Special Pensions Bill: finalisation

Meeting report

FINANCE PORTFOLIO COMMITTEE
08 November 2005
SPECIAL PENSIONS BILL: FINALISATION

Chairperson:

Special Pensions Bill [B28-2005]
Proposed amendment to Special Pensions Bill

SUMMARY
The Committee adopted the Bill with amendments. It reported that it had recognised that there were potential beneficiaries who had met all but the age criteria. Given the original purpose of the principal Act, which had been to address people who had rendered service in the establishment of a non-racial democratic constitutional order, the Committee resolved that the Executive should urgently develop other measures to address the plight of those excluded purely on the basis of age. The cut-off date referred to in the Bill had been changed from 31 March 2006 to 31 December 2006. Benefits payable in terms of this Act would be taxable unless exempted under any applicable law.

MINUTES
Treasury was represented by Mr L Wort (Chief Operations Officer), Mr D Jurgens (Chief Executive Officer: Special Pensions) and Ms J Ferreira. Advocate H Smuts appeared on behalf of the State Law Advisor.

Ms Ferreira took the Committee through some amendments Treasury had made following the public hearings on the Bill. (See document attached).

Clause 5 Insertion of section 6A in Act 69 of 1996
Ms Ferreira proposed a change to the cut off date. The date should change from the 31 March 2006 to 31 December 2006.

Clause 6
Ms Ferreira proposed that the date in the proposed Section 6B of the Act should change to 31 December 2006. There would also be a limit to the number of benefits that could be received by a pensioner who had already received a survivor's lump sum benefit by 31 December 2006 to one. However, such a person may be granted a funeral benefit.

She also proposed an amendment to Section 6D of the Act. The amendment had been proposed by Ms B Hogan (ANC) to ensure that full time students could complete their studies. The benefits receivable by a dependant referred to in the proposed 6D(b)(ii) would be payable to the dependant until he or she had reached the age of 23, if he or she was a full-time student. The proposed section 6G was amended to provide that the pensioner, spouse or child must make an application for a benefit in terms of Part 1A of the Act by not later than 12 months. Paragraph (2) under the proposed section 6G should be deleted. There would be no room for the condoning of late applications.

Ms J Fubbs (ANC) noted that Treasury had suggested that the proposed section 6D should refer to the age of 23 and not 21. There had been some discussion and one of the points that came out of the discussion was that most people left high school at the age of 19 and then went to universities. This was based on the assumption that a person would not fail any grade/class. It took four to six years to qualify as an engineer, doctor or lawyer. It had been suggested that the age should be 25.

Mr Wort replied that Treasury had looked at benefits extended in similar kinds of retirement funds. Most children left school at the age of 18. Treasury had provided for a basic degree of four years and hence it decided to use the age of 23 as the cut off point. He was unaware of the proposal that the cut off period should be 25 years. The Bill was providing for a standard benefit provided by other funds.

Ms Fubbs said that there was a new school age of seven years. A lot of pension funds were established before the school age was set.

Mr A Moloto (ANC) said that most people would leave high school at the age of 19 and do a basic degree over a four-year period. He felt that the cut-off period of 23 years was justifiable unless the Committee wanted to cater for other cases like postgraduate degrees.

Mr S Asiya (ANC) wondered if the cut-off period would take the shortage of skills into account.

The Chairperson said that Treasury had indicated that it wanted to cover a basic degree. He wondered if it would be fair to expect the Fund to address the problem of shortage of skills.

Mr B Mnguni (ANC) said that the Bill had tried to cover basic education. People who would decide to study further should be allowed to apply for the extension of benefits.

The Chairperson said that there were other Funds that could assist people who were unable to pay for their education.

Mr Moloto asked why the Fund should be expected to cover postgraduate studies. He conceded that people who wanted to become doctors or lawyers were in a different category. However, most degrees could be completed within three or four years.

Mr Asiya said that the Bill should provide that the benefits would stop should a person decide not to go to university or other tertiary institution.

The Chairperson said that in principle the Bill covered a person up to the age of 18 years but had special provisions for students and orphans who suffered from permanent and total disabilities.

Ms Fubbs proposed that the Bill should indicate that it would cover first degrees.

Mr I Davidson (DA) said that the problem was that people who wanted to study law, for instance, would have to do a Bachelor of Arts (BA) and then a Bachelor of Laws (LLB). The suggestion by Ms Fubbs would mean that a person's benefit would be cut after completion of the BA.

Mr Wort said that the Committee should consider that the purpose of the clause was to recognise that the period of studying was considered as a period of dependence on the principal member. The general period recognised by other funds varied from 21 to 23 years. The Government Employees Pension Fund recognised students up to the age of 22. Most medical aids recognised a student up to the age of 21. The Bill was aimed at dealing with a secondary purpose. The primary purpose of the Bill was not to provide for school funding but to recognise the period of dependency for a reasonable time. The reasonable time would be four years after matriculating. There was no reference to undergraduate or post-graduate student. A registered dependant of the deceased pensioner who was studying at a registered institution could go for a one-year secretarial course and another course thereafter but would still be assisted if they had not reached the age of 23. A person would remain a dependant until he or she had reached the age of 23 no matter what studies they were undertaking.

Clause 12 Amendment of section 14 of Act 69 of 1996 as amended by section 3 of Act 21 of 2003 and section 1 of Act 30 of 2003
Ms Ferreira said that the principal Act only referred to pension and Treasury was now proposing monthly pensions to orphans or spouses. The section would also refer to the Social Assistance Act and not the Social Pensions Act. Ms Ferreira proposed a new paragraph (b) to provide that benefits payable in terms of this Act would be taxable unless exempted under any applicable law. The Revenue Laws Amendment Bill contained provisions to exclude funeral benefits from taxation. The Special Pensions Amendment Bill itself did not a specific clause excluding funeral benefits from taxation because it was not a money Bill. The current paragraph (b) would change to (c).

Mr Moloto asked if it was normal practice to tax benefits of this nature.

Ms Ferreira replied that funeral benefits were normally taxed as part of income.

Mr Moloto asked if a beneficiary of a special pension who received R4 000 per month would be taxed.

Mr Wort replied that the benefit would be taxed if it was above the tax threshold.

Clause 16
Ms Ferreira said that the Bill provided for the dissolution of the Board 60 days after the 31^st of March 2006. She proposed that the period should be extended to not later than 60 days after 31^st of December 2006.

Mr Asiya proposed that there should be consultation with the Committee before the Board was dissolved.

Mr Nene said that the Committee had a duty to conduct oversight on Treasury on a regular basis, especially on matters that had timeframes. It was expected that the Board would have to report on its dissolution in any event. He did not think that it was necessary to incorporate the suggestion into the Bill.

Mr Davidson said he had never heard of a legislation that referred to the guidance of a Portfolio Committee. Legislation normally referred to consultation with the Minister.

Mr Mnguni said that the Committee’s duty was to perform oversight but not to govern together with the Minister.

Mr Nene said that the inclusion of the proposal by Mr Asiya might have unintended consequences.

Mr Asiya asked what was the reasons were for the amendment. Treasury had suggested a cut-off period of 31 March 2006 and was now saying 31 December 2006. The question was whether all people in the rural areas would have been covered by the 31 December 2006.

Mr Y Bhamjee (ANC) said that the Bill was an extra ordinary piece of legislation and required an extra ordinary approach. Provinces had legislation that required consultation with Committees. The Committee was free to include such a provision should it strongly feel that it wanted to be consulted before the Board was dissolved. It was important to bear in mind the purpose of the Act. The Committee should be fully satisfied that every person who qualified for a benefit had been reached before the Board could be dissolved. He asked what would happen, after the Board had been dissolved, should one find that some people had been left out.

Mr Mnguni said that perhaps members were worried that the dissolution of the Board might happen too soon and leave some people still not receiving the pensions. The Committee could call the Board to explain how many people had been captured and how many were still outside the system. The Committee could propose that there should be an extension of the cut-off period should it feel that some people had still not been reached. He disagreed with including of the words "in consultation with the Committee".

Ms Fubbs agreed with Mr Mnguni. She said that the words "after the Board has completed its activities" had been replaced by the words "as soon as possible after the commencement of the Special Pensions Amendment Act, 2005, but not later than 60 days after 31 March 2006". She was concerned that more emphasis might be placed on dissolving the Board as soon as the Act had come into operation. She proposed that the clause should read "the Minister must dissolve the Board not later than 60 days after 31 March 2006". It was the Committee's constitutional function and obligation to exercise robust oversight. The fact that it did not do so was not a dereliction on the part of the law but on the Committee's side.

The Chairperson asked if Treasury was happy with the proposal by Ms Fubbs. Treasury agreed with the proposal.

Clause 18
Ms Ferreira said that this clause contained a technical correction and was aimed at providing clarity and ensuring practical implementation of the legislation. She proposed the inclusion of the definitions of "child" and "orphan". The Bill contained a traditional or western definition of "orphan". The definition had been extended to include children who had been abandoned. The definition of a "child" would include a full-time student who was under the age of 23 and a person who suffered from a permanent and total disability on the date of the death of the pensioner, irrespective of his or her age. Paragraphs (d) and (e) would change to (e) and (f) respectively.

Clause 20
Ms Ferreira proposed that the words "natural child" be replaced by the word "child".

The Chairperson took the Committee through the Bill clause by clause bearing in mind the proposed amendments.

Clause 10
Mr Asiya clause 10(b) concerned about the cut-off age referred to in clause 10(b). The Committee had heard how people felt about the cut-off age.

Mr Moloto said that Mr Asiya had raised an important issue. People who qualified for benefits were not receiving them due to age.

Mr Gabela asked if Treasury did not have another way of addressing the concerns raised by members of the public on the issue of age.

Mr Wort said that Treasury had accommodated all that it could. A programme to ensure that Treasury reached all potential beneficiaries would soon be launched.

Mr Smuts said that the date referred to in the long title of the Bill should also change to 31 December 2006.

The Chairperson read the motion of desirability of the Bill and the Committee agreed that the Bill was desirable. Mr Davidson said that his caucus had not formally considered the Bill. He reserved the DA's position on the Bill and stated that he did not see any problems coming from the party.

The Chairperson read the report on the Bill. The Committee reported the Bill with amendments. The Committee further reported that it had recognised that there were potential beneficiaries who had met all but the age criteria. Given the original purpose of the principal Act, that is, to address people who had rendered service in the establishment of a non-racial democratic constitutional order, the Committee resolved that that the Executive should urgently develop other measures to address the plight of those excluded purely on the basis of age.

Mr Gabela proposed that the Committee's report should also provide that there be a quarterly monitoring of the implementation of Bill/Act. Mr Bhamjee proposed that the Executive should report to the House on measures developed to assist people. The Committee agreed to the suggestion and adopted the report.

Adoption of Committee reports
The Committee adopted its reports on the annual reports of National Treasury, Statistics South Africa and South African Revenue Services.

The meeting was adjourned.