Transnet Pension Fund Amendment Bill: discussion & voting

Meeting report

PUBLIC ENTERPRISES PORTFOLIO COMMITTEE
30 August 2000
TRANSNET PENSION FUND AMENDMENT BILL: DELIBERATIONS AND VOTING

Relevant documents:
Transnet Pension Fund Amendment Bill
Commentary by the South African Institute of Chartered Accountants, the Aviation Union of Southern Africa (AUSA) and COSATU
Proposed Amendments to this Bill (see Appendix)

SUMMARY
The committee entered into deliberations over the Transnet Pension Fund Amendment Bill. The role of government relating to the extension of state obligations and state guarantees to the new pensioners' fund were especially discussed. A further point of concern was clause 7 subclause 14(B)(6) that allowed the board of trustees to amend the rules applicable to the fund. The Department having considered all the issues raised proceeded to draft the proposed amendments. The committee considered these newly drafted amendments and accepted them after a vote was taken. The Chair proceeded to sign the Bill.

MINUTES
The Chair, Mr Belot, asked the Department to make available the comments made by the South African Institute of Accountants, AUSA and COSATU so that the committee could read through them. He then asked the Department if they had effected any changes to the Bill in response to these comments. The Department stated that they contemplate making changes to rules 18 and 19 in Schedule 1.

The Chair then gave committee members the opportunity to question the Department on concerns that they might have with the Bill.

Discussion:
Clauses 5 and 6
Mr Msomi (IFP) asked the Department to clarify the provisions of clause 5 and 6 of the Bill. Mr Majila (Department) stated that in clause 5 all the obligations of the state and employer in the current fund is transferred to the second defined benefit fund. This fund would be a closed fund that will not allow new members to join it. Mr Majila continued with clause 6, stating that in the Transnet Pension Fund Act, Section 14, no specific mention is made of the "Legal Succession to the South African Transport Services Act, 1989", as is provided for in this clause.

Rule 24 (in the Schedule)
Ms Taljaard (DP) asked if it is the norm in the pension industry to have an annual increase at a rate of 2%, as is set out in rule 24. Mr Nkuhlu (Department) answered that it is the norm that government pensions are annually increased at a rate of 2%. Transnet is guided by the government standard as it also deals with the public sector. He emphasised that nothing in the rule prejudices pensioners as the 2% rate applies to everyone.

Clause 7
Mr Msomi was concerned with the provision in clause 7 subclause 14(B)(6), that provides for the board of trustees to amend the rules applicable to the fund. A representative from the State Law Advisors Board, Mr Netshitomboni stated that the trustees would only be able to change it in consultation with the company itself. Many committee members expressed concern over this issue. The Department suggested that the provision makes allowance for the rules to be amended by the Minister acting with the concurrence of the Minister of Finance. The committee agreed to this.

Ms Taljaard asked whether the provision in clause 7 subclause 14(A)(8), excludes the pensioners' only fund from guarantee. Mr Majila reacted that the government guarantee applies to both the existing fund and the newly created pensioners' fund. However those employees who change over from the existing fund to the proposed defined contribution fund would not be covered by the guarantee. The reason being that this fund will regulated by market forces.

Rule 12 (in the Schedule)
Mr Msomi asked why a distinction is made between a "Manager" and a "Principal Officer" in rule 12(2). Are they separate individuals? Mr Netshitomboni stated that it is common practice in companies for a Manager to act as the Principal Officer of the pension fund. So they are one and the same.

Rule 28
An ANC member referred to rule 28(1) and asked why mention is made of "savings" and "current" accounts when no mention is made of transmission accounts. Mr Nkuhlu proposed that they delete both "savings" and "current" and simply refer to it as an "account".

Rule 27
Mr Msomi asked why rule 27 was specifically provided for when it is accepted practice that when a pensioner is re-employed he should continue receiving his pension. Mr Nkuhlu stated it was provided for in the current Act and from a legal, contractual point of view they felt it better to include it.

Voting
Once the committee members had expressed their concerns, the Chair gave the Department the opportunity to formulate a document setting out their proposed changes as well as taking into consideration the feedback received in the meeting. When the Department returned after the lunch-break they presented their proposed changes and the committee proceeded to check them. All the parties voted in favour of the proposed changes and a motion was passed in this regard.


Appendix 1:
Proposed Amendments to the Bill

CLAUSE 7
On page 4 in line 11 after "of" to omit "the".

On page 4 in line 21 after Gazette to insert "by the Minister"

2. On page 4 from line 31 to omit subclause 6 and to substitute:

"(6) The rules set out in the Schedule may be amended by the Minister acting with the concurrence of the Minister of Finance."

SCHEDULE
RULE 2
On page 5 in line 11 to omit "(2)" and to substitute "(3)";

On page 5 in line 13 after "of" to omit "section 14 b of the Act" an to substitute:

" to be published by the Minister by notice in the Gazette" On page 5 in line 17 to omit "marital union" and to substitute "marriage";

On page 5 in line 20 to omit "illegitimate child" and to substitute "child born out of wedlock.

RULE 3
On page 6 in line 12 to omit "Section" and to substitute "section";

On page 6 in line 14 to omit "Actuary" and to substitute "actuary";

RULE 7
On page 7 in line 20 after "thirty" to insert "(30)"

RULE 9
On page 7 in line 33 to omit "Rules" and to substitute "rules"

RULE 10
On page 7 in line 51 to omit "(i)" and to substitute "(a)";

On page 7 in line 52 to omit "(ii)" and to substitute "(b)";

On page 7 in line 54 to omit "(iii)" and to substitute "(c)";

RULE 12
1. On page 8 in line 22 to omit "and Principal Officer" and to substitute "(Principal Officer)";

2. On page 8 in line 24 to omit "and Principal Officer" and to substitute "(Principal Officer).

RULE 13
1. On page 8 in line 44 after "Manager" to omit "and";

2. On page 8 in line 45 to omit "(4)" and to substitute "(3).

RULE 18
On page 9 in line 28 to omit paragraph (e) and to substitute:

"(e) When an audit report reflects that the Fund's accounts are not managed on a sound financial basis, the Board shall inform the Minister".

RULE 19
On page 9 from line 39 to omit subrule (1) and to substitute:
"When an actuarial report referred to in rule 18 (2) (b) indicate that the fund is not in a financial sound position the Minister with the concurrence of the Minister of Finance may direct the board to submit a schedule setting out arrangements designed to restore the fund to an financially sound position within 3 months from the date of receipt of such
direction, together with a report thereon by the actuary."

RULE 23
On page 11 in line 29 to omit "Rules" and to substitute "rules".

RULE 28
On page 12 in line 46 after "pensioner's" to omit "savings";

On page 12 in line 46 after "or" to omit "current account".