Man en­ti­tled to pay­out he ex­pected – ad­ju­di­ca­tor

The Pen­sion Funds Ad­ju­di­ca­tor has or­dered that a pen­sion fund mem­ber get R261 500 more than an ac­tu­ary wanted to pay, writes Laura du Preez.

Weekend Argus (Saturday Edition) - - GOODWINES -

The Pen­sion Funds Ad­ju­di­ca­tor has up­held one com­plaint and dis­missed an­other where mem­bers had com­plained about be­ing quoted fund val­ues and sub­se­quently be­ing paid a dif­fer­ent amount.

In the com­plaint that was up­held, a mem­ber of the Pan­nar Group Pen­sion Plan, GH Kohne, com­plained that he had asked his fund’s ad­min­is­tra­tor, Spe­cial­ist Fund Ad­min­is­tra­tors, for a fund value five months be­fore he re­tired.

Ac­cord­ing to the rul­ing, Kohne was en­ti­tled, and elected, to take his de­fined ben­e­fit fund pen­sion as a lump-sum “up­lift­ment” ben­e­fit.

In Septem­ber 2006, he was ad­vised that his up­lift­ment ben­e­fit was R6.9 mil­lion. In Fe­bru­ary 2007 he re­tired and was paid a cash sum of R33 000, and R6.58 mil­lion was trans­ferred to two an­nu­ities – a dif­fer­ence of R261 500, the rul­ing says.

Kohne com­plained that he had not been in­formed that the ben­e­fit had been re­duced and he was dis­sat­is­fied with the ex­pla­na­tion given for the short­fall.

He said the dif­fer­ence in the amount quoted and the amount paid se­verely prej­u­diced him, as he had based his fi­nan­cial re­tire­ment plan­ning on in­cor­rect in­for­ma­tion.

The ad­min­is­tra­tor re­sponded say­ing it was not un­rea­son­able to have ex­pected Kohne to dou­blecheck the ac­tual value to be paid, but it ad­mit­ted that the fund could have han­dled com­mu­ni­ca­tion to him bet­ter.

AC­TU­AR­IAL CAL­CU­LA­TION

The act­ing ad­ju­di­ca­tor, El­marie de la Rey, found that the rules of the fund state that when a mem­ber elects to take the up­lift­ment value this must be de­ter­mined by the fund’s ac­tu­ary. The fund had ap­pointed NMG Con­sul­tants and Ac­tu­ar­ies to pro­vide it with ac­tu­ar­ial ser­vices.

De la Rey found that the ac­tu­ar­ies had cal­cu­lated Kohne’s up­lift­ment value in Septem­ber us­ing the ac­tual dif­fer­ence be­tween his age and that of his spouse, be­cause his pen­sion ben­e­fit in­cluded a pen­sion for a sur­viv­ing spouse.

But when the ac­tu­ar­ies had cal­cu­lated his fi­nal ben­e­fit, in­stead of us­ing the ac­tual dif­fer­ence in ages be­tween Kohne and his spouse, they had used an as­sump­tion that there was a five-year age dif­fer­ence be­tween him and his spouse, re­sult­ing in a lower ben­e­fit than it cal­cu­lated five months ear­lier.

De la Rey says al­though ac­tu­ar­ial as­sump­tions are used to cal­cu­late a fund’s li­a­bil­ity to its mem­bers, and ac­tu­ar­ies use dif­fer­ent prac­tices, in this case the ac­tu­ar­ies used as­sump­tions when the ac­tual em­pir­i­cal data was avail­able.

The rules of the fund do not spec­ify the man­ner in which the ac­tu­ar­ial re­serve must be cal­cu­lated by the ac­tu­ar­ies, but De la Rey says the use of as­sump­tion when the ac­tual data is avail­able “can­not be jus­ti­fied”.

Al­though Kohne had com­plained that he had been prej­u­diced by be­ing given one amount as a quote and an­other as fi­nal ben­e­fit, De la Rey up­held the com­plaint on the ba­sis that an as­sump­tion had been used in the cal­cu­la­tion of the fi­nal ben­e­fit rather than the ac­tual data. She or­dered the fund to li­aise with the ac­tu­ar­ies to de­ter­mine the ben­e­fit us­ing Kohne’s wife’s ac­tual age.

She said the fund must pay Kohne the dif­fer­ence be­tween the ben­e­fit cal­cu­lated in this way and the ben­e­fit he had al­ready been paid.

COM­PLAINT DE­NIED

In the sec­ond case, which the ad­ju­di­ca­tor dis­missed, Richard Martin com­plained he was paid about R13 000 less as a with­drawal ben­e­fit than the amount he was in­formed was his fund value two months be­fore he re­signed.

Martin be­longed to the Bergman Ingerop SA Staff Pen­sion Fund. At the end of April 2004, he was told his fund value was R502 212. He re­signed at the end of June that year and was paid R489 198.

The fund was a de­fined con­tri­bu­tion one that makes use of a sys­tem of de­clared, in­terim and fi­nal rates when al­lo­cat­ing in­vest­ment re­turns, the ad­ju­di­ca­tor’s rul­ing states.

The fund told the ad­ju­di­ca­tor that for the pe­riod from Septem­ber 2002 to Septem­ber 2004, an in­terim rate of seven per­cent ap­plied and this rate was used to cal­cu­late Martin’s with­drawal ben­e­fit when he re­quested it in April 2004.

How­ever, in June 2004, the fund’s trustees, in con­sul­ta­tion with its ac­tu­ary, de­cided to re­duce the in­terim rate to five per­cent and this amount was then ap­plied to Martin’s ben­e­fit when it was cal­cu­lated for his fi­nal ben­e­fit af­ter he re­signed.

De la Rey found that the rules of the fund pro­vide for its trustees to declare the fund in­ter­est and con­fer a dis­cre­tion on the trustees to re­view an in­terim rate of in­ter­est from time to time on the ad­vice of the fund’s ac­tu­ary.

She there­fore found the com­plaint could not suc­ceed.

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