PENSION FUND AMENDMENT BILL UNACCEPTABLE TO COSATU 22 MAY 1998 The Department of Finance's decision to table the Pension Fund Amendment Bill in Parliament yesterday is provocative and might spark massive national industrial action. Cosatu may be forced to call a national general strike to register our objection against certain provisions of the Bill, and the unacceptable unprocedural manner in which it is being processed. The Bill, amongst other issues, proposes that employers be granted access to Pension and Provident Fund surpluses. The granting of such access to employers, flies in the face of recent High Court judgements and the views expressed by the newly-appointed Ombudsman in the retirement industry, that any surpluses in Pension Funds belong to employees as they are the beneficiaries of these funds. Cosatu cannot allow the unethical raid on workers' hard-earned Retirement Fund savings. Retirement Fund surpluses belong to Fund members, not to employers. Cosatu has, over the last few years, consistently raised our concerns about the Ministry of Finance's approach to reform in the Retirement Fund Industry. In 1996, when the Ministry of Finance first introduced the 17% tax on Retirement Fund rental and interest income, we pointed out our concerns about the detrimental consequences this may have on our member's final yield and final withdrawal benefits. In good faith we accepted the need for Government to deal effectively with unacceptable arbitrage in this sector. We were promised that the detrimental consequences on lower-paid workers' Retirement Funds would be compensated by the introduction of the Top-up system, as proposed by the Smith Commission. This "Top-up" system was never implemented. Instead, the taxation on Retirement Fund rental and interest income was increased to 25% in the 1998/1999 National Budget. Again, there was no Top-up system introduced. Cosatu regards this matter in an extremely serious light. We have repeatedly raised our concerns directly with the Minister of Finance as well as in the appropriate social dialogue forums such as Nedlac's Public Finance Monetary Policy Chamber. The Ministry of Finance has once again, like with the introduction of Gear, taken a very provocative unilateral decision about a very fundamental issue affecting the future livelihoods of our members and workers in general. Cosatu is concerned that the Bill has not been submitted for discussion at Nedlac, as is required by the provisions of the Nedlac Act and common decency. We cannot let this matter be left unchallenged. Cosatu will raise the matter at today's Nedlac Public Finance and Monetary Policy Chamber meeting. We demand that the new Bill be submitted for discussion at Nedlac with immediate effect. Instead of allowing employers to dip into workers' Retirement Funds, the laws should be amended to close loopholes where employers benefit from surpluses by taking contribution holidays or where surpluses emerge when employers increase contributions to avoid paying tax. Cosatu participated in a Pension Funds Advisory Committee Task Group, which included representatives from other trade unions, business, members of the accounting profession, the South African Revenue Service, the Institute of Retirement Funds and the Financial Services Board which investigated the matter of employer access to pension fund surpluses. Despite this process, as well as a meeting convened between Cosatu and the Financial Services Board, Cosatu's views have not been adequately incorporated into the proposed legislation. For further information, contact Andre Kriel on 082 446 1669 or at the Nedlac office on 011 4822 511 (until 1.00pm today). Nowetu Mpati COSATU Head of Communications Tel: + 27 + 11 + 339-4911 Fax: + 27 + 11 + 339-2281 E-mail: nowetu@cosatu.org.za