Parliament annuls pension preservation rule locking employer contribution
Parliament annuls pension rule locking 100 % of employer contribution asks RBA to do proper public engagement
The Retirement Benefits Authority (RBA) has moved to clarify the implication of the recent annulment of the pension preservation rule.
“Please note that effective 7th November 2019, Parliament annulled in its entirety Legal Notice No.88 of 2019 through which the Cabinet Secretary National Treasury had sought to amend Regulation 19, (5) of the Retirement Benefits (Occupational) Regulations to lock up 100% of the employer’s contributions until the contributor attains the age of retirement or on any of the grounds set out thereunder,” reads the RBA notice in part.
Distribution of reserve funds also annulled
Besides the pension preservation rule, the said Legal Notice had also proposed to include a provision allowing for distribution of reserve funds to exiting members where the scheme maintains a reserve fund and to limit the maximum reserve funds held by a scheme to five (5) percent of the total value of the scheme fund.
The effect of this pension preservation rule annulment annulment is that ALL the amendments carried in the Legal Notice have been invalidated and will not take effect.
According to the Statutory Instruments Act 2013, “When a report on a statutory instrument has been tabled in Parliament, the statutory instrument shall be deemed to be annulled if Parliament passes a resolution to that effect.”
On the other hand, where Parliament has adopted a report or a resolution that a statutory instrument be revoked, the instrument shall stand revoked and the regulation making authority shall publish the revocation within fourteen days.
For this case however, Parliament annulled and not revoked the gazette notice thus the regulatory authority does not need to de-gazette the earlier notice for the annulment to take effect.
What the annulment of the Pension Preservation means
For avoidance of doubt, the effect of the annulment on the preservation rule is that, where a member of a defined contribution scheme leaves employment before attaining the specified early retirement age, he/she may opt to access 100% of his own contributions and 50% of the employer contributions together with the investment income accrued in respect of those contributions.- reads the RBA notice.
The Authority however advises that despite this provision, those changing jobs should delay accessing their pension contributions to ensure they have sufficient income in retirement.
Some industry players have reported cases of members of pension schemes seeking to access their contributions following the annulment of the gazette notice by Parliament meaning there was misunderstanding of what Parliament’s move meant.