Prior to the enactment of the Pension Funds Act No. 5 of 2019, Lesotho’s retirement fund industry operated without a dedicated legal framework. This regulatory vacuum left both fund members and pension administrators uncertain about their respective rights and responsibilities, creating risks for fund solvency and governance.
Recognising the need to establish a structured and stable pension system, the 2019 Act introduced comprehensive regulation aimed at ensuring that all pension schemes in Lesotho are properly managed, financially sustainable, and accountable. According to the Statement of Objects and Reasons accompanying the legislation, regulation was essential to safeguard retirement savings and strengthen public confidence in the industry.
Under the Act, the Central Bank of Lesotho was officially designated as both the regulator and supervisor of pension funds. The Central Bank’s mandate includes broad supervisory authority, such as the right to request information from any party, including fund administrators, the ability to conduct on-site inspections, and the power to audit financial records. In addition, it is tasked with monitoring legal compliance and initiating enforcement action where breaches occur.
The law requires that every pension fund, provident fund, or preservation fund operating within Lesotho must be registered with the Central Bank. Registration is conditional upon satisfying specific requirements outlined in the Act and its regulations. Furthermore, each fund’s governing rules must also be submitted for approval and registration by the Central Bank.
A key feature of the legislation is the recognition of pension funds as independent legal entities, capable of acquiring rights, assuming liabilities, and holding property in their own name. This formal legal personality provides a level of protection and continuity essential for long-term investment and fund sustainability.
The Act also outlines a clear governance framework for pension funds. Each fund must have a governing body consisting of at least five but not more than eleven members, unless the Central Bank authorises otherwise. All members of the governing body must meet the eligibility criteria specified in the regulations. In addition, a principal officer must be appointed, with the approval of the Central Bank, to oversee the fund’s daily operations. Both the fund and the principal officer are required to maintain a physical presence in Lesotho, and the principal officer must be a resident of the country.
One of the more nuanced provisions of the Act is Section 32, which addresses the legal treatment of pension benefits upon death or in matrimonial matters. It states that any benefits payable by a fund do not form part of the estate of a deceased member. This provision appears designed to provide certainty in cases involving marriages in community of property and to exclude pension pay-outs from being attached by creditors or inherited under intestate succession.
However, Section 32 has raised interpretive concerns. The wording is ambiguous, and it is unclear whether the intention is to exclude pension assets from the joint estate in matrimonial property regimes, to protect them from forming part of a deceased estate, or to prevent them from being used as collateral by the member. Clarification is needed to determine whether pension benefits can legally be pledged, inherited, or divided during divorce proceedings.
In conclusion, the Pension Funds Act, 2019, represents a landmark in the evolution of pension regulation in Lesotho. It introduces a modernised framework that strengthens regulatory oversight, protects retirement savings, and brings legal clarity to fund governance. Still, certain provisions, particularly around estate exclusion, require refinement to align legislative intent with practical application.