| Africa |
South Africa 2011 Budget package IBFD, Tax Analysts, Business Day The 2011 National Budget arrived accompanied by a variety of discussion papers and other documents. Among the highlights:
- From March 2012, an employer’s contribution to a retirement fund would be a taxable fringe benefit while employee contributions would be tax deductible up to the lesser of 22.5% of income or R200, 000 (US$28,520).
- A consultation on simplifying the tax regime for retirement funds will address extending the one-third lump-sum withdrawal cap on pensions and annuity funds to provident funds and look into other opportunities for harmonizing provident and pension funds.
- There will be further consultation on funding for national health insurance (IH 02/24/11).
- A consolidation of disparate social programs would take the occasion to introduce a mandatory basic retirement savings plan.
- The Policy Document A Safer Financial Sector to Serve South Africa Better advocates mandatory preservation of retirement funds and serves notice that both retirement annuities and pension fund fees are overdue for a review.
- Final Regulation 28, a refinement of pension fund investment rules, is also in this package. It tweaks various asset limits and a look-through principle discourages concealing risky assets to get around the limits. The regulation will take effect on July 1.
| Asia/Pacific |
- The executives whose pay was being judged in these votes would no longer participate in the vote.
- Tighter control of the role of remuneration consultants would entail declarations from the consultant and the board that they were not unduly influenced by the executive who benefited from their decisions.
- Mechanisms for hedging incentive compensation to reduce its exposure to unfavorable performance figures would be banned.
Bahrain Minimum monthly pension Trade Arabia The Shura Council has endorsed a measure that advances the goal of merging the public and private sector pension schemes (IH 02/02/11). Both will now have a minimum pension of BD200 (US$530) per month.
China New enterprise annuity rules; Penalty for nonpayment of wages Xinhua, China Hourly, Dow Jones The Ministry of Human Resource and Social Security has revised its Corporate Pension Fund Management Approach (Chinese only). It sets out governance structure, including the roles of trustees, account managers and investment managers. The major changes were in investment caps:
- The stock investment limit will rise from 20% to 30%.
- The 50% threshold for fixed income products will increase to 95%.
- The minimum liquidity requirement is cut from 20% to 5%.
Hong Kong 2011-12 Budget; MPF contribution hikes proposed Epoch Times, SCMP, The Standard The Finance Secretary has delivered the 2011-12 Budget featuring:
- A one-shot injection of HK$6,000 (US$770 ) into the accounts of Mandatory Provident Fund members and members of the occupational retirement schemes covered by the Employment Ordinance of Hong Kong as of February 23, 2011
- Refinements to a recently launched reverse mortgage pilot scheme (IH 01/12/11)
- A doubling of the elderly health care voucher (still a pilot scheme) to HK$500
- A batch of different job training and employment counseling initiatives
- The salary ceiling for contributions would rise from HK$20,000 to HK$30,000.
- The maximum contribution level would see a parallel growth from HK$1,000 to HK$1,500.
- The minimum monthly income subject to MPF contributions would rise from HK$5,000 to HK$5,500.
India Exec comp guidelines deferred; Unit-linked pension rules Financial Chronicle, Economic Times, AIR The Reserve Bank of India announced a delay in the implementation of its guidelines on top executive pay in the banking sector (IH 07/14/10). It will finalize its guidelines only after the Basel Committee on Banking Supervision (BCBS) has completed its own. In the interim, banks are advised to refer to the BCBS consultative document. The guideline implementation, initially set for fiscal year 2011-12, is pushed back to 2012-13. Also, the Insurance Regulatory and Development Authority (IRDA) is completing new rules on unit-linked pensions (IH 08/18/10). They are expected to address stakeholder concerns over the mandatory 4.5% guaranteed return. The rules would reportedly go into effect on April 1, so their release is imminent.
Japan Pension reform update Tax Analysts, Jiji Press, Japan Times The ruling party has been rebuffed in attempts to forge a working relationship with opposition parties on the social security and tax reforms (IH 01/12/11). The opposition has been calling on the Prime Minister to dissolve the legislature and hold a general election. The defection of 16 lawmakers in his own party has virtually guaranteed that reform is blocked under this administration. The Welfare Ministry is nonetheless preparing a pension reform package for April release. One new feature would be a minimum monthly benefit payment of ¥70,000 (US$856.43).
Malaysia Ruling on workers seconded abroad; Minimum wage for foreign workers IBFD, Malay Mail, Bernama The Inland Revenue Board of Malaysia has posted Public Ruling No. 1/2011 Taxation of Malaysian Employees Seconded Overseas, which clarifies some aspects of the tax regime for seconded workers. It examines how tax treaties apply in these situations and explores the role of “incidental” overseas duties in determining a worker’s tax treatment. Also, the Human Resources Minister has told the press that the minimum wage legislation (IH 02/16/11) would pay but equal minimum wages to local and foreign workers. A stakeholder “laboratory” has been gathering feedback on a variety of options for minimum wage legislation, but equal pay for foreign workers has the ministry’s firm support.
Philippines Medical reimbursement schedules Business World On the occasion of its 16th anniversary, Philhealth (Philippine Health Insurance Corporation) announced that a set of standardized payments is being introduced in all accredited hospitals for 22 of the most common medical conditions and operations. The roll-out should conclude by the end of June.
Thailand Tax break on retirement insurance premiums IBFD The Revenue Department has issued Ministerial Regulation No. 279 establishing a personal income tax deduction on contributions to retirement life insurance (IH 11/04/10). The annual cap will be the greater of THB200,000 (US$6,529) or 15% of annual gross income. Some key details such as the minimum age for accessing benefits will not arrive until the department’s formal notification of the reg. The regulation will take effect retroactive to January 1, 2011.
| Europe |
Denmark Prospects for pension reform bill EIU Several parties have adopted positions on the Prime Minister’s pension reform bill (IH 02/09/11). While the provisions on encouraging employment past retirement age have significant backing, the plan for phasing out the early retirement scheme evidently does not have the votes to get through Parliament. The bill will be submitted to Parliament this month.
EU Ruling on gender discrimination in insurance premiums; Cross-border healthcare directive Reuters, Irish Independent, The Times Yesterday, the European Court of Justice delivered its decision in Case C-236/09 (IH 02/16/11). In the closely followed case on whether using sex-based actuarial factors for life insurance premiums are discriminatory, the court ruled that factoring sex into insurance premiums is a violation of EU nondiscrimination law. The tremors will be most felt in pension annuities, life insurance and care insurance. Also, the European Council approved Parliament's compromise draft of the Cross-border healthcare directive (IH 01/20/11) without changes, but with four states voting against it and one abstaining. The directive is now adopted and the 30 month period allotted for member state transposition will end in August 2013.
Finland Social security guidance for foreign employers IBFD The tax administration has posted the guideline Obligations of a Foreign Employer. It explains that the social security withholding obligations of foreign companies permanently established in Finland depend on whether a worker has a certificate of secondment.
Hungary Constitutional Court reviews pension reform MTI, Global Pensions, IPE The Constitutional Court has started wading through the nearly 200 appeals against the second pillar nationalization under the administration’s pension reform (IH 01/26/11). The first step is determining whether the court has a legal basis for hearing the appeals. Incidentally, Parliament’s Economy and IT Committee has now approved the draft legislation on creating individual accounts within the state pension (IH 01/06/11).
Ireland New coalition government expected; Sovereign annuities delay Irish Independent; Irish Times, IPE It is apparent from last Friday’s election the Fine Gael and the Labour Party will soon put together a ruling coalition. Their shared views on health reform (IH 02/16/11) are well-established. An Irish Association of Pension Funds (IAPF) release sets out their proposals for pension reform. They find common ground on the issue of trimming the tax breaks on pensions. Fine Gael, which would be the coalition’s senior partner, recently added a proposal for a 0.5% levy on accrued pension funds. It has also committed to blocking the budget measures that would set an unreasonable tax burden on Personal Retirement Savings Accounts (PRSA, IH 02/02/11). The National Treasury Management Agency has conceded that the launch of the much anticipated sovereign annuities is still plagued by technical problems. They were initially set for a January debut and their arrival is now penciled in for April at the earliest.
Netherlands Pension tax break continuation for ZZPers IPE One small bridge to small business creation is a regime that allows the self-employed (ZZPers) to stay in their final employer’s pension fund for up to 10 years but retains tax benefits for only three years. The Financial Secretary (Dutch only) is now among those calling for the tax benefits to continue for the full 10 years.
Poland Sabbatical trade for retirement deferral PNB, News.pl The Civic Platform Party, senior partner in Poland’s ruling coalition, will soon release details of a sabbatical scheme that would grant workers a one-year leave in exchange for a one-year retirement deferral. This was initially conceived as a trade-off for workers aged 45-50, but it is now expected to be open to all workers. Sponsor aims include continuing education and preventing burnout.
Romania Confidence vote over Labour Code GIDA, Rompres, Mediafax The ruling coalition has adopted the new labour code (IH 01/26/11) and the administration aims to stage a confidence vote over it this week. The opposition is planning its own no-confidence vote. The coverage describes a few more provisions in the bill:
- There would be a 50% overtime premium for weekend work with the option of exchanging those hours for time off during the week.
- Layoffs could be performance-based and there would no longer be a moratorium on hiring new staff after a collective dismissal.
- Companies would be able to reduce the work week during quiet seasons and balance that with work weeks of up to 48 hours (aggregated over four months) during busier cycles.
- In the latest draft, the probation period for management staff does not rise above 90 days.
Spain Pension reform Market Alert Mercer has issued a Market Alert (both Spanish and English versions) covering the pension reform measures in the social and economic accord (IH 02/24/11). It focuses on retirement deferral incentives, tougher criteria for receiving a full pension when the contribution history falls short and the longer period for calculating benefits.
Sweden Bonus rules for financial sector The Local, Bloomberg, Dow Jones The Financial Supervisory Authority (FSA) paired a report (Swedish only) on low compliance with EU guidelines on financial sector bonuses with the release of its own rules (Swedish only) for financial sector bonuses. Variable compensation above SEK100,000 (US$15,539 )for employees who could affect a company’s risk level will have to be deferred. Companies with risk-weighted assets over SEK500B will have to pay a portion of variable remuneration in shares.
UK Boardroom quota proposed; Various Guardian, Daily Telegraph, Global Pensions The Department for Business, Innovation and Skills (BIS) has released the independent review Women on Boards. It calls on the FTSE 100 companies to have 20% female representation on their boards of directors by 2013, 25% by 2015. It also asks headhunting firms to draw up a code of gender diversity for board-level appointments and requests that shareholders factor diversity into their board member votes. There is no mention at this stage of mandatory quotas. In other news:
- HM Revenue & Customs has issued an FAQ document on the disguised remuneration measures in Finance Bill 2011 (IH 12/15/10). It uses numerous scenarios to clarify the scope of the legislation’s impact on a variety of benefit schemes including employee benefits trusts (EBT), employer financed retirement benefit schemes (EFRBS) and third party loans.
- The Government Actuary’s Department (GAD) has just issued new drawdown pensiontables with different rates for men and women. Yesterday’s European Court of Justice ruling against sex-based actuarial factors will doubtless force a revision.
- The Office for Disability Issues (ODI ) has released Government response to definition of disability consultation along with Equality Act 2010: Draft Guidancecovering the law’s provisions changing the definition of disability.
| North America |
Puerto Rico New Income Tax Code GAC, ONB, IBFD The Legislative Assembly approved the new Income Tax Code (Spanish only) on January 31. It features several new provisions on the tax regime for retirement plans:
- The annuity payable under a defined benefit plan must be below the lesser of $195,000 or the employee's average salary over the past three years.
- The annual employer and employee contributions (excluding roll-overs) to defined contribution plans may not exceed the lesser of $49,000 or the employee's previous year’s salary.
- Partial distributions are now allowed but they are taxed at 10%.
- There are new rules to refine nondiscrimination testing.
US Administration reversal on Defense of Marriage Act; Final FBAR regulations AP, MSNBC, The Guardian The Department of Justice has posted a letter advising congressional leaders that the department will no longer litigate on behalf of the provision in the Defense of Marriage Act that defines marriage as the union of a man and a woman. The President has concluded that this provision as applied to legally married same-sex couples is unconstitutional. The Department of Justice is required to continue enforcing the measure until either Congress or the courts overturn it. Also, the Treasury has released its final regulations on foreign bank account reporting (FBAR, IH 03/31/10). The regs do not provide the anticipated sweeping relief from the filing requirement for US pension funds and welfare benefit plans with foreign accounts. However, a pension trust that conducts its foreign investments through a US global bank custodian will, under certain conditions, be exempt from the reporting requirement.
| South America |
