1. Legal Update Anton Swanepoel Chair: IRFA Legal and Technical Committee Head: Legal, Sanlam Employee Benefits

2. Meant to apply from 1 March 2015 but Act was changed to move implementation date to 1 March 2016 to allow further consultations at NEDLAC. If no agreement at NEDLAC by mid-2015, implementation date may be moved to 1 March 2017. Decision to be made by 31 July 2015. T-day changes that apply from 1 March 2016 are briefly the following: Employer contributions to funds taxed as fringe benefits in hands of employees, but deemed to have been made by the employees. Employees may deduct up to 27,5% of remuneration or taxable income in respect of contributions (employer/employee) to pension, provident and retirement annuity funds, subject to annual cap of R350 000. T-day (harmonise tax on contributions; provident funds max 1/3 on retirement)

3. T-day (harmonise tax on contributions; provident funds max 1/3 on retirement) (cont.) May take maximum 1/3 of retirement benefit from provident fund as a lump sum. But restriction does not apply to contributions before 1 March 2016 (and fund return thereon). Funds to keep separate member accounts for pre-March 2016 contributions (and returns) and post-March 2016 contributions (and returns). Provident fund member 55 years or older on 1 March 2016 may commute full retirement benefit, including contributions made after 1 March 2016 (and returns) to the provident fund of which he/she was member on 1 March 2016. Commutation threshold upon retirement increased from R75 000 to R150 000 for all retirement funds. Tax-free portability between all approved funds, including pension to provident fund transfers.

4. Postpone payment of retirement benefit From 1 March 2015 retirement benefit does not accrue upon retirement from employment, but when member elects to retire from fund Fund rules will determine how benefit is invested in interim Normally no further contributions and no risk cover Section 37C of PFA applicable if retiree dies before election?

5. Future direction of pension funds industry according to NT Olano Makhubela, National Treasury at PLA conference March 2015: “Structural Issue 1: Post and pre-retirement Preservation of funds, with limited access Structural Issue 2: Increase participation in the system through mandation, how best to reach out to 6 million low-income employees Structural Issue 3: Reduce the number of funds to a manageable size; large standalone and multi-employer funds the way to go”

6. Can apply for exemption in terms of section 7B of PFA e.g. if umbrella pension/provident fund or RA fund Must apply for renewal of exemption before expiry thereof Registrar received renewal applications from funds with no properly constituted board – Registrar must then appoint temporary (section 26(2)) trustees to make application Information Circular 1/2015: Exemption regarding members’ right to elect trustees

7. Guidance to umbrella funds on commencement, termination, and re- commencement of employer’s participation Discusses erroneous deregistration of participation by PE’s (participating employers) in umbrella funds and how it may be remedied Registrar to request each umbrella fund to furnish an affidavit by chairperson containing details of PE’s including names of directors personally responsible for payment of contributions If participation of PE terminates and rules of fund include special rules applicable to that PE, fund must submit rule amendment to delete those special rules Draft PF Circular on Umbrella Funds

8. Draft Information Circular on shell/dormant funds without board/liquidator Shell fund is fund with no assets and dormant fund is non-active fund with assets, but no board From 2007 to 2013 Registrar used provisions of section 26 of PFA to appoint as “section 26(2) trustees” of dormant funds persons nominated by administrators – they disposed of assets and liabilities where after funds’ registrations were cancelled

9. Registrar now of view that section 26(2) does not authorise him to appoint these trustees for a purpose other than to arrange a properly constituted board However shell fund does not need a board to apply for cancellation of registration. Registrar will cancel registration at written request of e.g. trustee, auditor, valuator or principal officer, if satisfied fund has ceased to exist (financials and affidavits required) In future the section 26(2) trustee(s) for dormant funds must constitute properly constituted board. If impossible, Registrar will apply to court for appointment of curator Draft Information Circular on shell/dormant funds without board/liquidator (cont.)

10. In Directive 6 Registrar exempted certain transfers from sec 14(1), including transfers of unclaimed benefits from fund to unclaimed benefit fund as well as transfers between RA funds and between preservation funds Draft Notice states that Registrar is guardian of interests of fund members. Registrar now believes he cannot properly fulfil his duties regarding unclaimed benefits transfers unless his prior approval is required Exemption from sec 14(1) will be withdrawn with effect from date to be announced Draft Notice on withdrawal of exemption from sec 14(1) for transfers to unclaimed benefit funds

11. Since amendment of PFA last year contravention of sec 13A, e.g. failure to pay contributions within 7 days from end of month, is again a criminal offence Director(s) of employer company involved in its general financial affairs is/are personally liable for compliance with sec 13A – fund should keep record of their names Registrar will issue circular on how contraventions should be reported to SAP – currently busy with two pilot cases Funds must continue to report to Registrar and continue with enforcement measures Section 13A (fund contributions) contraventions

12. Only certain sections of Act in force e.g. regarding office of Regulator. Remaining sections yet to come into force – will be transitional period of one year whereafter full compliance required Personal information is all information relating to a person e.g. marital status, education, criminal history, fingerprints, personal preferences, email address, etc. Consent required, unless e.g. necessary to carry out actions for performance of contract Protection of Personal Information Act (“POPI”)

13. Info not be retained any longer than necessary Use of info must be compatible with purpose for which it was collected Must ensure security and confidentiality of personal info Protection of Personal Information Act (“POPI”) (cont.)