Transnet Pension Fund Amendment Bill: briefing by Department

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Public Enterprises

13 September 2006
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Meeting Summary

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Meeting report

 

PUBLIC ENTERPRISES PORTFOLIO COMMITTEE
13 September 2006
TRANSNET PENSION FUND AMENDMENT BILL: BRIEFING BY DEPARTMENT

Acting Chairperson:
Mr P Hendrickse (ANC)

Documents handed out:
Transnet Pension Fund Amendment Bill: Version as at 5 September 2006 following meeting with State Law Advisors
Transnet Pension Fund Amendment Bill: 5 September 2006 (showing different drafts)
Transnet Pension Fund Act 62 of 1990
Explanatory memorandum on the Transnet Pension Fund Amendment Bill
PowerPoint presentation: Transnet Pension Fund Amendment Bill
Transnet Pension Fund Amendment Bill [B30-2006]

SUMMARY
The Department of Public Enterprises briefed the Committee on the Transnet Pension Fund Amendment Bill. The Transnet Pension Fund had been established in terms of the Transnet Pension Fund Act in 1990 as a defined benefit fund. In 2000 an amendment to the Act permitted Transnet to establish new funds, which were set up as defined contribution funds, including the Transnet Retirement Fund. The Pension Fund was closed to new members as from 2000 and most of the Transnet employees had transferred to the Retirement Fund. Both funds had certain tax benefits to members, as they related to State owned enterprises. Transnet had subsequently been restructured and had disposed of some of its non-core assets. The employees working for the disposed units (such as SAA and Metrorail) then transferred to the pension funds of the new disposed-of entities. The purpose of this Amendment Act was to ensure that the tax protection that they had enjoyed under the Transnet schemes would be retained in respect of the portions accrued while they were employed at Transnet. Transnet, the trustees of the three Funds, and Cabinet had approved the draft amendments. The unions had been fully consulted and were also in agreement. The tax benefits would not apply in the case of employees who had transferred to Ernst & Young, a private enterprise, but the unions had been fully involved in this process. The unions had agreed with the draft as they were satisfied with other arrangements made.

A clause-by-clause briefing noted that the Bill aimed to be retrospective to 11 November 2005 to fall in line with the Transnet restructuring. Clause 5 contained most of the substantive amendments. The separation of the three sub-funds, and the procedure for valuation of these funds, was explained. The amendments permitted the pension benefits to be attached not only pursuant to the Divorce Act, but also the Maintenance Act. There was no certainty whether Transnet would be obliged to register under the new legislation relating to the Pension Funds Act, which was in the process of being drafted, but an option was included in this legislation should Transnet wish to do so.

Members’ questions sought clarity on the principles that had been embodied in the amendments. Both the Department and Transnet explained that the drafters had been careful to try to allow for as much flexibility as possible, and that the protection of employees was the primary purpose. Specific questions related to the employers’ right to decide if it wished to be a member of the new fund, the protection available to employees, clarification of whether the Retirement Fund was a multi-employer fund, the involvement of the unions, and the extent to which the impact of the sale of non core business was reflected in this legislation. Further queries were raised on the retrospective operation of the Bill, the new Rules, and whether it was correct that the Minister of Public Enterprises should have the right to settle disputes in view of a possible conflict of interest when State Owned Enterprises were involved. The Committee also raised, but did not debate, the principle whether Transnet should be able to recover losses from fraud or theft from pension benefits.

Members suggested that a sub-committee should further discuss the Bill with the Department and Transnet, and only some matters would need to come back for further deliberation by the full Committee. It was unlikely that public hearings were necessary, since the stakeholders had been fully involved in the drafting process. The Committee would, however, call for public comment.

MINUTES
Principles and Purpose of the Transnet Pension Fund Amendment Bill: Presentation by Department of Public Enterprises
Ms Ursula Fikelepi, Chief Director, Department of Public Enterprises (DPE), handed out the draft Transnet Pension Fund Amendment Bill as of 5 September 2006 after a meeting with the State Law Advisors. In answer to a question she clarified that the different colours used in the text of the Bill had merely indicated the different drafts, and that the Bill represented the agreed version, rather than alternative suggested wordings.

Ms Fikelepi stated that the Transnet Pension Fund (TPF) was established by the Transnet Pension Fund Act of 1990, and was set up as a defined benefit fund. She clarified that this meant that the employers had guaranteed the benefit that would accrue to members, which gave the employers a strong liability to ensure that the funds were invested in a way that would cover the guarantees. All Transnet employees at that time were obliged to become members of the Fund.

This Act was amended in 2000 to establish the Transnet Second Defined Benefit Fund for pensioners, and to allow Transnet to establish other new funds, such as the Transnet Retirement Fund (TRF), which was a defined contribution fund, as opposed to a defined benefit fund. Defined contribution funds had less impact on the employer’s liability as the employer merely guaranteed to return the amount of the contribution. Most employees had transferred voluntarily to the TRF with effect from 1 November 2000. On that date the TPF then was closed for new membership.

The funds under the TPF and the TRF were protected under the Income Tax Act in the sense that the accrued lump sum that related to membership prior to 1 March 1998 was not taxable.

Transnet then restructured, and as part of that process disposed of certain non-core assets. Ms Fikelepi gave the examples of SAA and Metrorail, as well as the internal audit function. The employees of the disposed assets then transferred to the new owners (state owned enterprises or private sector) and joined the pension funds of the new owners. The new pension funds were not necessarily protected from income tax, and therefore some of the employees stood to lose the special tax protection. For this reason Transnet, the Department of Public Enterprises and the Department of Labour had therefore agreed, in April 2006, that the employees of State Owned Enterprise (SOE) businesses should be permitted to continue their membership of the TRF, and the TPF should also be restructured to permit some employees to continue their membership of this Fund, in order to retain the tax advantages. The amendments now being tabled gave effect to this agreement. Ms Fikelepi indicated that the drafts had been approved by Transnet, the trustees of the three Transnet pension funds and Cabinet.

The main principles contained in the amendment Bill were that Transnet Pension Fund would remain one legal entity, but would now be an independent multi-employer fund. It would be renamed the Transport Pension Fund. The SOEs who now owned the former Transnet assets would join as the principal employers, and would hold their own sub-funds which would include the active employees. The sub-funds would have clearly defined and ring fenced assets and liabilities, which would be determined by the Trustees, the fund valuators and actuaries. Each principal employer would take sole responsibility for the guarantees of its own sub-fund. Although there was only one legal entity, the amendments had provided that sub funds would be regarded as separate, although they would, if they wished, have the opportunity also to work together. General Rules would be drafted to control governance, costs and statutory matters. Special Rules would be formulated for each fund, and would cover control, service, contributions and benefits. There were two levels of trustees; the Board would apply the General Rules and deal with governance, and the other trustees would deal with their own fund under the Special Rules. The Rules were in the process of being drafted and could only be passed once the establishing legislation had been passed.

Ms Fikelepi stressed that the amendments would maintain the benefits and tax treatment of the former Transnet employees. Whenever Transnet assets were disposed of, provided the new employer agreed, employees of the new employer would have the option to remain in the Transport Pension Fund. Although most of the amendments related to the former Transnet Pension Fund, the same principles would apply also to the Transnet Retirement Fund. The TRF would remain as a Transnet Fund. It was not to become a multi-employer independent Fund, but the SOEs who had taken over the former Transnet businesses would have the option to join as participating employers. This would mean that the existing employees of the SOE could remain members of the TRF. New employees of the SOE who had never previously been members of the TRF would not, however, have the option to join.

Discussion
The Acting Chairperson suggested that members ask questions of clarification at this point, before dealing with the specific wording of clauses. He stated that the Committee would be asking all stakeholders for their comments on the Bill and would also call for public comment. During that process it would still be possible to examine each clause of the Bill so that the Committee had gained a good insight into the Bill by the time that the comments were received.

The Acting Chairperson asked Ms Fikelepi to confirm his understanding that the Transnet Pension Fund was a defined benefit Fund, which had been closed since 2000. It consisted of Transnet employees only. The Retirement Fund, on the other hand, was still open to new Transnet employees and employees who had at one stage been employed by Transnet. Any employees who had not been employed by Transnet, but who were employed by SAA or Metrorail would not be able to be members.

Ms Fikelepi confirmed that this was correct.

Mr J Stephens (DA) asked whether the employer or the employee was given the option to remain in the TRF.

Ms Carla Prentice (Executive Manager, Transnet) replied that if the new SOE employer decided to become a participating member its employees could elect to remain in the TRF. If, however, the employer decided not to become a member, the employee could not force it to do so.

Mr Stephens asked how it was possible for employees to join TRF if it was not a multi-employer fund. He felt that the slide presentation was unclear in this regard.

Ms Prentice clarified that the TRF was not to be regarded as a multi-employer fund for all purposes. For a specific period it would in a sense be a multi-employer fund, but only insofar as current members who had opted to remain were concerned. In other words, employees of SAA and Metrorail who had formerly worked for Transnet could remain. New employees of SAA and Metrorail were not permitted to join. This was an anomaly, but had been done deliberately in order to protect rights.

Mr Stephens asked why, in that case, sub funds were not created, similar to the new Transport Pension Fund.

Ms Fikelepi replied that in principle TRF would remain a Transnet fund. It was not necessary to create sub funds, as no new outside employees would be joining it.

The Acting Chairperson asked if former Transnet employees who had now moved to SAA would have the option to join the SAA pension scheme.

Ms Fikelepi confirmed that they would have the option either to remain with the Transnet scheme or to move to the SAA scheme. Any new employees of SAA would not have the option and would go directly on to the SAA scheme.

The Acting Chairperson referred to an earlier question of Mr Stephens and asked for confirmation that if the new employer decided not to apply to participate in the TPF or the TRF, the employee would not have the option to do so.

Mr Y Carriem asked why the Bill gave the option to the employer, when surely the Unions would wish to protect the interests of the employees. He felt that the Unions would not accept this clause.

Ms Prentice responded that the option was indeed given to the employer whether or not to apply for participation in the Transnet schemes. However, this did not mean that the employee was necessarily deprived of any rights. The legislation had been deliberately worded so that it did not interfere with the ability of Transnet and new purchasers of former Transnet businesses to negotiate the terms of what was essentially a purely commercial transaction. A new employer who decided not to apply to participate in the Transnet schemes would have to justify the terms and conditions under which the employees were being taken over, in terms of the Labour Relations Act. An employee who felt that his or her vested rights were being infringed did have other remedies available. She added that the Unions were aware of this clause and were happy with it. In fact both SAA and Metrorail would be participating in the Transnet schemes, but there was an understanding that the matter would be re-debated in five years time, and if there was a better option at that time, which satisfied the Unions as well as the management, then they would consider withdrawing. 50% of the Trustees were Union members, so that there was protection there too. Although there was no suggestion of a “back-door” approach, Transnet did want some flexibility to be written in.

Ms Fikelepi added that this was all part of the collective bargaining chain. Unions would take up with the employers any questions relating to pension benefits and these drafts reflected what had already been agreed upon with the Unions.

Mr Y Carriem (ANC) noted that this draft had been prepared after negotiation between all stakeholders. He suggested that the presenters should focus on the principles in this discussion and if necessary come back at a later stage to deal with the wording of each section. He pointed out that many Members, including himself, did not have much experience in pension matters and therefore needed very clear explanations. He felt he needed an explanation on the difference between retirement and pension funds, the difference between defined benefit and defined contribution funds and the reason why one fund should be open and the other closed. He was not insisting upon an answer now, and felt that perhaps the Acting Chairperson and a few other members could set up a sub-committee meeting to get answers to these kind of questions of principle, and then report back to the full Committee. He would like these issues explained for his own understanding.

The Acting Chairperson agreed with this suggestion and said that he would like the presenters to give his the names of stakeholders and the names of the non-core businesses that were being disposed of.

Ms Fikelepi replied that she would be happy to put any answers in writing or discuss other matters outside the meeting. For the moment, she could give a brief response. A defined benefit fund was one where the employer set out for the employee a defined or stated benefit, such as “75% of annual salary as at a certain date” and on retirement that previously defined benefit would be paid out. A defined contribution fund was one which guaranteed that the contributions made would be paid out. The defined benefit funds were more risky for employers as they would have to meet these guarantees even if their investments had not met these amounts. Defined contributions could be set aside as they were made. One of the main reasons for the closure of the Transnet Pension Fund, a defined benefit fund, had been the exposure to liability. The Transnet Retirement Fund, on the other hand, was a defined contribution fund, and this would also answer the earlier question on why no sub-funds were needed. Whatever the employee put in would be ring fenced for that employee on retirement. Essentially this type of Fund was easier to run.

The Acting Chairperson commented that most schemes in the past were defined benefits but the Unions had raised the principle that the funds were essentially employee funds and the employees should have a greater say in how they were being invested. If the money market collapsed then the employees stood to lose everything in a defined contribution fund, but if the markets did well then the funds would grow. There was no cross-subsidisation of other employees and an employee’s contributions were not affected at all by how many other members were contributing.

Mr Carriem asked whether the amendments had tried to cover the impact of the sale of non-core business agreements.

Ms Prentice replied that they tried to do so. However, it had to be remembered that these were commercial transactions. The exact terms and conditions of each employee’s payouts would be covered in the sub-fund agreements, which would specify whether SAA, for instance, had agreed to take on all the obligations of Transnet, or only some. In respect of active employees, there was a straight transfer. Pensioners’ rights would be determined by the guarantees. The trustees of the sub funds would have to look to the values of the liabilities transferred and the sellers’ and buyers’ actuaries would also be consulted to make sure that the assets and liabilities matched, and to determine the values to be fixed for shares, properties and so on.

Ms Fikelepi added that all legislation was prescriptive in nature but DPE and Transnet had not wanted to prescribe obligations that unfairly burdened any entity. It was preferable to leave commercial issues to be discussed in their proper forum.

Mr Stephens asked if a copy of the agreement with the Unions after the most recent strike was available.

Ms Fikelepi responded that an agreement had been reached and she would obtain a copy and make it available to the Committee.

Clause by clause explanation of the Bill and deliberations by members
Ms Fikelepi, at the request of the Acting Chairperson, then proceeded to discuss each clause of the Bill, reading from the Draft Version as at 5 September 2006, which she had previously tabled. The Acting Chairperson suggested that comments and queries be raised as the clauses were tabled.

General
The drafters had proposed that the amendments take place retrospectively, with effect from 11 November 2005, which was the date of amendments to the Transnet Retirement Fund on restructuring. She pointed out again that there were not many amendments relating to the TRF as much of the detail concerning membership was contained in the TRF Rules, not the Act.

Clause 1
Ms Fikelepi stated that the definitions had either been inserted to explain and define new concepts, or to remove or replace old definitions that now needed to be brought in line with the new concepts. There was nothing contentious in the definitions.

Clause 2
Section 2 of the old Act would be replaced in its entirely and replaced with a purpose clause. The Act had already undergone so many amendments that the drafters felt that a purpose clause in the Act would make for easier reading.

Mr H Bekker (IFP) asked for assurance that all parties had agreed to the retrospective operation of the Bill, as this was not usual.

Ms Fikelepi assured him that this had been workshopped extensively and all, including the Union representatives of Transnet, had agreed to the retrospective amendment.

Ms Prentice added that the drafters had investigated whether anybody would be prejudiced and nobody had indicated that they were opposed to this.

The Acting Chairperson asked whether the schemes were currently operating in terms of Rules.

Ms Fikelepi replied that they were, but that more Rules and revisions would be added as the new structure came into play.

Clause 3
Ms Fikelepi explained that this cause allowed for the proportional allocation between employers. The Minister of Public Enterprises, with the concurrence of the Minister of Finance, would have the final determination of any dispute, and would have to take into account the matters listed.

Clause 4
Ms Fikelepi stated that the old Section 4 of the Transnet Pension Funds Act would be deleted and replaced. This was done because the Section contained references to old definitions and funds. This new clause now provided for recognition of periods of service under the old Railways and Harbours schemes.

Clause 5
This clause contained most of the main amendments.

Clause 5.1 dealt with the introduction of the umbrella structure, now to be named the Transport Pension Fund.

Clause 5.2 and Clause 5.3 deleted references to the old rules and requirements relating to the first establishment of the Transnet schemes.

Clause 5.4 dealt with the introduction of the two levels of General and Special Rules. Oversight and monitoring of the Rules remained with the Minister of Public Enterprises, acting with concurrence of the Minister of Finance. These two Ministers would play a similar role to the role that the Financial Services Board played in respect of other pension funds. None of the Transnet pension or retirement schemes fell under the Pension Funds Act, although Transnet would have the option to apply to fall under this Act in future, if it wished. However, the drafters had taken into account the fact that the pension funds legislation was currently being redrafted and they were unsure whether the new draft would require Transnet to be regulated under this legislation. The drafters had not wished to prescribe or anticipate anything. Amendments could always be made to the Transnet legislation if necessary at a later stage when there was clarity on this issue.

 The Acting Chairperson stated that the Financial Services Board ensured that the employees were protected. He enquired if the Minister of Public Enterprises had that primary responsibility. Since the Minister was part of the government that owned the State Owned Enterprise, he asked whether the Minister would not be perceived to have a bias in favour of the employer.

Ms Fikelepi replied that although the Minister was part of government, he would have to act in the public interest. The idea was that there should be an impartial arbiter in the event of dispute. The drafters tried not to give the Minister broad and general powers, and had, on the advice of the State Law Advisors, curbed the Minister’s discretion as much as possible.

The Acting Chairperson asked that the presenters make a note of his concern, as this would be a matter for further discussion when the Committee considered the specific wording of each clause. Trustees would have a responsibility neither to employer nor employee, but to the Fund, and he was concerned that the position of trustees should not be weakened, and that adequate protection be given to employees.

Mr Stephens was concerned that there might also be a real possibility of a conflict of interest, since the Minister and government were the guarantors of obligations. An arbiter would have to weight up the financial interests of the guarantors and the interest of employees.

The Acting Chairperson asked that this comment also be noted and raised for discussion at a later point.

Clause 5.5 noted the binding effect of the Rules.

The Acting Chairperson asked if he could obtain a copy of the Rules.

Ms Fikelepi confirmed that the current rules were extensive but she could provide a copy. The new Rules were still being drafted, and the drafters were consulting with DPE and with National Treasury.

Clauses 5.6 and 5.7 dealt with the setting up of Sub-Funds and the writing and approval of Rules. The powers and responsibilities that were originally assigned to the Board of the Transnet Pension Fund were now reassigned. Clause 5.7 also dealt with transferral of employees from one sub fund to another.

Clauses 5.8 and 5.9 contained administrative requirements for the Sub-Funds.

Clause 5.10 inserted a new subsection in the Act to prescribe for the contents of the General Rules.

Clause 5.11 dealt with administration of the Sub Funds. Ms Prentice pointed out that the separation of the three Sub-Funds had been extensively debated. Some stakeholders thought that they should always work together, others believed that it was necessary to allow for separate administration. In order to get best economy of scale they would probably in practice work together but the Bill was worded so that they had the option to run on their own, or together.

Clause 5.12 inserted a new subsection dealing with the contents of the initial special rules of a sub fund, relating to benefits and rates of contribution. This was similar to a current TPF Rule.

Clause 5.13 and 5.14 dealt with employer guarantees and liability. An employer would not have liability to the TPF but would be liable only for its own sub-fund. This provision was part of the ring fencing process.

Clause 5.15 dealt with payments by an insurer. A Fund would be able to transfer to an insurer such as Old Mutual to undertake the payment of pensions.

Clause 6
The heading and certain subsections of Section 6 of the Act were amended to deal with actuarial evaluations of the new Transport Pension Fund. This Fund was to be valued at three-year periods. The Sub-Funds would be valued also as if they were separate entities. Although they did not have status as separate legal entities, they would be treated as such for valuation purposes so that they could be ring fenced more easily and so that funds were not mixed and diluted. The Minister required only one actuarial report, but Transnet had been concerned to ensure that no one Sub-Fund had a surplus while others were running at a loss. This provision was therefore aimed at financial soundness.

Clause 7
This clause dealt with benefits and provided that no pension or lump sum or right to such benefits was capable of being assigned, transferred or ceded, nor was liable to attachment, subject to the provisions of the Divorce Act and the Maintenance Act.

The Acting Chairperson asked whether housing loans would also fall under this clause.

Ms Fikelepi confirmed that they would not; the exceptions were limited to divorce or maintenance obligations.

Clause 8 provided that if a person was insolvent the pension would not form part of the insolvent estate assets. The clause further provided that annuities would enjoy the same protection.

Clause 9 dealt with recover of debts due to an employer from the pension benefits payable on dismissal or retirement. Ms Prentice stated that the wording remained substantially similar to what was already in the Transnet Pension Fund Act. The wording was rather ambiguous, and Transnet had wanted to amend this section further to clear up the ambiguity, but other stakeholders had differing views. Therefore, it was decided to leave the wording the same (subject to the amendment of the name of the pension fund) to speed up the process and allow the Bill to go through.

Mr Stephens asked, as a matter of principle, whether Clause 9 was wise. Whilst he understood why Transnet would want to recover any money lost through fraud or theft, he wondered if it was in the best interests of the individual or the State to recover it from the pension money. The individual would have to live after being dismissed or retiring, and if he had no pension he would become a social liability.

Ms Prentice stated that she understood the Member’s concerns, but this provision had always been part of the legislation. The principle of attachment of pension benefits had not been discussed; the focus of discussions related to where the onus of proving that a member had resigned or absconded lay.

The Acting Chairperson stated that in principle, the employer was of course entitled to recover losses, but whether they could be recovered from the pension perhaps needed to be debated in more detail.

Clause 10 dealt with deduction of costs owing to a third party for housing. It would facilitate the non-core disposals since Transnet had also transferred some housing under its former control and provided finance. Certain other technical amendments had been made.

Clause 11 and Clause 12 contained technical amendments only. Ms Fikelepi stated that the drafters had not believed that any obligations due to Transmed were applicable and therefore it had been decided not to amend the wording of Section 11 of the Act in this regard.

Clause 12 added a further point in relation to Transnet guaranteeing the financial obligations of the Transnet Second Defined Benefit Fund. The reference requiring a principle employer to provide guarantees in respect of the sub-funds was now contained in Clause 5.

Clause 13 contained the reference to Transnet being permitted to apply for registration of the Transnet schemes under the Pensions Fund Act. Ms Fikelepi reminded Members that there was no certainty as yet whether Transnet would be obliged to be registered. Section 13(2)(c) of the Transnet Pension Fund Act had now also been amended in so far as the Income Tax Act was concerned. This would mean that even if Transnet were to apply or were to fall within the Pension Funds Act the tax benefits would still apply.

Clause 14 dealt with membership of the Transport Pension Fund or the TRF. It essentially set out the categories of new and existing members, and defined the date as 11 November 2005. It confirmed that past employees of Transnet who had now moved to new SOEs could retain members but new members who had never been part of Transnet could not join. The Department of Labour had wished new SOE members to be allowed to become part of the TRF, but Transnet did not; it wished to keep it as essentially a Transnet Fund.

Mr Stephens commented that there were actually three steps in the procedure. Firstly, the new employer must decide to become a new principal employer, secondly must apply to Transnet and be approved, and thirdly the employee would then have to exercise his or her option whether to stay in the Transnet scheme.

Ms Fikelepi confirmed that this was correct.

The Acting Chairperson noted that TPF was a closed fund, and TRF therefore applied to current and former Transnet employees. He enquired what would happen if the SOE was not approved as a new principal employer, in particular whether the employee’s actuarially assessed amount in the Fund would then transfer to the SOE pension fund.

Ms Prentice stated that this would normally happen, but if not, then the labour legislation would require SAA to explain why a different amount would be transferred, and the Rules of the fund would then apply. When an employee exited the Fund, by becoming employed elsewhere, he or she could choose where the savings should be transferred; to a new pension fund, to a retirement annuity or to a preservation fund.

Mr Stephens enquired whether a member exiting the TPF fund would find that the benefits were no longer defined benefits and would not be guaranteed.

Ms Prentice replied that this would not necessarily be the case. The labour legislation would not prevent the transfer from a defined benefit to a defined contribution fund providing that the conditions were reasonably comparable.

Ms Fikelepi added that the labour legislation would apply normally in the case of a sale of business. However, even when a sale of shares was involved the drafters had tried to follow the same principles. Members should remember that the employee was protected by other legislation also, so that this Bill did not have to provide for protection of the terms and conditions of employment.

Clause 14 provided that the protection of income tax benefits would only apply when the business had been sold to an SOE in the public sector. The employees of the internal audit function that had now been sold to Ernst and Young would not have the options available to the employees of SAA and Metrorail. This was because a private enterprise was treated differently for tax purposes. However, the trade unions were satisfied with the provisions that had been made for employees and had agreed to this.

Ms Prentice added that the preservation of benefits in relation to pre-1998 tax rights was worked over a certain formula. Employees who stayed in the Fund for more than a certain period would in fact be diluting their rights so that preservation in the Transnet scheme would not necessarily preserve their rights to full advantage. There was not necessarily any cost to the employee in moving to another scheme as some other funds did offer no brokerage or low brokerage fees.

Ms Fikelepi added that clause 14 had further cleaned up the references to old legislation and old schemes. She pointed out that it further provided that if one of the new purchasers, such as SAA, were to sell to Transnet or to Metrorail, its employees would be able to stay in the Fund. However, if an SAA employee were to resign to join Transnet or Metrorail he would have to exit the Fund.

Clause 15 dealt with Section 14A of the principal Act. Transnet had already, under that Act, been given the power to establish the TRF, and this section was not amended, other than minor textual amendments.

Clause 16 dealt with Section 14B of the principal Act, which had related to the establishment of the Second Defined Benefit Fund. Once again no major amendments had been made. The amendments were textual only. That Second Defined Benefit Fund was not part of the current process.

Clause 17 dealt with the Minister’s powers to make regulations, and the wording had been changed to ensure that the powers must pertain specifically to the matters contained in this legislation.

General discussion
Mr C Wang (ANC) felt that it would be helpful if members could received a graphical representation of all the funds, which clearly indicated what type of funds they were.

Ms Fikelepi confirmed that she would prepare this.

The Acting Chairperson asked also for an explanation of acronyms, and for definitions to be included (such as a brief definition of a defined benefit fund).

Mr Wang also asked if employees would be given the General and Special Rules before joining the Fund.

Ms Prentice confirmed that the Trustees had to confirm to all members whenever the rules were approved and they were also available on a website. She pointed out that since 50% of trustees were from the Unions, there would have been Union input into the Rules.


Mr A Mokoena (ANC) asked if the pensions would be paid to dependents of a member on death.

Ms Fikelepi replied that this point had been briefly touched on. The question of liabilities would have to be discussed as part of the commercial agreement of sale of the non-core assets, and would depend upon the general rules of the Fund.

Ms Prentice added that if the sale to the SOE had contained a specific obligation that spouses and children would receive the pension then they would do so. If not, then Transnet would pay. The SOE employee benefit would remain the same, although it may be paid from a different source. The exception would be the employees of Ernst and Young, who were obliged to exit the Fund altogether.

The Acting Chairperson asked who monitored the payments.

Ms Prentice replied that the Transnet Restructuring Committee had been set up to meet with Union representatives. There was a Pension subcommittee and a Benefit subcommittee, both of which had examined matters together with advisors from the Unions and management.

The Acting Chairperson commented that it seemed that the only difference of opinion on the Bill seemed to be whether new employees should be permitted to join the Transnet schemes, but this would be raised again when the specific wording of the Bill was considered.

The Committee Chairperson (Mr Y Carriem) took over for the last part of the meeting to note that some issues probably did not need a full discussion by the Committee again as some queries could be settled outside the meeting. It was likely that public hearings were not necessary if the Committee was happy that all stakeholders had been represented and heard. The presenters would be able to clarify some of the issues raised and provide the documents requested to Members before the wording was considered at a meeting during the next Term. He noted that the Committee would be dealing with the Annual Reports in the following week.

The meeting was adjourned.

 

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