Special Pensions Amendment Bill [B29-2008]: Report Back; Insurance Laws Amendment Bill [B26-2008]: Report Back & adoption

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Finance Standing Committee

12 June 2008
Chairperson: Mr N Nene (ANC)
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Meeting Summary

National Treasury gave the Committee a report back on the Special Pensions Amendment Bill. This focused on their responses to the comments made by stakeholders in the public hearings.

Treasury accepted the recommendations regarding:
- Clause 2, which was amended to allow for the deletion of the disqualification relating to a person convicted of an offence after 2 February 1990.
-Clause 7, which was amended to allow for the extension of the period within which a spouse or orphan must apply for the pension. It was extended to 36 months.

Members asked for clarity about the fact that persons under 35 (in 1996) would have their pensions backdated to 2001. There were also questions around the deletion of the disqualification relating to a person convicted of an offence after 2 February 1990. Members also asked for more detail on the composition of the Board. The Chair said that the Special Pensions Bill would be finalized on 17 June 2008


National Treasury (NT) and the Financial Services Board (FSB) gave the Committee a report back on inputs received during consultation with stakeholders, as well as their responses to these comments. The main issues raised were on (i) Proposed health demarcation amendments, (ii) Binder agreements (iii) Auditing, reporting and valuation and (iv) Insufficient time allowed for processing of the Bill and consultations.

Members expressed interest in the possibility of persons with basic medical schemes cover obtaining additional cover through normal health insurance products. There were also suggestions that the consultation on this Bill had in fact been adequate. The Insurance Laws Amendment Bill was adopted with amendments.

Meeting report

Report back on the Special Pensions Amendment Bill
Ms Marion Mbina-Mthembu (Chief Director- National Treasury) highlighted National Treasury’s comments on the public hearings. She read through the document titled ‘Special Pensions Amendment Bill: Government’s Response to Public Hearings’ (referred to in the meeting as the matrix).

The commentators were: APLAMV (Azanian People’s Liberation Army Military Veterans), Pan Africanist Congress (PAC), MKVA (Umkhonto we Sizwe Veterans Association, ANC Veterans League (ANCVL)- Intsika Yethu and Cofimvaba Sub-regions, AZANLA (Azanian National Liberation Army), AZAPO (Azanian People’s Organisation, ANC Veterans League- KZN Region, Khulumani and Ex Political Prisoners Committee Member EC (EPPCM).

The following issues were considered for amendment:
-Qualification criteria- age (clause 2- inserting S6Abis (1) (a))
Most commentators proposed that the age for qualifying for pension be lowered to 25. Some proposed the age be lowered to 21, while others proposed its removal.
National Treasury (NT) proposed that these recommendations not be accommodated.

-Qualification criteria- minimum service period (clause 2- inserting S6Abis (1) (b))
There were proposals that the minimum service period should be one year. Others proposed that it should be three years while there were calls for its removal altogether.
NT proposed that these recommendations not be accommodated

-Qualification criteria- political affiliation (clause 2- inserting S6Abis (1) (b) (i))
There was a proposal that this criterion be deleted.
NT proposed that this recommendation not be accommodated

-Qualification criteria- offence committed with a political objective (clause 2- inserting S6Abis (1) (b) (iii))
There was a proposal that this criterion be deleted.
NT proposed that this recommendation not be accommodated

-Under 35 pension retrospective to 1 April 2001 (clause 2- inserting S6Abis (3)
The proposal was that these pensions be backdated to 1 April 1995
NT proposed that this recommendation not be accommodated

-Disqualification- convicted of a crime after 2 February 1990 [S1 (8) and clause 2- inserting S6Abis (6) and (7))
Most commentators proposed that the disqualification be deleted.
NT proposed that the proposal be accommodated and the disqualification be removed.

-Spouses Pension (Clause 5- amending S6D)
There was a proposal that the surviving spouse should get 100% of the pension payable to the spouse prior to his/her death.
NT proposed that this recommendation not be accommodated

-Timeframe for application of benefits (clause 7- amending S6G)
There was a proposal that the period within which a spouse or dependant must apply, should be deleted.
NT proposed that the proposal be accommodated. The period would be extended to 36 months.

-Appeal Board (clause 11- inserting S8AA)
The proposal was that non-statutory force (Military Veterans Associations) should be represented on the appeal board.
NT proposed that this recommendation not be accommodated.

-Pensions payable (clause 23- replacing table 3)
The proposal was that the pension amounts payable under Schedule 3 should be increased, especially for persons under 50; as well as “persons 50, but younger than 65 on 1 December 1996”.
NT proposed that this recommendation not be accommodated.

The remaining recommendations dealt with general matters
-Lapsing of Part 1 (S6A)
There was a proposal that the closing date (31 December 2006) for the 35 and older age group should be removed or extended.
NT proposed that this recommendation not be accommodated

-Qualification of other benefits (S14)
The proposal was that all benefits payable under the Act should be exempt from tax.
NT proposed that this recommendation not be accommodated

-Permanent and total disability- Tribal
The commentator said that brutal assaults on freedom fighters by pro-apartheid tribal chiefs were overlooked by the Act.

NT stated that prior to the lapsing of part one, the Act had provided that persons suffering permanent and total disability arising out of specific circumstances qualified for the special pension.

-Board Representation
The proposal was that non-statutory force (Military Veterans Associations) should be represented on the appeal board.
NT stated that the comment was beyond the scope of the Bill.

-Late Applications
The commentators sought condonation for the 6000 applications which were rejected due to late submission thereof.
NT proposed that this recommendation not be accommodated

-Annual Increases
The commentator requested annual increase of pension should not be less than 7%-8%.
NT said that the Minister would continue to consider current inflation trends in making these adjustments.

-Administration- Implementation
Commentators wanted processes and procedures facilitating the implementation of the Act to be monitored, investigated and scrutinized.
NT stated that the comment was beyond the scope of the Bill

-Skills Training/ other support and compensation to pensioners and others not qualifying
Commentators proposed that pensioners and persons who had contributed to the struggle but did not qualify for special pension, should be given job guaranteed skills training, medical aid and other support.
NT stated that the comment was beyond the scope of the Bill

-Other
The commentator requested financial support for its activities and that government should withdraw its opposition to its lawsuits against SA corporations.
NT stated that the comment was beyond the scope of the Bill.

Discussion
Dr D George (DA) said that he had requested that NT allow him to examine the calculations regarding the cost of the Bill. He wished to see what assumptions informed these calculations.

Ms Mbina-Mthembu said that NT would provide these in writing.

Dr George said that one could not overlook the fact that there were younger ex-combatants, who fell outside the scope of the Bill, who had not obtained an education or employment. It was necessary to introduce other interventions to deal with these people.

The Chair said that while this was outside the scope of the Bill, it should be included in the Committee’s recommendations.

Mr M Johnson (ANC) referred to the fact that amount received by persons under 35 (in 1996) would be backdated to 2001. The amount received by persons who were 35 and over (in 1996) would be received from 1 April 1995. He referred to the situation where a person in the above 35 category applied in 2006. This person would receive a lumpsum dating back to 1995. This did not amount to equal treatment.

Ms Ms Mbina-Mthembu explained that the person who was 30 in 1996 would still only qualify at age 35, which would be in 2001.  Although the person may have qualified from age 30, s/he would be paid from age 35. Backdating these people’s pensions to age 34 and younger would have been unfair to those who were 35 in 1996, and who only got paid from age 35.

Mr Johnson referred to the heading “Disqualification- convicted of a crime after 2 February 1990) on page 3 of the matrix. He said that he did not understand paragraph 3 of the third column (under the heading “Treasury Response”).

Ms Jo Ann Ferreira (Chief Director- Legislation) explained that Part 1 of the Act had lapsed on 31 December 2006. Thus the disqualification affecting persons in the 35-and older- category also lapsed. NT had only realized afterward that the disqualification for this group had lapsed and therefore felt that it should be removed for the 30-35 age category as well. Where persons were excluded as a result of this disqualification, they would however remain disqualified despite the disqualification having lapsed. Government would not allow a blanket accommodation of all these applications, which had initially been rejected. They would deal with them on an individual basis if approached by the affected persons.

Mr Johnson did not accept NT’s view that having more than three members on the Board would be too cumbersome. He said that he did not even know who the existing members who sat on the Board were.

Ms Mbina-Mthembu said that there were usually not many people on these Boards. She did not know who the members of the present Board was, but the information could be given to the Members.

Ms Ferreira added that it was not necessary to have the Military Veterans Associations on the Board, since Government had links with the various political parties and non-governmental organizations, who could assist with the verification processes. It would therefore eliminate the situation where applications needed to be appealed.

Proposed Amendments to the Special Pensions Amendment Bill
Ms Ferreira referred to the document titled “Proposed Amendments to the Special Pensions Amendment Bill [B29- 2008].

Clause 2 was amended to allow for the deletion of the disqualification relating to a person convicted of an offence after 2 February 1990.

Clause 7 was amended to allow for the extension of the period within which a spouse or orphan must apply for the pension. It was extended to 36 months.

The Chair said that this Bill would be considered formally on 17 June 2008.

Report back on the Insurance Laws Amendment Bill
Mr Ismail Momoniat (Deputy Director General- National Treasury) said that the presentation would focus on (1) the Report back based on meetings held with stakeholders, and (2) Amendments to the Bill. He referred to the document titled ‘Insurance Laws Amendment Bill, 2008- Report Back to PCOF on Friday 13 June 2008’ This document  firstly highlighted engagements between NT and stakeholders from 6 June to 13 June 2008. Mr Momoniat described the turnout at the Public Consultative Forum as phenomenal. NT had in fact received comments up until the previous day.

Mr Momoniat said that a total of 39 stakeholders were recorded as being present at the meeting. In addition nine sets of written comments were received.

The main issues raised at the Forum were:

Proposed health demarcation amendments
Among the comments received were that the wording introduced regulatory uncertainty to health related insurance. Also, transitional arrangements were unclear and created uncertainty.

NT/FSB response: The issues were clarified and resolved. In the Long Term Insurance (LTI) Industry, there was already industry agreement around demarcation. Department of Health (DOH) and Council for Medical Schemes (CMS) both did not attend, since they had already indicated their agreement with the revised wording.

Binder agreements
Mr Jonathan Dixon (DEO: Insurance- FSB) said that there was agreement that industry concerns had been dealt with. Details would be dealt with in regulations. There were proposals that:
-Contractual savings (regarding the classification of “intermediary”) and commission issues would be dealt with together.
-“independent intermediary” be defined.
-word clarification
-wording of sub clause (4) implied a contravention against the written agreement rather than the contravention itself.
They queried the overlap for underwriting managers between the LTI and Short Term Insurance (STI) Acts.

NT/FSB response:
-broader policy concerns were resolved
-where an insurer had an outsourcing arrangement,
(a)the agreement had to be written
(b)liability remains with the insurer
(c)insurer owns the policy information

-there are various forms of binder agreements, which must be accommodated
-wording in S49 and S49A of LTI Act and S48 and S48A of STI Act required clarification.
-all agreed on the appropriate treatment of determining (a) the degree to which profit sharing would be allowed, and (b) when a party to a binder agreement could deal directly with the public. These would be included in regulations.

Auditing, reporting and valuation
-Stakeholders said that the Bill expanded reporting obligations for auditor. These obligations were too onerous.
NT/FSB response:  that the proposed amendment was retained.

-There were views that expanded reporting obligations on the Statutory Actuary was too onerous and that Statutory Actuary should not be held criminally liable.
NT/FSB response: that reporting obligations would be restricted. However s/he would be held liable for contravening the Act.

-There were views that by the Registrar revaluing assets, past decisions would be impacted (if this were to apply retrospectively).
NT/FSB response: that revaluation applied only for statutory purposes and that it should not apply retrospectively

-There were views that S54 should be amended to protect maturity value, ensuring hereby that regulations were empowered through legislation.
NT/FSB response: S54 should be reworded.

-There were views regarding criminalization through S66 and S67 of LTI Act and S64 and S65 of STI Act.
NT/FSB response: that the section should revert to the wording of the principal Act.

Insufficient time allowed for processing of the Bill and consultations
There were views that the Bill could be challenged on grounds of insufficient time granted for consultation.

NT/FSB disagreed. Mr Momoniat said that there was broad agreement on all substantive policy issues. Areas requiring further consultation related to technical issues and detailed proposals.
Mr Momoniat said that many stakeholders present in the Forum did not understand the Parliamentary processes. They thought that the Committee should still continue to consult after the public hearings stage. While Government conceded that the period for consultation had been short, they believed that consultation had been extensive and sufficient. Further opportunity for comment would arise once the regulations were drafted.

Discussion
Dr George referred to the situation where an individual was providing cross subsidization for other persons in the Medical Schemes pool. He asked if it was understood that that person was not excluded from becoming part of a normal health insurance pool as well.

Mr Momoniat explained that these issues would be dealt with in regulations. He understood the fears of the health community. There remained concerns regarding the level of cover medical schemes would provide, although there were provisions regarding minimum cover. There is a space for health insurance products as well, but it was important to get the balance right. The consultation process in the drafting of regulations would be very important in this regard. It would bring certainty and address the fears of that community.

Mr Dixon added that the accepted principle was that the regulated insurance products should not undermine medical schemes and the appropriate levels of cover provided by these schemes. Once the appropriate levels of cover for medical schemes have been determined, anything over and above that could be provided by risk rated products offered by insurance companies. The Bill provided the process for policy discussions with the Minister of Health, the Council for Medical Schemes and the FSB. When regulations are to be drafted there would be another opportunity to do a presentation on the policy behind the regulations.

Dr George proposed that there be ongoing dialogue between Government and stakeholders from the beginning of these processes. One should look at if any outcomes were likely to change if consultation continued. He believed that the outcomes would not change, which meant that the consultation process had been effective.

National Treasury presentation on Amendments to the Insurance Laws Amendment Bill
Ms Ferreira commented on the nature of the amendments made to the Bill. She highlighted these amendments by referring to the document titled “Portfolio Committee Amendments to Insurance Laws Amendment Bill”.

Adoption of the Insurance Laws Amendment Bill
The Chair read through the motion of desirability. The Members agreed to the Bill’s adoption with amendments.

The Chair thanked everyone for their participation in the process. He described the consultation process as a cornerstone of democracy, as it ensured that legislation was supported by all.

The Chair adjourned the meeting.

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