PENSION LAWYERS ASSOCIATIONSURPLUS APPORTIONMENT

MIKE CODRON

CHIEF ACTUARY

FINANCIAL SERVICES BOARD

AUGUST 2006

HISTORY

► 7 December 2001 Act came into being

► June 2003 Regulations Issued

► June 2004 PF Circulars Issued

► 7 December 2004 Last SAD

► 7 June 2006 Last SAS submission date

INTERACTION WITH INDUSTRY

► March/April 2005 Met with largest administrators and corresponded with balance

► September/October 2005 Repeat

► 2 November 2005 In frustration issued a PF circular

► May 2006 Final Road-show

► July 2006 New letters

2 NOVEMBER 2005 - CIRCULAR

► Valuations to be received by 31 March 2006 or else a fine R50 per day

► SAS also to be received by 31 March 2006 or else the trustees to set up a Tribunal

MAY 2006 ROADSHOW► Met with about 30 Administrators

► Phoned the Rest

► Advised all that there would be fines for the late submission of Actuarial Valuations as from 1 May 2006 backdated to 1 April 2006

► SAS to be submitted over staggered dates up to 31 December 2006

► Will not accept 2007 unless a major issue such as litigation

► Other cases e.g. terminated prior to 7 December 2001 but not deregistered to be dealt with in a separate project.

JULY 2006 LETTERS

► Requested funds to submit revised dates for the following cases:

● Primarily 31 December 2006

● 2007

● No Dates

► If not received backdated to 1 April 2006

► Reminded those who had not replied to look at paragraph 6 of the Financial Institutions (Protection of Funds) Act No. 28 of 2001. Point is are they fit and proper to be licensed to be Retirement Fund Administrators

STATISTICSSTAND ALONE FUNDS

With Surplus

“Nil” schemes

Total

Approved 93 4054 4147Rejected 1 17 18Queries 63 536 599Not Complete 83 205 288

240 4812 5052

STATISTICSUMBRELLA FUNDS

With Surplus

“Nil” schemes

Total

Approved 9 5822 5831Rejected - 2 2Queries 7 621 628Not Complete 3 31 34

19 6476 6495

WHAT ARE THE ISSUES

► Apathy

► Trustees having no idea of their responsibilities

► Trustees not wanting to accept the rights of former members

► Arrogance

► Greed

► Hiding surplus

EXAMPLE

Number of Members 344

Weighted Average Age 47,2 years

Average Salary R52 645

EXAMPLE (Continued)

AGE DEATH DISABILITY

25 3,5 5,630 4,1 5,5

35 3,2 4,0

40 1,4 2,6

45 0,5 2,3

50 0,8 2,7

55 0,6 2,5

60 0,9 2,7

WHAT THIS MEANS

Average no deaths per annum 2Amount R200 000Average no disabilities per annum 1Amount R150 000Reserve as per PF 117 ±R600 000

RISK RESERVE

R7,1 million

OTHER EXAMPLES

► Excessive Solvency Reserves – in one case 51%

► Excessive costs of exercise – one party was assuming 50% of members and former members will complain

► Hiding employer misuses

OTHER EXAMPLESCONTINUED

► High risk reserve because of some highly paid executives

► Post SAD events

► Refusing to add fund return to employer misuses

► Refusing to add fund return from SAD to date of payment to former members

15FEMPLOYER SURPLUS RESERVES

Approved 25Rejected 41Queries 1Not Complete 4

71

TRIBUNALS

To date:

► Tribunals 8

► Appeal Board 1

OTHER COMMENTS

► Deregistered Funds

► Frivolous complaints

► Lack of Communication – especially Nil Schemes

► The Actuarial valuation is part of the SAS

CONCLUSION

► We will name and shame where necessary

► The Trustees are responsible for the SAS

THANK YOU

QUESTIONS ?