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Pension Funds
Thursday, February 1, 2007
More prevarication from the industry

Despite numerous attempts by the Financial Services Board (FSB) to encourage funds to submit their pension surplus apportionment schemes, the rate of submission continues to be disappointingly slow.

Indeed the FSB says it will begin appointing its own tribunals from January 2007 to deal with recalcitrant trustees. But the move will have to be a staggered operation considering a paltry 381 schemes have so far been received by the FSB out of an estimated 1 500 to 2 000 funds.
On 7th December 2001, the Pension Funds Act 1956 was amended to require all funds with a surplus to submit an apportionment scheme to the Registrar of Pension Funds. The date for this was staggered over a three-year period ending on 7th December 2004. In view of the work required, each fund was given 18 months after their respective surplus date to submit a scheme. In theory this meant that all schemes should have been received by 7th June 2006.
“Yet over 75% of funds have failed to submit their schemes,” laments chief actuary Mike Codron. He acknowledges that initially it took some time for the necessary regulations to be put in place and attendant pension circulars issued, but this was all completed by June 2004.
“As for the funds with no surplus – some 11 000 of them - the FSB also requires the necessary submissions.” So far about half of them have complied.
Mr Codron acknowledges that, “Clearly it is a very complicated piece of legislation. But it would appear that the main problem could be a non-compliance attitude of many trustees. Another problem is that they often do not understand their obligations or duties and rely on their service providers even though the responsibility rests with them.”
Mr Codron says the Registrar had given the problem a great deal of consideration. In terms of the Act, the only remedies available 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 three 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 would be to replace 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.” By last month (January 2007), however, it was clear that a “great number of tribunals will have to be set up” by the FSB.
“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.”
 

Copyright © Insurance Times and Investments® Vol:20.1 1st February, 2007
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