Pension Funds Amendment Bill; Taxation Laws Amendment Bills: briefing & adoption

NCOP Finance

19 June 2007
Share this page:

Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

19 June 2007

Chairperson: Mr T Ralane (ANC, Free State)

Documents handed out:
National Treasury Presentation on the Pension Funds Amendment Bill
National Treasury Presentation on the Taxation Laws Amendment Bill
Pension Funds Amendment Bill [B11-2007]
Pension Funds Amendment Bill [B11B-2007] as voted on by the National Assembly
Taxation Laws Second Amendment Bill [B19-2007]
Taxation Laws Amendment Bill [B18-2007]

Audio ecording of the Meeeting

In their briefing on the Pension Funds Amendment Bill, National Treasury focused on the background to amendments, problems and challenges and also outlined the proposed amendments. The Committee asked for clarity on deferred pensioners, the likelihood of amendments being contested in court, retrospectivity, inclusion of the bargaining councils and the powers of the Registrar.

National Treasury’s presentation on the Taxation Laws Amendment Bill focussed on simplifying lump sum formulas, penalties, VAT rulings and records, Secondary Tax on Companies, the Small Business amnesty, and the Diamond Export Levy Bill. The Committee’s questions focussed on foreign companies and double taxation, donations, record keeping as it relates to Research and Development and the formula for taxable lump sums.

Both bills were approved by the Committee.

Pension Funds Amendment Bill [B11B-2007]
In National Treasury’s presentation on the Pension Funds Amendment Bill, they explained the background to the laws covering the retirement fund environment, the problems and challenges and gave an outline of the proposed amendments.

Key problems in the regulation of the retirement funding environment included high costs, skimming of investment returns, investment losses and misappropriation of funds. Key challenges regarding retirement funds included lowering of costs through proper disclosure, improved governance, trustee training, appropriate application of surplus legislation, improved supervisory abilities of the Financial Services Board (FSB) and encouraging a culture of compliance.

Amendments proposed by National Treasury focussed on the inclusion of Bargaining Council funds, specific provisions for pension fund administrators, closing loopholes and clarifying surplus apportionment, jurisdiction of the Pension Funds Adjudicator, increased powers of the registrar, treatment of divorce orders and retrospectivity.

National Treasury also provided an overview of the surplus apportionment regarding the pension funds. Proposed amendments included clarification on certain aspects of the existing surplus legislation, the inclusion of deferred pensioners explicitly and authorisation of the Registrar to set certain requirements. It was also proposed that funds have to submit nil surplus returns and that umbrella funds have to apply the requirements of surplus apportionment on a participating employer level.

Increased powers of the Registrar were also proposed. In terms of the proposed amendments the Registrar should be able to intervene in the management of a fund if member’s interest were compromised. The Registrar should also be able to replace any board member who is not fit and proper. The ability of the Registrar to “name and shame” when in the public interest, was also proposed.

Regarding divorce orders the “clean-break” principle was proposed, to provide for the payment of benefits to a non-member spouse in terms of a divorce order, and permit payment of benefits. 

National Treasury proposed that amendments be made retrospective and deemed to come into operation on 7 December 2001. 

Following public comments on the Bill during its passage through the National Assembly, some changes has been made which included the tightening of definitions and wording. Section 14(7) of the amendments had been enhanced to eliminate the possibility of churning by intermediaries from underwritten to non-underwritten retirement annuities. Clause 40 B on retrospectivity has been tightened and broadened to include the submission of a “nil return”. A new clause 40 C was also included which focused on the scrutiny of regulations.  
Mr E Sogoni (Gauteng) said that it was important to ensure that a law would be passed which would stand the test if contested in court. He asked Treasury if the proposed amendments would be able to stand up to legal argument on the matter of retrospectivity.

Ms Ferreira replied that National Treasury cannot guarantee that retrospectivity would not be challenged. Treasury were however confident that they would be able to defend retrospectivity in court.

Mr Sogoni asked for clarification on the term deferred pensioners.


Mr Marius du Toit (Chief Actuary) explained that a deferred pensioner would be somebody who left their pension fund at age forty, for example, and leaves his contribution in the pension fund until retirement age. The pension fund would only pay out at retirement age.

Mr Sogoni asked if everyone was covered under the amendments, given that some people were excluded.


Mr Baron Furstenburg (Director: Financial Markets) said that the legislation would not cover people who were outside of the Act. The aim of longer term policy reform is to align everything to ensure that all pension fund members have equal protection.

Mr M Goeieman (Northern Cape) asked for clarification on Slide 15 of the Treasury presentation regarding the date January 1980 with regard to the issue of 2001.


Ms Jo-Ann Ferreira (Chief Director: Public Entities Governance Unit) explained that a lot of abuses happened during 1980 and 1990 which was the reason for the legislation being made retrospective from 1 January 1980. She said that the courts ruled against Treasury because the legislation was not specific. The proposed amendments aimed to make legislation specific. Ms Ferreira also indicated that certain sections were made retrospective from 2001 and those sections were also made very specific.

Ms Ferreira said that the Minister of Labour supported the legislation to include the Bargaining Councils. Given a lack of specific expertise the Registrar of Labour would also prefer that the Bargaining Council’s fall under the Registrar of Pension Funds. Mr Jurgen Boyd (Deputy Executive Officer: Pensions) said that there was only one objection raised from the Furniture Bargaining Council. He said that the Registrar of Labour approached his office and indicated that they do not have the infrastructure for administer Bargaining Council pension funds.

Mr Sogoni also asked for clarification on the Registrar’s powers to remove trustees without first going to court. He asked what processes and requirements have to be considered in order to remove trustees. Mr Boyd said that there is a process to be followed which consisted of an inspection. The outcome of an inspection would determine the course the Registrar would follow. Every party would be given and opportunity to respond to findings against them. If parties feel a decision of the Registrar was not fair would be able to lodge an appeal against findings.

Ms Ferreira clarified the definition of spouse as a person who is a permanent life partner, spouse or civil union partner, or a spouse in terms of the Marriage Act or Customary Marriages legislation. She said that the situation that was described in terms of pension fund would not arise.

Mr Ralane urged the FSB and Treasury to carefully monitor the implementation of the amendments.

Voting on the Pension Funds Amendment Bill
The Chairperson read the motion of desirability for the Bill and the Committee agreed to approve the B version of the Bill which included the amendments made in the National Assembly.

Taxation Laws Amendment Bills
The National Treasury team gave a presentation on the Taxation Laws Amendment Bill 2007. Professor Keith Engel (Chief Director: Tax Policy) said that the South African Revenue Services (SARS) had managed to collect more taxes and that a number of exemptions has been established to improve savings. Taxes on retirement funds would end from 1 March 2007.

Mr Franz Tomasek (General Manager: Legislative Policy: South African Revenue Services) focused on Secondary Tax on Companies (STCs) and its use and abuse in terms of corporate reorganisation. He indicated that amendments would ensure that companies did not get an exemption but a deferral. Mr Tomasek said that companies should not be able to use restructuring to escape paying tax where they were required to pay tax. Prof Engel also said that STCs would be reduced. The 12.5 percent Secondary Tax on Companies (STC) will be replaced with a phased-in 10 percent dividend tax.

Other amendments included sole proprietor relief, annuity payments to the family of former employees, Research and Development deductions and donations made to or by a traditional council, community, tribe or recreational clubs would not be subject to donations tax. Certain obsolete provisions were deleted from the Bill.

Amendments relating to VAT rulings and VAT records were also discussed by Mr Tomasek. He indicated that the Commissioner may issue binding “VAT class rulings”. Decisions regarding VAT rulings were going to be published.

With regards to the Small Business Amnesty, the amnesty application period and debt write-off application period had been extended.

Prof Engel also focused on changes to the Diamonds Act. He said that the aim of the Diamonds Export Levy Bill was to promote the cutting and polishing of diamonds within South Africa.

Mr Sogoni asked clarification on the control of foreign companies and double taxation.


Mr Tomasek replied that an anti abuse rule had been developed to ensure that subsidiaries of South African taxpayers did pay tax. If one was a resident of South Africa one had to pay tax no matter from where your income came. There were double taxation agreements with other countries to ensure that people do not pay double tax.

Mr Z S Kolweni (North-West) asked for clarification regarding employees helping ex employees.
Prof Engel said that if an employer wanted to help an ex employee or dependants of ex employee they should not be punished. Employers would be given a deduction but will not be forced to assist their ex employees.

Ms A Mchuna (ANC, KZN) asked for clarification on record keeping as it relates to Research and Development (R&D).


Prof Mr Engel said that when tax payers claimed for a deduction it was their obligation to keep records. In order to claim for tax deductions related to R&D it would be required for companies to provide information to the Department of Science and Technology. It would mostly be sophisticated companies who would undertake R&D and they should be able to keep records.

Ms Mchuna also asked for clarification on donations as indicated in the proposed amendments.


Mr Tomasek said that donations were only deductible if they were made to certain public benefit organisation otherwise they were not deductible. Donations under the R100 000 limit entailed no tax but the donation should not become tax deductible.

Mr Sogoni asked for clarification regarding taking out all the money from a fund or only being allowed to take out a certain amount. He also wanted an explanation of the calculations for taxable lump sums.


Prof Engel said that if it was a provident fund, then one can take out everything but in a normal pension fund, one cannot take out everything. The taxable lump sum formula indicates that the first R300 000 payout would be tax free and from R 900 000, one would be taxed at 36%.

Voting on the Taxation Laws Amendment Bill
The Chairperson read the motion of desirability for the Bill and the Committee agreed to approve the Bill.

Committee study tour planning
The Chairperson asked the Committee as to which country they should visit on their planned overseas trip. Russia was mentioned but no final decision was taken.

The meeting was adjourned.



No related


No related documents


  • We don't have attendance info for this committee meeting

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: