An internal memo sent to staff at Dr Iqbal Survé’s Independent Media proposes that their pension and provident funds be disbanded, Fin24 reports. According to the memo, “This would mean that there will be no further company contribution to the fund and members will now be responsible for their own post-retirement funding and planning.
Rosemary Hunter, partner and pension fund lawyer at Fasken, says if the employees have had their salaries reduced and they cannot afford their contributions to the pension fund anymore, it would be better to ask the pension fund board to amend its rules to provide for the temporary suspension of retirement funding contributions, but still require the employer to pay contributions to provide for group risk benefits until the situation improves.
“They could also ask the board of the pension fund to amend its rules to make the fund ‘paid up’ to avoid future contributions and to ask Independent Media to take out group life and permanent health insurance cover for them. Members’ retirement savings could then remain invested rather than withdrawn and not made subject to the deduction of tax at punitive rates as they would be if the fund was liquidated.”
There has been arguments that funds should be able to pay out special relief benefits, but not all retirement savings to members who are still employed but who are not receiving their usual salaries due to the Covid-19 pandemic.
“This could help avoid the ‘all or nothing’ approach reportedly suggested by the memo,” Hunter says.
Fasken made detailed representations to government in April this year on legal issues related to the proposal.
“Unfortunately, the call for amendments to legislation to facilitate this appears to have fallen on deaf ears,” she said.