Edition: June - August 2015
Be that as it "may"
Or is it “shall”? On the interpretation of such simple words can turn fortunes to top up pension funds for the benefit of former members. Before they celebrate, they’ll have to be traced.
It looks unnecessarily cumbersome and costly for the liquidator of a retirement fund to institute litigation against National Treasury and Financial Services Board over a ministerial regulation, arguably confused, that the FSB must enforce.
Had the proceedings been launched while the liquidator was still the curator, it would certainly have been possible for the Pension Funds Registrar to control his actions under s5 of the Financial Institutions (Protection of Funds) Act. However, it’s less certain that the registrar has these same control powers over a liquidator although he must still report to the FSB.
Whether curator or liquidator, he would have common cause with the FSB in their basic duty to protect the interests of pension funds’ members and former members. It would surely have been preferable then to resolve the matter in one-on-one discussion, abetted by senior counsel opinion if need be, than to face one another in court and evoke the legal costs that will accumulate for both the FSB and the fund.
In this instance, the litigation has been launched by Tony Mostert as liquidator of the Picbel Group provident fund. Even should the FSB and National Treasury ultimately not oppose Mostert’s application to court, fees would already have been incurred by the preparations for trial.
But the prospect of widespread consequences, in terms of windfalls, could be more theoretical than real. This is because of practical deficiencies in the distribution of unclaimed benefits (see other articles in this TT edition).
On the narrow issue of the regulation issued some years ago by the Minister of Finance, it’s evident that FSB deputy pensions registrar Rosemary Hunter agrees with the arguments that Mostert has advanced. In fact, as a lawyer in private practice before her FSB appointment, she’s advanced them herself.
In the textbook ‘The Pension Funds Act: A Commentary’, published in 2010, Hunter and her co-authors discussed this contentious Regulation 35(4) at some length. In part: “A board (of trustees) that was able to calculate minimum benefit top-ups for certain former members, but was unable to trace them...(was) not obliged (notwithstanding the minister’s purported regulation to the contrary) to make provision for their claims in respect of such top-ups and shares of residual surplus allocated to them.”
Then she noted that the minister (of finance) had sought by regulation to prevent a board of trustees from releasing in the future those moneys from a fund’s special-purpose contingency reserve account*. In the regulation he sought to compel trustee boards to make provisions other than on payments:
“Even that part of Reg 35(4) is inconsistent with the Pension Funds Act and thus ultra vires the powers of the minister in terms of s36 (of the Act),” she argued. “A regulation which purports to fetter discretion explicitly granted to a board (in terms of the Act) is certainly inconsistent with it. So is a regulation which purports to require funds to freeze some of their assets in circumstances in which it is highly unlikely that those for whom they were intended will ever be located and thus highly unlikely that they will ever be used in fulfilment of the objects of the Act.”