Despite numerous attempts by the Financial Services Board (FSB) to encourage funds to submit their surplus apportionment schemes, the rate of submission continues to be disappointingly slow.
On 7 December 2001, the Pension Funds Act, 24 of 1956 was amended to require all funds with surplus to submit a surplus apportionment scheme to the Registrar of Pension Funds. The date for this scheme was staggered over a three year period ending on 7 December 2004. In view of the work required to complete a scheme, each fund was given 18 months after their surplus date to submit the scheme, so theoretically all schemes should have been received by 7 June 2006.
Chief actuary Mike Codron says it is acknowledged that initially there were regulations and pension circulars that were needed in order for the funds to complete their scheme but these were all issued by June 2004. It is now some two and a half years later.
"To date some 381 schemes have been received out of an estimated 1500 to 2000 funds with surplus i.e. some 75 to 80% of the funds have failed to submit their schemes."
"Of the remaining 11000 funds with no surplus, about half have been received. The FSB requires details of these schemes without surplus, otherwise many funds with surplus would not submit a scheme and there would be no way of knowing if a fund had a surplus. "
"So why has the response been so slow,?" Codron asks. "Clearly it is a very complicated piece of legislation. However, it would appear that the main problem could be a non-compliance attitude of many trustees. Another problem is that trustees often do not understand their obligations or duties and rely on their service providers even though the responsibility rests with them."
Codron said the Registrar had given this problem a great deal of consideration. "In terms of the Act, the only remedies available to the Registrar are to impose a fine (which is not very large) or to request the fund to appoint a tribunal. Should the tribunal not be appointed for 3 months or should the period of non-submission of the scheme become excessive, the Registrar can appoint the tribunal directly.
A tribunal is an expensive option and the effect is that it takes over and replaces the board of trustees completely for purposes of the surplus scheme.
"The Registrar has recently sent some 300 letters to funds requesting them to set up their tribunals, but come January 2007, the Registrar will appoint the tribunals directly. It is appreciated that this will require a great number of tribunals so this will be done on a staggered basis. "
"As stated earlier, this will cost the fund money which will be paid for by the members. In this event members should consider whether their trustees have acted in their best interests and if not who should pay the costs.
"Finally it must be stressed that the real issue is not that the registrar has become impatient. The real issue is that hundreds of thousands of people are due money, some of them desperately, and the trustees are just not making the money available to them."
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