Benefits

Impact of the Pension Funds Amendment Bill on Divorce Matters Read More »

Need Any Consultations

Permanent Life Partners’ Rights to Maintenance and Intestate Succession

Permanent Life Partners’ Rights to Maintenance and Intestate Succession

Bwanya v Master of the High Court, Cape Town and Others

On 31 December 2021, the Constitutional Court handed down judgment in the matter of Bwanya v Master of the High Court, Cape Town and Others 2022 (3) SA 250 (CC). The Constitutional Court ruled that where partners undertook reciprocal duties of support, ‘support’ must be given a wide meaning – it includes care, emotional relationship, etc, and is not confined to financial support.

Facts of the Case

Jane Bwanya and Antony Ruch were in a life partnership, living together as if married and planning to marry each other. Ruch died unexpectedly before they married. His will was out of date – he had left his estate to his mother who had predeceased him – so he died intestate.

Ms Bwanya claimed maintenance in terms of the Maintenance of Surviving Spouses Act and as intestate heir in terms of the Intestate Succession Act. Her claim was rejected by the executor on the basis that under the two Acts Ms Bwanya did not qualify for the claimed benefits. She then applied to court, saying the rejection of her claims was discriminatory or unconstitutional. She argued that the two Acts were unconstitutional to the extent that they exclude surviving partners in permanent heterosexual life partnerships, where the partners had undertaken reciprocal duties of support, from claiming maintenance and inheritance from the estates of their deceased partners.

The High Court Ruling

The Western Cape High Court partly upheld her application. In respect of the Intestate Succession Act, the court found that it was unconstitutional to exclude permanent life partners from benefits of intestate succession; it therefore ordered that, wherever the Act referred to the deceased’s “spouse”, that word should be read to mean “spouse or a partner in a permanent opposite-sex life partnership in which the partners had undertaken reciprocal duties of support”. However, the court dismissed Bwanya’s challenge to the Maintenance Act, mainly because it found itself to be bound by the precedent of Volks v Robinson [1], in which the application and facts had been near-identical.

[1] Volks N.O. v Robinson [2005] ZACC 2; 2009 JDR 1018 (CC)[2005] ZACC 2; 2005 (5) BCLR 446 (CC)

Bwanya approached the Constitutional Court seeking leave for direct appeal against the High Court’s finding in respect of the Maintenance Act, as well as confirmation of the High Court’s declaration of invalidity in respect of the Intestate Succession Act.

Order of the Constitutional Court (CC)

The CC ruled that, insofar as the Maintenance of Surviving Spouses Act is concerned, the definition of “survivor” needed to be added to it “and includes the surviving partner of a permanent life partnership terminated by the death of one partner in which the partners undertook reciprocal duties of support and in circumstances where the surviving partner has not received an equitable share in the deceased partner’s estate.”

The Intestate Succession Act was similarly amended by the CC.

The order of the Court was suspended for 18 months (to 30 June 2023) pending remedial legislation by Parliament.

If the remedial legislation is not enacted, then these orders have no effect on the validity of any acts performed in respect of the administration of a deceased estate wound up before 30 June 2023.

Comments

Permanent life partner has been included in the definition of “spouse” in the PFA since 2007. What is helpful about the Bwanya case is the single criterion used: the partners undertook reciprocal duties of support which in this case is given a wide meaning – support includes care, emotional, etc., and is not confined to financial support.

For s 37C distributions, if regard is had to how the estate of the deceased member is distributed, then if the member does not leave a valid will, the Fund must consider the partner’s right to inherit.

Where a fund has a pensioner pool, if the rule is that the spouse must be married to a member at retirement then that will need to include a permanent life partner if not already covered in the rule.

Services

Permanent Life Partners’ Rights to Maintenance and Intestate Succession Read More »

Need Any Consultations

FSCA Interpretation Ruling 1 OF 2024

FSCA Interpretation Ruling 1 OF 2024

Background

On 25 March 2020, the FSCA issued Interpretation Ruling 1 of 2020, which replaced Information Circular PF no. 2 of 2010. The FSCA was alerted those certain aspects of that ruling required revision, since it incorrectly brought an unclaimed benefit within the ambit of section 37C of the pension Funds Act (PFA).

Interpretation Ruling 1 of 2024 was issued to provide clarity, consistency and certainty in the interpretation and application of section 37C of the PFA. It revokes and replaces FSCA Interpretation Ruling 1 of 2020.

The 2024 Interpretation Ruling explains the distinction between a benefit becoming payable upon the death of a member, in which case section 37C will apply, as opposed to a benefit that has already become payable before the member’s death. The latter benefit falls outside the ambit of section 37C, even if the benefit has not yet been paid to the member upon his or her death.

Section 37C of the PFA

Section 37C(1) of the PFA provides that:

“Notwithstanding anything to the contrary contained in any law or in the rules of a registered fund, any benefit (other than a benefit payable as a pension to the spouse or child of the member in terms of the rules of a registered fund, which must be dealt with in terms of such rules) payable by such a fund upon the death of a member, shall, subject to a pledge in accordance with section 19(5)(b)(i) and subject to the provisions of sections 37A(3) and 37D, not form part of the assets in the estate of such a member, but shall be dealt with in the following manner…”.

The section therefore provides that benefits payable because of the death of a member do not form part of the member’s estate and sets out how the benefit payable upon the death of a member must be dealt with.

The key distinction is the cause of the vesting of the benefit.

- Where the death of the member is the cause for the benefit to become payable, section 37C will apply.

- On the other hand, if a member has become entitled to claim a benefit and if the fund received a written instruction from the member to pay out or transfer the benefit before the member’s death, then it is that written instruction that caused the benefit to be payable (not the death of the member). This applies if a member, before his death, instructed the fund in writing to pay or transfer the benefit. In such cases, the written instruction, and not the member’s death, triggers the payment of the benefit, therefore making section 37C inapplicable

Unclaimed Benefits

Paragraph 4.6 of the Interpretation Ruling provides that:

“The unclaimed benefit is not due and payable because of the death of a member, and accordingly section 37C will not be applicable when that member dies. Where the person entitled to an unclaimed benefit die, the benefit, which has vested in that person, must be paid to that person’s estate and must not be dealt with in terms of section 37C.”

Unclaimed benefits are owed to the member, as the benefit has become due and payable to that person. Even when transferred to an unclaimed benefit fund, the nature of the unclaimed benefit does not alter. If the entitled individual is traced, the benefit must be paid to him/her.

An unclaimed benefit is not due and payable because of the death of a member, and section 37C will not be applicable when that member dies. Where the person entitled to an unclaimed benefit dies, the benefit, which has vested in that person, must be paid to that person’s estate and must not be dealt with in terms of section 37C.

Similarly, where an unclaimed benefit arose from a death benefit distributed in terms of section 37C, the section does not apply upon the death of that beneficiary who is entitled to that undistributed death benefit in an unclaimed benefit fund. Such an unclaimed benefit vested in the beneficiary and must be paid to the beneficiary’s deceased estate.

Although the person entitled to the benefit is a member of the unclaimed benefit fund, it is not their death that makes the benefit payable, and the wording in section 37C “payable upon the death of a member” does not apply.

Paid-Up Members and Deferred Retirees

Paid-up members and deferred retirees are, in terms of the PFA, both considered members. If paid-up members or deferred retirees instruct the fund to pay or transfer their benefit, or to treat it as a retirement benefit, the benefit becomes payable. If paid-up members or deferred retirees pass away after giving such instruction to the fund but before the benefit is processed accordingly, it must be paid to their estates.

Application of the Interpretation Ruling

Interpretation Ruling 1 of 2024 is applicable from date of publication, which is 4 March 2024. All claims already in progress at this date will have to be reviewed so that they comply with the provisions of the Interpretation Ruling.

Services

FSCA Interpretation Ruling 1 OF 2024 Read More »

Need Any Consultations

Health Insurance Solution for NGOs in Africa

Health Insurance Solutions in Africa

Health Insurance Solutions in Africa

Revolutionizing Health Insurance Solutions in Africa: A Modern Approach

In today’s fast-evolving world, underscored by the challenges of climate change and emerging health threats, the necessity for comprehensive health insurance solutions has never been more critical, especially for Employers and non-governmental organizations (NGOs) operating across the diverse and dynamic landscape of Africa. Axiomatic Consultants, an independent advisory practice renowned for its deep expertise and innovative solutions in employee benefits, is at the forefront of addressing these needs with unparalleled dedication and insight.

Our Global Presence, Your Local Solution

With established offices in South Africa and Dubai, Axiomatic Consultants offers a bespoke suite of employee benefit solutions that span group risk, and health benefits. Our proactive response to global health challenges and environmental crises has reinforced our belief in the paramount importance of providing employees with a robust level of risk insurance and health insurance benefits. This commitment not only ensures the well-being of your workforce but also equips employers with the confidence that their teams are comprehensively protected.

Tailored Health Insurance Benefits

Recognizing the unique challenges faced by Employers and NGOs, we have crafted an exclusive health insurance benefits solution designed to meet the demanding needs of your organization. This solution is supported by 24/7 customer service and bolstered by local expertise through our specialist team, ensuring that your needs are met, anytime, anywhere.

Flexible and Comprehensive Plans

Our offering is characterized by its flexibility and comprehensiveness, with a variety of plans that cater to different needs and budgets. Whether your team consists of expatriates, third-country nationals, or local employees, our plans are designed to be customized with optional benefits, ensuring a perfect fit for your organization’s unique requirements.

Core and Optional Benefits

CORE BENEFITS

OPTIONAL BENEFITS

Allowing for a truly tailored benefits package.

Core and Optional Benefits

Accessibility is key in healthcare, which is why we partner with insurers that offer a wide network of contracted medical providers across Africa. This extensive network facilitates direct claims settlement, minimizing out-of-pocket payments and ensuring that your employees have access to high-quality medical care whenever they need it.

Dedicated Client Services Team

Our commitment to your organization doesn’t end with the customization of your plan. A dedicated client services team is at your disposal, ready to assist with hassle-free implementation, administration, and support services, ensuring a seamless experience for both employers and employees.

Life & Disability Protection

Understanding the importance of flexibility, we offer the ability to customize your plan to meet your specific needs. Our optional benefits can provide a combined life and disability cover of up to 2M USD or 10X the gross annual salary of employees, offering peace of mind and comprehensive protection.

In a world where health and well-being are increasingly at the forefront of our priorities, Axiomatic Consultants stands ready to partner with Employers and NGOs across Africa to meet and exceed the health insurance needs of your employees.

Together, we can ensure a healthier, more secure future for your organization and its most valuable asset: its people.

Services

Health Insurance Solutions in Africa Read More »

Need Any Consultations

Interest on late payment of contributions by employers

Interest on late payment of contributions by employers

1. From which day is late payment interest calculated on arrear contributions payable by the employer: the 1st of the month, or the 8th of the month?

In terms of the Pension Funds Act and Conduct Standard 1 of 2022, interest is payable by the employer on arrear/late contributions. This interest is calculated from the first day following the expiration of the period contributions were payable for until the fund receives the contributions – at the prime rate plus 2%.

There is confusion about whether the penalty interest starts to run from the 1st day of the next month or the 8th day of the next month. The Office of the Pension Fund Adjudicator (OPFA) and the FSCA hold different views:

FSCA’s view:

OPFA’s view:

The FSCA and OPFA will be meeting to discuss this difference of opinion and the FSCA is considering whether to issue an Interpretation Ruling on the matter. There is currently no consensus, which means that administrators and funds have no clear guidance on this matter.

2. Does the in duplum rule apply to the amount of interest payable by an employer on late contributions?

The in duplum rule

The in duplum rule means that the interest on a debt can’t exceed the unpaid balance of the principal debt.

Example: Margaret lends Joe R200. Margaret charges Joe interest on this debt. When the interest gets to R200 (the same amount as the original debt), the in duplum rule means that the interest cannot grow any higher.

Recent High Court case

In the recent High Court case of Municipal Workers Retirement Fund v Umzimkhulu Local Municipality and Others the High Court found that the in duplum rule does not apply to the interest prescribed in the Pension Funds Act for arrear contributions. Therefore, the employer had to pay the full amount of statutory interest owing to the fund.

The FSCA’s and OPFA’s views

Before the case:

Now - after the case:

This means that the interest on arrear contributions payable by an employer can continue to add up and even exceed the original arrear contribution amount owed by the employer.

Services

Interest on late payment of contributions by employers Read More »

Need Any Consultations

FSCA assessment: Treating Customers Fairly and Regulation 28

FSCA assessment: Treating Customers Fairly and Regulation 28

An FSCA assessment
Exemption of large funds

1. An FSCA assessment: Treating Customers Fairly and regulation 28 principles applicable in contracting services to the fund or its board

In December 2023, the Financial Conduct Services Authority (FSCA) sent a communication to the Principal Officers of many retirement funds requesting information relating to transformation in respect of certain service providers.

Funds were requested to complete the following assessment:

- Treating Customers Fairly [1] (TCF) self-assessment with regards to the implementation of measures to meet the TCF outcomes. This part of the assessment is not new – many funds have completed it already.
- The Regulation 28 principles of self-assessment with regards to the implementation of measures to consider in contracting services to a fund or its board. [1] TCF is an outcomes-based regulatory and supervisory approach of the FSCA designed to ensure that regulated financial institutions (for example, retirement funds) deliver specific, clearly set-out fairness outcomes for financial customers (for example, members). Funds are expected to demonstrate that they have implemented and are delivering the TCF outcomes in the way that they conduct business.

The assessment had to be returned to the FSCA through its online submission portal by 31 January 2024.

[1] TCF is an outcome-based regulatory and supervisory approach of the FSCA designed to ensure that regulated financial institutions (for example, retirement funds) deliver specific, clearly set-out fairness outcomes for financial customers (for example, members). Funds are expected to demonstrate that they have implemented and are delivering the TCF outcomes in the way that they conduct business.

Why has the Regulation 28 assessment been circulated?

The FSCA states that it has set itself supervisory priorities for the current financial year, which includes considering the extent to which Regulation 28 principles are embedded within retirement funds.

Regulation 28 provides that retirement funds have a fiduciary duty to act in the best interest of their members, whose benefits depend on the responsible management of assets. This Regulation requires a fund and its board to consider, in contracting services to the fund or its board, the need to promote broad-based black economic empowerment of those providing services.

Questions set out in the FSCA’s regulation 28 assessment

- Does the fund have a procurement policy in place? If so, furnish us with a copy of the policy. If the fund does not have a procurement policy in place, outline the procurement process of the fund.
- When contracting services to the fund and its board, does the fund consider the need to promote broad-based black economic empowerment of entities providing services? (Please explain in detail how the fund meets this condition in the comments section).
- Does the fund request BBB-EE certification from its service providers when contracting services? If so, please furnish us with copies of such certification.
- Does the fund evaluate whether its existing service providers continue to promote broad-based black economic empowerment?
- Do you have a mechanism in place to deal with an existing service provider who no longer complies with the BBB-EE requirements? (Please explain in detail how the fund deals with such a scenario in the comments section).
- When contracting services to the fund and its board, does the fund consider the need to promote broad-based black economic empowerment of independent trustees providing services if applicable? (Please explain in detail how the fund meets this condition in the comments section and if this is not applicable, please indicate such in the comments).

The assessment should create a baseline for the FSCA to supervise and regulate the effect of the Conduct of Financial Institutions and regulatory interventions on the transformation progress of funds.

2. Exemption of large funds from certain prescribed formats for preparing financial statements

The Pension Funds Act (the Act) requires every fund, within six months of the end of every financial year, to provide the prescribed financial statements to the FSCA that have been audited by the auditor of the fund.

From 21 December 2023, the FSCA’s RF Notice 26 of 2023 replaces RF Notice 5 of 2020, (the Exemption of Large Funds from certain prescribed formats for preparing financial statements under section 15 of the Pension Funds Act).

“Large Funds” are defined as funds with total assets exceeding R50 000 000.

The RF Notice has been published because the prescribed format of annual financial statements does not align with the amendments to Regulation 28 of the Act.

To ensure alignment with the amendments to Regulation 28, the FSCA is planning to replace the current BN 77 Notice with a Prudential Standard, which is currently in draft format.

But in the interim, to deal with the issue of BN77 not currently aligning with Regulation 28, the FSCA has published exemptions in relation to infrastructure reporting and certain Schedules.

The exemption of large funds from the provisions of section 15 of the Act provides for three scenarios:

Scenario 1

For the preparation of financial statements in respect of a financial year that ends after 1 March 2018, a Large Fund is exempted from the requirement to complete Schedule D1 when preparing financial statements but must complete the Independent Regulatory Board of Auditors (IRBA) approved illustrative “Auditor’s report template: Audit of the Financial Statements of a Large Retirement Fund (Schedule D)”.

Scenario 2

For the preparation of financial statements in respect of a financial year that ends between 1 March 2018 and 31 December 2022, a Large Fund is exempted from the requirement to complete Schedule IB1, but must complete IRBA’s illustrative “Assurance Report on Compliance with Regulation 28 of the Pension Funds Act” that was approved by IRBA in March 2019; and

Scenario 3

For the preparation of financial statements in respect of a financial year that ends after 31 December 2022, a Large Fund is exempted from the requirement to complete Schedule IB1 but must complete Annexure A to the notice “2023 Assurance Report on Compliance with Regulation 28 of the Pension Funds Act”.

Services