Rössing surplus pension distribution questioned

A PROPOSED rule change to the Rössing Pension Fund has been described by pension fund experts as a smokescreen to allow Rössing Uranium to access at least one-third of the fund’s surplus.

But trustees of the fund denied that the company stands to receive anything from the surplus funds. The actuarial valuation of the surplus at the end of March last year was N$412,5 million, which would mean that the company would benefit close to N$140 million from the surplus, if the pension fund experts’ assertions are correct, with both former and current members getting the rest. A draft surplus distribution agreement stipulates that the fund trustees have agreed to distribute the surplus money in a ‘fair and equitable’ manner to include all members. It states that the ‘distribution should be 33,3% each, in respect of active members including pensioners, the company and former members’. According to a proposed rule amendment to the fund, the ’employer surplus account shall be credited with any amount credited to this amount in terms of the fund’s scheme for the distribution of surplus at the distribution date’.This has caused an uproar in some circles questioning the legality should the company benefit from the surplus distribution at this juncture or through later rule amendments. The principal officer of the Rössing Pension Fund, Erich Beukes, said there is ‘no intention or proposal to make any payment from the fund to the company’.Beukes last week said following two years of discussions between the trustees and the fund, the Mineworkers Union (MUN) and the company, a decision was taken as to how to distribute the surplus pension fund. He said in terms of the rules of the fund, the ultimate decision was for the company to make, ‘as the company underwrites the costs and benefits promised by the fund and has to agree any benefit improvements’. Beukes said once the company had communicated the final decision to the trustees, it was necessary to make certain changes to the rules in order to implement these decisions. ‘The reason for the rule amendment were therefore to define former members so that they could also be included in the surplus distribution, as previously former members had no entitlement to any further benefits from the funds, and to cater for the manner in which surplus is to be allocated to members. There is nothing in the rule amendment about payments to be made to the company,’ Beukes said.But local pension experts, who prefer anonymity, say the proposed amendments are simply a smokescreen to pave the way for the company to obtain at least indirect benefit at a later stage in the same way that the Tsumeb Corporation Limited (TCL) surplus distribution was ‘pushed past the regulator under false pretenses’. ‘Once this was done,’ said one expert, ‘there was no return and the members and past members left without remedy’.The experts questioned what is ‘fair and equitable’, asking why stipulations of eminent surplus distribution legislation, to be copied from South Africa in new Namibian legislation, are not used to determine fairness and equity. They suggested the employer is trying to bypass surplus distribution legislation to be applicable in Namibia soon. They made reference to the Income Tax Act of 1981 which stipulates that the employer should be precluded from controlling the management or assets of a pension fund and from ‘deriving any monetary advantage from moneys paid into or out of the fund, except where the employer is a partnership, a member of the partnership may be permitted to derive such monetary advantage if he or she was previously an employee and, on becoming a partner, was permitted to retain his or her membership of the fund as though he or she had not ceased to be an employee…’. The Corporate Communications Manager of the Namibia Financial Institutions Supervisory Authority (Namfisa), Isack Hamata, would not discuss the Rössing Pension Fund matter, saying the regulator can only discuss the affairs and actions of the institution with itself. As far as the Income Tax Act is concerned, Hamata said the Act, in as far as the provisions on pension funds go, ‘means that should an employer or employee derive any monetary benefit from a pension fund, that fund will lose the tax concessions allowed by the tax authority’. A legal opinion on this by South African-based Thipa Incorporated Attorneys said both the Income Tax Act and the Pension Fund Act prohibits an employer from taking contribution holidays or surplus monies since these assets form part of the fund for the benefit of the members. The pension fund experts said the Rössing Pension Fund members enjoyed a contribution holiday since 1992, and that the employer also did not make any contributions to the fund. ‘Questions are raised as to why current members who joined the fund after 1992, and therefore did not contribute to the surplus, or the current employer, who also did not contribute to the surplus, should in any way now, or in future, benefit from the surplus,’ the expert said. Namfisa’s Hamata also commented on the fact that the Rössing employees have enjoyed the contribution holiday, adding that ‘it is not only the employer who has not contributed to the Rössing Pension Fund’.Beukes agreed that the employees were on a contribution holiday since then due to the surpluses that were built up in the fund prior to that. But he said the company has never been on a contribution holiday, adding: ‘A required contribution has been set at 0 per cent since 1992.’’As part of the surplus distribution, it has been agreed that the company be allowed to continue to contribute 0 per cent, and then after approximately three years to contribute at the rate that would be required if there was no surplus,’ Beukes said. An actuarial report of March 31 2009 found the surplus pension was worth N$367,2 million, less than the N$458,3 million it was worth in 2006.Beukes said the reduction was due to salary and pension increases, and because the members and company did not contribute for that period. ‘The main factor was the low returns earned over a three-year period,’ Beukes said. The trustees have yet to take a decision as to how to allocate surplus to former members,’ commented Beukes.