the registrar bynotice in theGazette;";Reproduced by Sabinet Online in terms of Government Pr inter s Copyright Authority No. 10505 dated 02 February 1998 ,29 AUGUST 2007 Act No, 11, 2007 PENSIONFUNDSAMENDMENTACT, 2007(r)by the insertion after the definition of"prescribed"of the followingdefinition:"'prescribedbyregula tion'means prescribed by theMinisterbyregulation;";(s)by the insertion after the definitionof"reserveaccount"of the following5definition:"'retirementannuity fund 'means aretirementannuity fund as definedin section I of the Income Tax Act, 1962 (Act No.)