Here is the concluding part of my article in today's BusinessDay and other newspapers.
The Ugly
Commencement date - The Pension Reform Act 2014 (Act) was signed into law by the President on 1 July 2014. The Act does not specify a commencement date. The Interpretation Act provides that where no date of commencement is contained in an Act, the commencement day shall be the day the Act is passed or signed into law. Unless a commencement date is inserted before the Act is gazetted, the commencement date will be 1 July 2014. This does not give room for transition arrangement and proper planning by affected employers.
Gaps in coverage – Only employers with a minimum of 15 employees are required to contribute to the new Scheme. The Act provides that in the case of private organisations with less than 3 employees participation in the Scheme would be governed by guidelines issued by the National Pension Commission (PenCom). However, the Act is silent on the applicability of the Scheme to private organisations with more than 3 but less than 15 employees. Also what happens to employers with 5 to 14 employees regarding their past contributions under the old Act?
Sole contribution by employers – The new Act provides that an employer can take full responsibility of the contribution but in that case, the contribution shall not be less than 20% of the employee's monthly emolument. This does not make sense given that the combined contribution by both parties is 18%. Employers will therefore be discouraged from taking full responsibility.
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