Government Gazette

REPUBLIC OF SOUTH AFRICA

Vol. 438 Cape Town 6 December 2001 No. 22922

THE PRESIDENCY
No. 1332 6 December 2001
It is hereby notified that the President
has assented to the following Act,
which is hereby published for general
information:–
No. 65 of 2001: Pension Funds
Amendment Act, 2001

AIDS HELPLINE: 0800-123-22 Prevention is the cure

2 No. 22922 GOVERNMENT
GAZETTE. 6 DECEMBER 2001

Act No. 65,2001 PENSION FUNDS AMENDMENT ACT. 2001

GENERAL EXPLANATORY NOTE:

1 Words in boldtype in square bracketsindicateomissions from

existing enactments.
Words underlined with a solid lineindicateinsertions in
existing enactments.

(English text signed by the President.)

(Assented to 5 December 2001.)

ACT
To amend the Pension Funds Act,1956, so as to define “fair value”; to clarify the
position of a registered pension fund to furnish guarantees in respect of housing
loans granted to members by persons other than the fund; to extend the concept
of
ownership; to further regulate the amountof loans and guarantees; to extend the
Minister’s powers to make regulations; to provide for the deduction from deemed
benefits in casesof default and transfers to other pension funds; and to provide for
matters incidental thereto.

B E IT ENACTED by the Parliament of theRepublic

fo1lows:-
of South Africa, as

Amendment of section 1 of Act 24 of 1956, as amended by section21 of Act 101 of

1976, section 9 of Act 94 of 1977, section 10 of Act 80 of 1978, section 38 of Act 99
of 1980, section 20 of Act 54 of 1989, section 29 of Act 97 of 1990, section 14 of Act 5
83 of 1992, section 21 of Act 104 of 1993 and section 1 of Act 22 of 1996

1. Section 1 of the Pension Funds Act, 1956 (hereinafter referred to as the principal
Act),isherebyamended by theinsertion in subsection (1) afterthe definition of
‘dependent’ of the following definition:
‘‘ ‘fair value’, in relation to an asset of a fund, means the fair value of that asset 10
determined in accordance with South African Statements of Generally Accepted
Accounting Practice;”.

Amendment of section 19 of Act 24 of 1956, as amended by section 13 of Act 80 of

1959, section 9 of Act 58 of 1966, section 1 of Act 80 of 1969, section 2 of Act 23 of
1970, section 7 of Act 91 of 1972, section 23 of Act 101 of 1976, section 11 of Act 94 15
of 1977, section 11 of Act 80 of 1978, section14 of Act 103 of 1979, section 39 of Act
99 of 1980, section 14 of Act 82 of 1982, section 20 of Act 46 of 1984, section 17 of
Act 86 of 1984, section 11 of Act 50 of 1986, section 5 of Act 51 of 1988, section 8 of
Act 53 of 1989 and section 11 of Act 64 of 1990

19 of
2. Section the principal Act is hereby amended- 20
( a ) by the substitution for subsection (5) of the following subsection:
“ ( 5 )(a)A registered fundmay, if its rules so permit and subject to the
regulations, grant a loan to a memberby way of investment of its funds
or furnish a guaranteein favour of a person otherthan the fund in respect
of a loan granted or to be granted by such other person to a member to 25
enable the member-
4 No. 22912 GOVERNMEN GAZETTE. 6 DECEMBER 2001

Act No. 65,2001 PENSION FUNDS AMENDMENT ACT. 2001

(1) to redeem a loan granted to the member [by a person other than
thefund] againstsecurity of, eithera pledge by the m e r r w
concerned to the fund of the benefit contemplated in paragr@
-_
(c)(ii), or immovable property which either belongs to the member
or his or her spouse or the member and his or her spouse and on 5
which a [dwelling] residence has been or will be erected which is
occupied or, as the case may be, will be occupied by the member or
a dependant of the member;
(ii) to [purchase a dwelling,or to purchase land and erect a dwelling
on it] acquire immovableproperty on which a residencehas beenor 10
will be erected, or to erect a residence on immovable propertlih
respect of which, either the member or his or her spouse, or
member and his or her spouse, has or have obtained ownershipor
the right to ownership through a right of occupation, for occupation
by the member or a dependant of the member; or 15
(iii) tomake additions or alterationstoor to maintain orrepaira
[dwelling which belongs to] residence of which ownership or &
right to ownership was obtained through a right of occupation&
either the member or his orher spouse or themember and his or
spouse and which is occupied or will be occupied by the memberor 20
a dependant of the member,
if the right of occupation of the immovable property or residence>
secured by virtue of the operation of any custom or law, other t h a n 2
agreement of lease or similar temporary measure,entitling such member,
or his or her dependants, to the right of occupation of such immovable 25
property or residence or any specified portion thereof.
(6) A loan or guaranteeby a fund, contemplated in paragraph (a), shall
not begranted or furnished,respectively, after the commencementof the
[Financial Institutions Amendment Act,19861 Pension Funds Amend- -
ment Act, 2001- 30
(i> unless secured by-
(aa) a first mortgage on the immovableproperty in respect of which
[it] the loan is granted; or
(bb) a pledge by the member concerned to the fund of the bene.6ts
to which the member is entitled in terms of the rules of the 35
fund; or
(cc) both such mortgage and such pledge;
(ii) in respect of immovable property if the member concerned is liable
to the fund in respect of a loan or guarantee granted [to him]
furnished in respect of the member in respect of other immovable 40
property;
(iii) [at a lower rate ofinterest than that] unless, in the case of a l o g
granted by the fund, the rate of interest on the loan is equal to
exceeds the rate of interestwhich may fromtime to time be
prescribed by regulation; 45
(iv) in the case of a loan granted to the member by some other person&
respect of which a guarantee has been furnished by the fund, or&
respect of a loan by the fund to the member, unless the capital sum
in respect of any suchloantogetherwithinterestthereon,is
redeemable over aperiod not exceeding 30 years in equal weekly or 50
monthlyinstalments [which shall includethe interest on t:he
capital sum outstanding]: Providedthat if such period i n 2
particular case extends beyond the normal retirement date of the
member concerned, the outstanding balance of the loan on that d a g
must be able to be repaid out of no more than one third of the to@ 55
value of the benefit due to themember at that date.
(c) A loan or guarantee contemplated in paragraph ( a )shall not exceed,
at the time it is granted or furnished, where it is secured in accordance
with-
6 No. 22922 GOVERNMENT GAZETTE,6 DECEMBER :!001
-
Act No. 65,2001 PENSION FUNDS AMENDMENT ACT, 2001

(i) paragraph (b)(i)(aa), 90 per cent of the [market] fair value of the
hypothecated immovable property concerned;
(ii) paragraph (b)(i)(bb), the lesser of the amount of-
(aa) the lowest benefit in terms of the rules which the member
would receive [if he wereto terminate]on termination of his 5
or her membership of the fund [voluntarily] , nett of income
tax as envisaged in section 37D(a); or
(bb) the [market] fair value of the immovable property concerned
[, whichever is the lesser amount]; or
(iii) paragraph (b)(i)(cc), the lesser amount of- 10
laa) theamountequal to the aggregate of 90 percent of the
[market] fair value of the hypothecated immovable property
concernedand the amountof the lowest benefit in terms of
rules which the member would receive [if he were to
-
terminate] on termination of his or her membership of the 15
fund [voluntarily] , nett of income tax as envisaged ins e c t i s
37D(a); or.
(bb) the [market] fair value of thehypothecatedimmovable
property concerned [, whichever is the lesser amount].
[(cA)]@ The percentages referred to in subparagraphs (i) and (iii) of 20
paragraph (c) may be increasedto 100 per cent, subjectto the furnishing
to the fund by the employer of the memberof an irrevocable guaranteein
respect of so much of the loan or the amount of the guarantee as may
exceed 90 per cent.
[(d)]@ For the purposesof this section ‘immovable property’ includes25
a [surveyed site in respect of which a right of leasehold is registered
in terms of section 6A of the Blacks (Urban Areas) Consolidation
Act, 1945 (ActNo. 25 of 1945)] land tenure right as defined in section 1
of the Upgrading of Land Tenure Rights Act, 1991 (Act No. 112 3
1991)”; 30
(b) by the substitution for subsection (5A) of the following subsection:
“(5A) [For the purposes of subsection (5) ‘market value’ means
the price which would be obtained on a sale in the Republic between
a willing seller and a willing purchaser (between whom there is no
other direct or indirect connection), as estimatedbya person 35
appointed by theregistered fund concerned for that purpose:
Provided that-
@ [where] Where a transaction for the purchase of an immovable
property [(other than vacant land upon which dwelling
a is in the
course of erection orabout tobeerected)] ispending and a 40
purchase price has already been agreed upon, or where such an
immovable property was acquired by purchase not more than six
months before the dateon which the estimateis made, the[market]
fair value of the property shall not be fixedat an amount higher than
the true purchase price of the property, as declared orto be declared 45
by the parties Concerned for transfer duty purposes [plus, in the
last-mentioned case, one hundred rand];
(b) where a transactionfor the erection of, or additions alterations
or 1%
or to maintain or repair a residence is contemplated, the estimate of
the fair value of the immovable property shall not be fixed at 50
amount higher than the fair value contemplated in paragraph (d
plus an amountequal to the cost of sucherection,additions,
alterations, maintenance or repairs, as the case may be.”; and
(c) by the substitution in subsection (5B) for the words preceding paragraph (a)
and for paragraph (a), of the following words and paragraph, respectively: 55
“Notwithstanding anything to the contrary contained in the rules of a
registered fund, such a fund shall not, directly or indirectly after the
commencement of the [Financial Institutions Amendment Act,19861
Pension Funds Amendment Act, 2001-
8 No. 22912 GOVERNMENT GAZETTE. 6 DECEMBER 2001

Act No. 65,2001 PENSION FUNDS AMENDMENT ACT, 2001

, f -
(a) grant a loan to, a member or
make any of its funds available, whether by way of aninvestment or
otherwise, to be utilised in any manner by the fund or someone else
for a loan to a member or a guarantee on behalf of a member. other
than- 5
(i) a loan
- [for a purpose mentioned in paragraph (a) of]
contemplated in subsection (5) and which complies with the
provisions of [paragraphs (b) and (c) ofl that subsection; and
(ii) a guarantee contemplated in subsection ( 5 ) and which c i s
plies with the provisionsof that subsection; or”. 10

Amendment of section 36of Act 24 of 1956,as amended by section 18 of Act 103 of

1979, section 18 of Act 86 of 1984, section 9 of Act 53 of 1989, section 27 of Act 83
of 1992 and section 2 of Act 7 of 1993

3. Section 36 of the principal Act,is hereby amendedby the insertion insubsection ( 1 )

after paragraph (bC) of the following paragraph: 1s
“(bD) prescribing additional conditions under which a fund may grant a loan to2
member or furnish a guaranteein favour of a person other than thefund&
l g r a n t e d by such other person for the
purposes contemplated in section 19(5);”.

Amendment of section 37D of Act 24 of 1956,as inserted by section 14 of Act 94 of 20

1977 and amended bysection 14 of Act 80 of 1978

4. Section 37D of the principal Act is hereby amended-

(a) by the substitution for paragraph (a) of the following paragraph:
~~

“ ( a ) deduct any amount dueon the benefit in questionbythe member3

accordance with the Income Tax Act, 1962 (Act No. 58 of 1962), - 25
and any amount due to the fund in respect of-
(i) a loan granted to a member in terms of section 19(5)[(u)]; or
(ii) any amount for which the fund [is] becomes liable under a
guarantee furnished in respectof a .member for a loan granted
by some other person to [a] the member [for any purpose 30
referred to] in terms of section 19(5)[(u)], from-
(aa) theamount of the benefit towhichthemember or a
beneficiary [is] becomes entitled in terms of the rules of
thefund [to anamount not exceedingtheamount
which in terms of the Income Tax Act, 1962 (Act No. 35
58 of 1962), may be taken by a member or beneficiary
as alumpsumbenefit as defined in theSecond
Schedule to that Act]; or
(bb) in the caseof a transferofihe member to another fund, the

transfer, if the board of the transferor fund is

satisfied that
it is not otherwise reasonably possible to negotiate the
repayment or to transfer the loan or the guarantee; or
(cc) in the case of default on the repayment of any such loan

her membership of the fund isnot terminated, the amount

of the benefit which the member would have received on
termination of membership on the date of default, if such
a deduction is onlyeffected as a last resort after the board

required repayment can be made;”; and

(b) by the addition of the following subsection, the existing section becoming
subsection (1):
“ ( 2 ) For the purposes of paragraph (a)(ii)(bb) and (cc) of subsecticg
(l),the amounts so deducted shall be deemed tobe a benefit towhich the 55
member becomes entitledon termination of his or her membership of t l ~
10 No. 22922 GOVERNMENT GAZETTE, 6 DECEMBER 2001

Act No. 65,2001 PENSION FUNDS AMENDMENT ACT, 2001

fund for reasons other than as a resultof retirement or death arising t&
at
date of the transfer or the default.”.

Short title and commencement

5. This Act is called the Pension Funds Amendment Act, 2001, and comes into
on a date fixed by the
operation President by proclamation in the Gazette. 5