Transnet Pension Fund Amendment Bill: deliberations

PUBLIC ENTERPRISES PORTFOLIO COMMITTEE
17 October 2006
TRANSNET PENSION FUND AMENDMENT BILL: DELIBERATIONS

Chairperson: Mr P Hendrickse (ANC)

Documents handed out:
Transnet Pension Fund Amendment Bill: B30-2006
Transnet presentation on Bill – as at 13 October 2006
South African Transport and Allied Workers Union (SATAWU)
Proposed additional amendments on the Transnet Pension Fund Act

SUMMARY
The Committee considered the Transnet Pension Fund Amendment Bill by seeking clarity on the specific wording of the Bill. A clause-by-clause informal discussion led by Transnet clarified that the Bill would apply retrospectively to 11 November 2005. The discussions also noted the separation of the three sub-funds and the procedure for valuation of these funds. The amendments would permit the recovery of debt from pension benefits only under the provisions of the Divorce Act, 1979 and the Maintenance Act, 1998. Deliberations will continue on 20 October.

MINUTES

Clause-by-clause Discussion of the Bill and deliberations by Members
Ms C Prentice (Transnet Project Manager), at the request of the Chairperson, proceeded to discuss each clause of the Bill. The Chairperson suggested that Members raise comments and queries as a clause is tabled.

General
The meeting of 13 October 2006 mandated a sub-committee to further discuss the Bill with the Department and Transnet. The following deliberations are as a result of the sub-committee discussions and only key issues are raised. 

Clause 1
Ms Prentice stated that the amendments are intended to protect members of Transnet and the State-owned enterprises (SOEs). Clause 1 deals with definitions where actuary is defined as the person appointed to valuate the fund. A valuator is a consultant specifically appointed to valuate the fund. Dependent pensioners are the active members who receive benefits such as spouses and children. An employee was defined as a Transnet or SOE employee. Ms Prentice commented that the term “rules” should be in lower case. A principal employer would be Transnet and other SOE employers. She also confirmed that the definition of rules had been expanded to include special rules. The term Minister is defined as the responsible major shareholder and the wording “Minister of Public Enterprises” should be deleted. The fund would henceforth be referred to as the Transport Pension Fund.

Mr Y Carrim (ANC) asked how one would differentiate between Transnet and a SOE.
 
Ms Sandra Coetzee (Deputy- Director General, Department of Public Enterprises (DPE)) explained that a SOE was a self-funded company while Transnet being a public entity depended on funding from the fiscus.

Mr Carrim commented that the definition of a SOE is broad and could include any state department. He suggested that the State Law Advisers look at how this definition will change with the new SOE legislation expected next year.

The Chairperson responded that it is not the duty of the State Law Adviser to anticipate what the Bill would look like next year.

Ms Coetzee explained that this definition is for the purposes of this Act and will not permeate other legislation.

Ms Prentice suggested that a SOE could also be called “other employer”. She further stated that special rules are related to the subfund, South African Airways (SAA) and the SA Rail Commuter Corporation (SARCC). The definitions of Transnet and Transnet group of employers remain the same as in the Act.

Mr Carrim noted that the Department of Transport is not state-owned, it is the State. A different term that would clarify the definition must be found.

Ms Prentice responded that Transnet is happy with the definition but will take advice from the Committee in this regard.

Clause 2
This clause deals with the name change from Transnet Pension Fund to the Transport Pension Fund.

Clause 3
Ms Prentice explained that the employer was responsible for obligations payable from revenue and that Clause 3 sets out clearly defined parameters for the treatment of obligations which may arise.

The Chairperson asked what would happen if there was a shortfall.

Ms Prentice responded that this section related to employer contributions. It also related to the Legal Succession Act based on specific terms of reference. This is an historic clause.
 
Clause 4
Ms Prentice stated that this clause explained how the new fund and the old pension fund would become the Transport Pension Fund. Sub-clause 4(a) would allow new sub-funds when for example Metrorail joins the fund next year. Sub-clause 4(b) states how active members, pensioners and dependent pensioners are treated. She further explained that there are a number of assumptions that are made, for example the assumption of mortality rate.

Mr J Stevens (DA) questioned how the rights of existing members would be affected, if at all.

Ms Prentice said the rights of members would not be affected.

Clause 5
Ms Prentice stated that this clause dealt with the establishment of the sub-fund board. It also clearly sets out the power and duties and special rules of the board. The administration of the fund will be outsourced. She proposed that the general rules be approved by the Minister only where there were financial implications. The Department of Public Enterprises supported this proposal.

Mr J Stevens (DA) asked who determined when disputes would be referred to the Minister.

Ms Prentice confirmed that an evaluator would be appointed and that the Registrar of pension funds will not approve rule amendments where there are financial implications.

Clause 6
This clause provided that all sub-funds would be subject to actuarial evaluation.

Clause 7
Ms Prentice explained that the valuator is appointed by the Trustees and not by the Minister. Each sub-fund must have its own valuator. The Pensions Fund Act determines what goes into an actuarial evaluation.

The Chairperson asked if the Minister of Finance would be the final guarantor.

Ms Prentice said this was a good legal question and that further clarity would be needed.

Clause 8
Ms Prentice explained that in terms of the Maintenance Act pensions could be attached.
 
Mr Stevens asked if the pension fund would not be an easy target for the collection of debt.

Ms R Hunter (Transnet attorney) explained that the recovery of debt is governed in terms of the Act. The Treasury is considering the viability of this legislation in relation to the recovery of debt.

Clause 10
Ms Prentice explained that 'or her' should be substituted where there is reference to 'him' only.

Mr Stevens stated that money could only be collected from the fund, where a member has committed fraud, theft or absconded.  

Ms Hunter confirmed that this issue was being raised and was on the National Treasury agenda.

Mr H Bekker (IFP) asked if a loan transaction was between the pension fund and employer or employer and employee.

Ms Prentice said both instances were covered.

Clause 13
This clause set out the obligations of the State similar to those provided for in Section 16 of the Legal Succession Act.

Clause 14
Ms Prentice explained that section C would be deleted.

The Chairperson asked that the Committee elaborate rather than delete the section.

Clause 15
Ms Prentice explained that Clause 15 of the Bill was complex. It determined who would belong to the fund. This issue will continue to be debated with labour.

Ms Hunter stated that the inclusion of SAA and Metrorail had been negotiated with the trade unions and was accepted by the Minister. She also confirmed that this section was fraught with corporate governance issues.

General Discussion
The Chairperson delivered a short history of the Bill and explained that only when the issue of vested tax rights came up was there a need for a Bill to be drafted. The initial position of Transnet was that it accepted the Bill. He also stated that in terms of the Labour Relations Act members could be transferred to another fund when a business is sold.

Ms Prentice confirmed that SAA was in the process of setting up a fund for new employees.

Mr Carrim felt the Committee must avoid raising the same issues over and over. The Bill aimed to protect the vested interests of the members and complied with current Labour legislation. The powers of the board must be included in the Act. He also requested that these issues be followed up at the next meeting of the Committee on 20 October 2006.

The Chairperson stated that the onus was on the Department to negotiate if Parliament is to pass the Bill before adjourning for the year.

The meeting was adjourned.