FSCA Communication 10 of 2020 (RF): Publication of FSCA Interpretation Ruling 1 of 2020 (RF) on the Application of Section 37C of the Pension Funds Act, 1956

FSCA COMMUNICATION 10 OF 2020 (RF)
Publication of FSCA Interpretation Ruling 1 of 2020 (RF) on the Application of
Section 37C of the Pension Funds Act, 1956.
25 MARCH 2020

1. Purpose

The Financial Sector Conduct Authority (“Authority”), pursuant to section 142(1) of the Financial Sector Regulation Act, 2017 (Act No. 9 of 2017), hereby publishes FSCA Interpretation Ruling 1 of 2020 (RF) (“Interpretation Ruling”) on the application of section 37C of the Pension Funds Act, 1956 (Act No. 24 of 1956) (“PF Act”). The Interpretation Ruling is available to download from the Authority’s website: www.fsca.co.za.

2. Background

2.1 The publication of the Interpretation Ruling follows from an extensive consultation process between the Authority and the public, which has enabled the Authority to consider the various views on the correct interpretation of section 37C of the PF Act.

2.2 The draft Interpretation Ruling was published on 12 November 2019 for a period of four (4) weeks with comments due on 13 December 2019. The comments received were considered by the Authority, which prompted to Authority to engage in further consultation by inviting the commentators to a consultative workshop which was held on 21 February 2020.

2.3 It became clear through the consultation process that within the retirement funds industry there are differing practices on interpreting and applying section 37C, and it is therefore important that there is clarity, consistency and certainty on the interpretation and application of this section.

3. Paid-up members

3.1 By publishing the Interpretation Ruling, the Authority is clarifying the circumstances under which section 37C (in respect of the death distribution process) would be applicable to the payment of members’ benefits.

3.2. According to the Interpretation Ruling, section 37C will apply to paid-up members’ benefits, deferred retirees’ benefits (as defined in the Interpretation Ruling) and unclaimed benefits, where no election to withdraw has been made by the member prior to such member’s death.

3.3 As a result of the publication of the Interpretation Ruling, retirement funds may now proceed to finalise amendments to their rules, as required by regulation 38 of the PF Act, consistent with the Interpretation Ruling.

3.4 The Authority has taken note of the calls from various sectors of the retirement funds industry (“the industry”) for an amendment to section 37C of the PF Act in order to inter alia expressly clarify section 37C’s applicability to paid-up members and deferred retirees. In this regard, the Authority will engage with the National Treasury to propose relevant amendments to the PF Act.

3.5. The Authority further takes cognisance of the industry’s proposal to amend section 37C of the PF Act in order to provide greater clarity and simplify the death benefit distribution process. This is a more complex issue which requires careful consideration given its policy implications. In this regard, the Authority has already called upon key stakeholders to make submissions on possible amendments. The submissions are currently under consideration, and the Authority will also duly engage the National Treasury on this matter.

3.6. Information Circular 2 of 2010 is withdrawn.

4. ENQUIRIES

For more information regarding this Communication contact the Regulatory Framework Department of the Authority at Roslynne.vanwyk@fsca.co.za.