Shift in control of pension schemes | Fin24
 
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Shift in control of pension schemes

Aug 06 2014 17:53
Fin24

Cape Town - There is a noticeable shift in control of pension schemes away from employers, and pension benefits are now seen as deferred income," according to Karin MacKenzie, director at Herold Gie Attorneys.
 
"This trend should be seen against the backdrop of the strong labour protection framework in South Africa and the increased negotiating strength of organised labour."
 
"Pension assets are the largest slice of the fiscal pie and control of funds and 'fair' benefits are becoming a politally and economically sensitive issue," she continues.
 
"The social importance of pension resources means a need for protective regulation. These factors have led to substantial and complex legislation and compliance issues that affect both funds and employers that participate in them."
 
The Pension Funds Act imposes duties on an employer, and it is required to act in good faith.

The payment of contributions is obviously a primary obligation, and there is a tightening regulatory framework to deal with this. Often when businesses are in financial distress, the pension contributions are the first casualties.

Because of large scale default, particularly amongst smaller employers, the sanctions have been beefed up in the latest amendments and the statutory provisions have been given teeth:
 
- Non-payment of contributions has been re-criminalised, and employers who fail to pay them over could look at fines of up to R10m or imprisonment for 10 years;

- Directors and proprietors are now made personally liable for contributions;

- Late payment attracts hefty interest.
 
Another piece of legislation, which impacts on employers is the Protection of Private Information Act (Popi), which protects the confidentiality and privacy of personal information.

Typically, employers will be required to transmit sensitive information regarding health, age and income for benefit purposes, and will have to ensure that proper systems are in place to prevent the misuse of such information.
 
"They must comply with the fairly onerous POPI requirements. The breach of these provisions could also attract substantial criminal fines or imprisonment," explained MacKenzie.
 
Other areas employers ought to take note of are:
 
- The circumstances in which losses sustained through the misconduct of an employee may be recovered from pension benefits;

- Transfers of business under section 197 of the Labour Relations Act and their impact on pension benefits;

- When they may be liable for unfunded benefits – this requires a knowledge of the obligations under the fund rules;

- Applying for exemption when covered by a collective agreement or sectoral determination if they already participate other benefit schemes;

- The need for employee representation on boards of trustees;

- The impact of business rescue on pension contributions.

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pension funds  |  retirement  |  money
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