Pension fees inflame workers
● A pension fund administrator is under fire for allegedly overcharging a fund with 21,000 union members and losing some of their retirement savings in poor investments.
NBC Holdings charged the Chemical Industries National Provident Fund (CINPF) about R50m last year — or nearly R200 each per member per month — to manage their pensions.
A report by Gobodo Forensic and Investigative Accounting said the fees charged by the company were “substantially higher” than what most other firms charge.
CINPF’s trustees commissioned Gobodo in August last year to investigate a raft of issues, including whether the fees they were paying were “industry related and in the best interest of the fund or its members”.
The report, dated December last year, states that not only were NBC’s charges levied for the year ending March 2019 higher than industry norms, the company also invested the CINPF’s funds in underperforming investment vehicles, which led to the fund declining in value by R82.4m, or 1.4%.
NBC’s head of legal, Lieb van Zyl, declined to comment, saying the matter is the subject of a court case.
“NBC has every confidence that the questions raised will be properly ventilated in the course of the judicial process. We hold ourselves available to deal with the questions raised as soon as the application and or any other proceedings arising therefrom have been adjudicated upon,” he said.
Van Zyl was referring to a court case in which some CINPF members and NBC launched a high court application to prevent trustees from appointing another company to administer the fund. The CINPF trustees had sought to appoint Akani Retirement Fund Administrators after the Gobodo report said NBC was overcharging it.
Nhlanhla Dangazela, the CINPF’s principal officer, said the fund’s relationship with NBC has broken down due to trust issues.
“First they wanted to force two unlicensed service providers down our throats. We questioned them about this and they didn’t respond. Then we discovered that they had divested R100m without approval from our board. That is when we decided to commission the investigation, which clearly shows that NBC is charging us ridiculous fees,” he said.
“The report also shows that R52m was lost in 2017 and we were never told about it. They also charge us about R800,000 per month for members who are no longer contributing to the fund. That is almost R10m every year.”
The board of trustees, he said, decided that it was in the best interests of the fund to cut ties with NBC.
NBC manages pension funds worth more than R5.8bn on behalf of the CINPF, which has about 21,000 members, most of whom are in the Chemical, Energy, Paper, Printing, Wood and Allied Workers Union.
“Applying a fund size of approximately 21,000 members with R5.8bn in assets, our assessment indicated that the current fee of 1.47% of payroll being paid by CINPF for administration and consulting, legal and actuarial service does not appear to be marketrelated,” the report states.
“Considering the options available in the current market, the fees being paid by CINPF as at 28 February 2018, if calculated per member, equates to approximately R191.32 per member per month. When using this principle as a basis for the calculation of fees, it is evident that this is substantially higher than the current market.”
The report also states that, based on its size and the value of assets, the CINPF could negotiate better terms from other service providers.
It says that NBC charged the CINPF based on a percentage of the payroll of employers of members who participate in the fund, which automatically increases its fees when the employees are given salary increases every year.
A senior executive in pension fund administration, who spoke on condition of anonymity, questioned how much NBC is charging in fees.
“Everybody in the sector knows that a fund of that size should not and cannot be charged that much,” he said.
Another pension fund administrator said R50m sounds “too high”.
“What exactly is it that they do to charge that much?” he asked.