WINDHOEK- The pension fund industry is calling for inclusive and wider consultations before government amends the Administration of Estates Act of 1965, which could collapse some of the industry’s players. These concerns follow amendments which have been made to certain parts of the Administration of Estates Act, 1965 (Act No. 66 of 1965) but
did not address issues relating to the administration of the Guardian’s Fund and safe custody and record keeping of
the Offices of the Master of the High Court.
Motivating the Administration of Estates amendment Bill in the National Assembly late last year, Justice Minister
Sacky Shanghala said these provisions are outdated and not in line with current best practices.
The Guardian’s Fund is administered by the Master of the High Court in terms of the provisions of Chapter V of the Administration of Estates Act, 1965. It is a fund created to administer funds which are paid to the Master on behalf of various persons known or unknown, such as minors, persons incapable of managing their own affairs, unborn heirs, missing or absent persons or persons having an interest in moneys of a usufruct or fideicommissary nature.
The monies consist mainly of inheritances and death benefits due to a beneficiary from a deceased estate of pension fund.
S h a n g h a l a s a i d t h e Administration of Estates Act, 1965 does not provide for the proper protection of monies due
to minors of deceased estates.
The proceeds of policies which are due to a minor are paid by insurance companies to either the guardian of held in a fund
administered by the insurance company. The minister added that many complaints are lodged with the Master by minors that never receive such monies from their guardians. When, and if the minors receive those monies, the guardian or the
insurance companies have already deducted monies for all sorts of purposes.
He a r g u e d t h a t t h e administration and trustee fees payable on monies kept in trust by private institutions are not
currently regulated. However, Retirement Fund Solutions (RFS) Managing Director Marthinuz Fabianus feels a policy
intent for the envisaged changes or shortcomings that the amendment sought to redress is to be prepared
and wide consultations should be held to consider the best ways possible for addressing relevant shortcomings or problem areas in the payments of funds to minors from the various sources and or institutions.
According to Fabianus, the first problem is that a new law was introduced without any awareness on the part of most or all the institutions that would be required to carry it out. “It appears clearly that it was not considered that there is an existing
industry and existing practices that are impacted,” he told New Era.
Equally, there is no understanding on what the rationale was for this amendment and further there is no clear understanding how it needs to be interpreted or to deal with it in practice, Fabianus said. “The immediate effect of the
amendment has placed in limbo all current annuity payments to minors and other payments in process to minors from pension funds in particular, but also from any of the other sources referred to in the amendment,” he noted.
Some of the administrative concerns he raised include that the amendment needs to be understood
how it will impact pension fund administrators, vis-à-vis their obligations in terms of Schedule 2 of the Income Tax Act regarding deduction of the Pay As You Earn (PAYE) on lump-sum benefits and income benefits and the issuing of
PAYE 5 certificates.
“The amendment does, in our opinion, not allow administrators to deduct tax as it categorically states that the amount payable is to be paid to the Master, which is the gross amount,” he argued. Section 37C (2) of the Pension
Funds Act provides that “a payment by a registered fund to a dependent shall be deemed to include a payment made by the fund to a trustee contemplated in the Trust Moneys Protection Act, 1934 (Act 34 of 1934), for the benefit of a
dependent contemplated”. He says an entire service industry has been established per the Trust Moneys Protection Act, 1934, adding certain service levels have been established between pension funds and trust administrators over
the years, to the satisfaction of the beneficiaries and persons entrusted with management of pension funds
in carrying out their fiduciary duties towards the beneficiaries.
He explained that certain growth expectations have been agreed with the custodians of the minor beneficiary trusts.
“It is our view that there are certainly grounds to contest the constitutionality of this amendment assuming our understanding of the gazetted law correctly mirrors its letter and spirit. The amendment will not just cause serious disruption and negatively impact large numbers of minor beneficiaries and their guardians, as well as the financial services
and related industries, but will have serious consequences for the country’s macro-economic stability and will most likely lead to further deterioration in the country’s ratings by international bodies,” he maintained.
2019-01-14 10:45:13 7 days ago