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South Africa: Radical Measures Set to Overhaul Pension Funds
By Pocyline Kung'u, AllAfrica.com
June 13, 2003
Nairobi - In a bid to reverse the
near-fatal decline in the pension funds industry, Finance Minister David
Mwiraria proposed radical changes intended to restore activity in the
He proposed to increase investment
opportunities for small schemes with fund values below Sh5 million to
allow such schemes to invest up to 100 per cent in Government securities.
Acknowledging the need for increased
domestic savings, the minister recommended to increase the maximum ceiling
per contributor from Sh4,000 to Sh20,000.
For the security of employee benefits
at a time when a company becomes insolvent, the minister proposed to amend
Section 331 of the Companies Act to give priority to unpaid retirement
benefits contributions as is currently given to accrued but unpaid wages
To protect contributors' earned
benefits, he proposed to reduce the vesting period for employer
contributions from five years to three years of commencing and pensionable
In addition, Mwiraria proposed to
remove the requirement for defined contribution schemes to undertake
actuarial valuations every five years.
However, the Retirement Benefits
Authority (RBA), will continue to monitor returns on investments to ensure
scheme funds grow at reasonable rates.
Several amendments to the Insurance Act
were made to reduce the cost of compliance and to strengthen the regularly
capacity of the Insurance commission.
He shortened the period for preparation
and submission of audited accounts from six to four months in order to
harmonise the accounting period with the rest of the financial sector.