New legislation spells name change for Pension Funds Tribunal.
The financial services dispute resolution landscape is being radically reshaped to ensure a consistent framework across the financial services sector, while providing for a quick and cost-efficient review of an aggrieved party’s grievance.
Along with the proposed amendments is a name change for the Office of the Pension Funds Adjudicator (OPFA), which will be renamed the Retirement Funds Ombud and for the Pension Funds Act to be called the Retirement Funds Act. In May 2021, a new Ombud Council, as well as an interim chief ombud, were appointed to oversee governance at South Africa’s financial services ombuds.
South Africa is well underway to implementing a Twin Peaks model of regulation in its financial sector. The introduction of the Financial Sector Regulation Act (FSR Act) and the establishment of the Financial Sector Conduct Authority (FSCA) was one of the first major steps taken towards achieving this objective. The FSR Act also made consequential amendments to the Pension Funds Act, 1956 and other financial sector legislation, which included amendments of the Act affecting the mandate of the OPFA.
The evolution of the Financial Services Appeal Board into the Financial Services Tribunal (FST) was one such amendment as it brought within the ambit of the FST’s jurisdiction decisions made by the Pension Funds Adjudicator (PFA). The FST has been in operation since 2018 and has offered a much-needed process for the quick and cost-efficient review of an aggrieved party’s grievance. Decisions made by the FST have shaped some of the OPFA processes to ensure parties are not unduly prejudiced. Muvhango Lukhaimane, the PFA, said in the OPFA’s 2021–2022 Annual Report that the Ombud Council acts as a regulator of ombud schemes and the OPFA will be subjected to such regulation. “The OPFA has started engaging with the interim Chief Ombud and making available all requested information to assist the Ombud Council in performing its mandate.
“The National Treasury is investigating an optimal operating model for the Ombud Schemes including the OPFA to ensure a more effective ombud system in the financial services sector. The OPFA has made submissions to the National Treasury on the proposed models and continues to engage in an effort to ensure challenges in the current system are addressed. The proposed amendments also enable the sharing of information between ombuds and the regulator. This is positive as it creates an opportunity to establish a system for the exchange of information, the objective of which should be to reduce systemic issues giving rise to common types of complaints in specific retirement funds,” said Lukhaimane.
She said while the FSR Act was intended to legislate the manner in which regulators and ombuds conduct themselves, the Conduct of Financial Institutions Bill (COFI Bill) is intended to legislate how financial institutions such as retirement funds are expected to conduct themselves.
The second draft of the COFI Bill was published for comment and the OPFA took the opportunity to submit comments. Certain consequential amendments to the Pension Funds Act were proposed which, if passed, would likely have a significant impact on the OPFA’s mandate. “Of importance were the proposals pertaining to section 37C of the Pension Funds Act, which deals with the manner in how death benefits in a pension fund should be disposed of. The proposed amendments appear to have not been well thought through and if adopted would serve to create significant confusion in the industry and impact on the complaints that would have to be dealt with by the OPFA. The OPFA has accordingly proposed a full consultation process takes place, which must include workshops held with relevant stakeholders in the retirement funds industry before any amendments to section 37C are effected. It is intended that all conduct issues will be exported from the Pensions Act into the COFI Bill as an overarching piece of legislation that applies to the conduct of all financial institutions, including retirement funds,” said Lukhaimane.
The publication of conduct standards in terms of both the FSR Act and COFI Bill will also form part of the legislative framework that retirement funds will be expected to abide by. These are also likely to form the basis of complaints received by the OPFA.
Issued by the IRFA TALK December 2022 newsletter.