COSATU calls on Minister to withdraw regulations

28 May 2007

The Congress of South African Trade Unions calls on the Minister of Finance to withdraw the new regulations to the Long-Term Insurance Act. The federation condemns the National Treasury process that has resulted in these regulations being drafted and published without consultation with workers and pension fund members.

This process has all the signs of being heavily influenced by the long-term insurance industry, in the same way that the National Treasury and the industry have conducted other behind-closed-doors deals in the past.

COSATU is aware that the industry lobbied the Treasury to limit to R3 billion the amount it was forced to refund in 2006 to retirement annuity policyholders, whom it had fleeced for years through unjust charges and undisclosed penalty fees, which amounted to theft. The R3 billion repayment represented a mere slap on the wrist from the industry regulator, the Financial Services Board, and the Treasury.

As COSATU stated in its submission to the Portfolio Committee of Finance public hearings on bulking: "COSATU is very concerned that a signal from the industry is that you can steal from the poor as much as you can and when you are caught, pay back what you have stolen and the matter is closed. We reject this. We reject suggestions that it is a costly exercise to bring criminals to book in the retirement fund industry. We reject the idea that big institutions can do as they like since the law will not catch up with them".

Our repeated requests for the details of the bilateral negotiations between the industry and Treasury officials to be tabled in the National Economic Development and Labour Council (Nedlac) for discussion have fallen on deaf ears. Treasury officials assured us they would table these matters in Nedlac, but have failed to do so.

Now the industry has got exactly what it wanted. In terms of the new regulations, not only can it continue charging undisclosed fees and penalties, but this practice is now condoned in law. The regulations legalise the so-called "causal event charges" - the early termination charges and premium reduction fees for which the life insurance industry has become notorious.

The Minister is fond of blaming pension fund shareholders, trustees and policyholders for their lack of activism. COSATU is now calling for some activism from the Minister. It is time for him to clean up his own house to ensure his officials and the FSB are removed once and for all from the clutches of the pensions industry. It is time for the Minister to put his money where his mouth is, and side with the workers whose savings are the lifeblood of the pensions industry, and not with the bosses who control its institutions and are stealing from workers daily.

If the Minister is not going to correct this, then the whole industry will lose what little credibility it has left among of current and potential savers.

COSATU is even more worried that the entire social security and retirement reform process, which is supposed to be negotiated currently through Nedlac, is threatened by the attitudes and actions which have resulted in these regulations being signed into law by the Minister behind our backs.

The detailed paper that the National Treasury promised for public release by at the end of March is still outstanding and it remains a mystery as to when it will be made available. COSATU doubts very much whether we are going to be able to meet the 2010 deadline announced by the President in his State of Nation Address.

We fear that even the good proposals in the February paper might not see the light of the day, because National Treasury is being lobbied by the industry at the expense of the members of retirement funds.  

We call on the Minister to immediately withdraw the new regulations and to consult all interested parties on them, as part of the pensions reform process which is already underway. We warn the Minister that there is too much at stake in the reform process for the millions of workers, their families and communities to allow it to be hijacked by narrow industry interests, driven only by making maximum profits for shareholders.

In the meantime, COSATU will be stepping up implementation of its 2006 National Congress resolution to transform the FSB.

Finally, we welcome the newly appointed Pension Funds Adjudicator, Mamodupi Mohlala and hope that all her predecessor's previous good work will be protected and sustained in defence of working people's only savings.

We wish Vuyani Ngalwana, the former Pension Funds Adjudicator, all the best in his career after spending serving members of retirement funds well during his term.