PF Circular 64: Amendments to the Pension Funds Act under the Financial Institutions Amendment Act of 1986

Sinancia1 Institutions Office Private Bag X238 PRETORIA 0001 June 1986 CIRCOLX PF. NO. 64 (3all self-administered pension funds and ins~rers who underwrite pension funds). 7 > .;JANCIAL INSTITUTIONS AMENDMENT ACT, NO. 50 OF 1986

1. Attention is drawn to the amendments to the Pension Funds Act, 1956, (hereinafter referred to as the Act) contained in sections 9 to 13 of the Financial Institutions Amendment Act, No. 50 of 1986 (hereinafter referred '3 as the Amendment Act) which came into operation on the date of publica￾tion of Government Gazette No. R10243 of 28 May 1936.
2. The nore important amendments are briefly summarised hereunder - -. 1.i The purpose of the amendment to subsection (7) of section 16 of the Act is k? +utend the matters on vhicn a valuator must repor: and also to specify m~zeparticulars in this regard. 2.2 The amendment to section 13 by :he insertion of subsection (1A) obligates a f.nd, within three months From the date of submitting any return under ti? Act which indicates that the fund is not in a financially sound condi￾rlo~,t? submit a scheme setting oilt the arrangements which have been made or xhich are intended to be made in order to bring the fund into a finan￾cl~liysound condition togethe: with a report thereon by the valuator. 2.3.1 The amendment to subsection (5) of section 19 of the Act prohibits a fund, after the commencement of the Amendment Act, from granting a mortgage loan to a member at a lower rate of interest than that which is from time to time prescribed by regulation and stipulates that the capital sum shall be redeemed over a period not exceeding 30 years in equal weekly or monthly instalments which shall include interest on the capital amount outstanding. 2.3.2 The amendment to paragraph (c) of subsection (5) of section 19 of the Ac: raises the limit of 75% of the market value of the property against which a mortgage bond may be granted to 90% of the market value of that property. In terms of the new subsection (CAI, the latter percentage may be increased to 100% provided that the employer f the member furnishes the fund with an irrevocable,guarantee in .. respect of so much of the loan as exceeds 90%. 2.3.3 The amendment to subsection (58) of section 19 of the Akt stipulates khat a fund shall not directly or indirectly, after commencement of the Amendment Act, grant a loan to a member or make any of it's funds available, whether by way of an investment or otherwise, to be uti￾lised in any manner by the fund or someone else for a loan to a men￾her other than a loan for the purpose mentioned in paragraph (a) of

sabsection (5) and which complies with the provisions of paragraphs (b) an2 (c) of that subsection. 2.4 Section 32A was inserted in the Act to authorize the rsgistrar, subject to the consent of the Minister of Finance, to prohibit a particular practice or method of conducting business as an irregular or undesiraule practice or undesirable method of conducting business, by way of a notice in the Gazette, for any specified category of pension fund or for all pension funds. The procedure for making such a declaration is also determined by Section 32A. 2.5 Ssction 37(l) (f) of the Act bas been extended to make failure of compli￾ance with the newly inserted sections 32A(2) and (4) of the Act an offence and also to increase the penalties applicable to the various contraven￾tions of the Act. 3. The amendment to section 19(5)(b)(iii) of the Act also necessitated an anendment to the Regulations published under Government Notice R.98 in Gotlernnent Gazette Extraordinary No. 162 of 26 January 1962, as amended. Consequently a new paragraph 27 in Part VII of the Regulations was inser￾ted by the ublication of Government Notice R.1037 in Government Gazette No. 10249 of 28 nay 1986 prescribing 158 per annum as the rate of interest for the purpose of section 19(5)(b)(iii) of the Act. 4. In view of the amendments made to the Act pension funds are obliged ti, bring their rules into conformity with the provisions of the Act. 5. Kindly ecknowledge receipt of this Circular and confirm that a copy ther9- of was handed to your auditor by signing and returning the attached acknowledgement form to this Office. / REGISTRAR OF PENSION FUNDS (Circular P.F. No. 63 of April 1985 was addressed to all self-administered pension funds)