Delays in pension fund payouts dominate complaints to adjudicator

SECURITY FUND A HEADACHE TRANSFER DELAYS

The vast majority (about 70 percent) of complaints to the Pension Funds Adjudicator are about the delayed payment or short-payment of benefits to retirement fund members who resign from their funds, either on leaving their jobs or on dismissal, according to the adjudicator’s annual report for the period ended March 31, 2016. The second most common cause of complaints (about 10 percent) is death benefits.

These percentages have not changed much in the past two years, although the number of complaints rose almost 38 percent – to 9 667 – compared with the previous year. The complaints received roughly equalled the number of complaints finalised (9 970) by the adjudicator’s office during the 12-month period, and the office issued 3 476 determinations (up by almost 21 percent).

In the report released this week, the adjudicator, Muvhango Lukhaimane, says a reason for the rise in complaints is heightened public awareness about unclaimed benefits, although an unwelcome sideeffect is that tracing agents, who act on behalf of potential claimants, have been submitting a large number of complaints to her office. During the year, the adjudicator’s The Private Security Sector Provident Fund (PSSPF) continued to dominate the disputes that came before the tribunal of the Pension Funds Adjudicator, Muvhango Lukhaimane, during the 2015/16 financial year. Of the 3 476 determinations handed down during the reporting period, the PSSPF accounted for 1 387, a staggering 39.9 percent.

Lukhaimane slams the PSSPF in her annual report.

“The situation with the governance and operations of the PSSPF has repeatedly been brought to the attention of the Financial Services Board, without any improvement. To date, this tribunal remains unaware of any action that has been taken either against the board of management office decided to stop processing complaints from these agents, many of whom are “unscrupulous operators” that charge a fee and then provide very little information. Liaison in this regard was continued directly with the complainants. Lukhaimane stresses of the PSSPF or the administrator, Absa Consultants and Actuaries, for glaring transgressions, such as failure to allocate contributions timeously, failure to pay out benefits when due, incorrect information given to members regarding the status of their claims or fulfilment of employer duties, failure to issue benefit statements and failure to investigate death benefits timeously. This is non-compliance with the most basic duties of a board of management and an administrator,” she says.

Lukhaimane says this failure is illustrated by the fact that, of the 1 387 PSSPF-related determinations, complainants were granted relief in 1 385 of these and only two were dismissed. that her office offers a free public service, to which retirement funds should draw the attention of their members, and potential claimants should approach the office directly.

She says although the retirement-funding industry is thriving in South Africa, with about R3 trillion In the 2015/16 annual report of the Office of the Pension Funds Adjudicator, the adjudicator, Muvhango Lukhaimane, says a significant number of complaints related to procedural delays in the transfer of fund benefits from one retirement fund to another.

“Union-aligned funds and administrator-sponsored funds are habitual offenders in relation to this. This can anecdotally be ascribed to the desire not to lose business in assets under management, inefficient administration continues to be at the root of many complaints to her office – particularly delays in the payment of withdrawal benefits. These delays are often because employers have not paid over contributions to funds, although it is the responsibility of funds to ensure that contributions are paid.

One fund, the Private Security Sector Provident Fund, and its administrator, Absa Consultants and Actuaries, was singled out as the biggest source of complaints (see “Security fund a headache”).

Hold- ups in the processing of death benefits accounted for the second- highest number of stemming from administration and consulting fees.

“One fund where procedural issues have managed to frustrate participating employers and members wishing to transfer is the Chemical Industries National Provident complaints finalised in the 2015/16 reporting year.

“In this financial year, many complaints related to unreasonable delays in the finalisation of section 37C investigations owing to the dilatory conduct of the boards of management of funds. This tribunal cannot overly stress the importance of finalising section 37C investigations within the allocated period of 12 months,” the adjudicator says.

(A section 37C investigation is carried out under section 37C of the Pension Funds Act, which requires a retirement fund to determine a deceased member’s dependants and beneficiaries and apportion the benefit among them equitably.) Fund, an instance where fund rules inadvertently usurped the powers of the Registrar [of Pension Funds] and went far beyond what the [Pension Funds] Act intended in terms of satisfying the expectations of the member.

“This matter has been reported to the registrar for intervention, as the offending provision in the [fund’s] rules will remain valid unless amended by the board of the provident fund or the registrar,” Lukhaimane says.

“Delays in the allocation and distribution of death benefits lead to untold suffering on the part of dependants and beneficiaries who would have submitted all the documents required on time,” Lukhaimane says.

In one case cited in the report, she rapped a pension fund on the knuckles for tardy conduct that resulted in a benefit remaining unpaid for seven years.

Lukhaimane says the higher rate at which her office has been able to process complaints can be attributed to improved efficiencies, increased productivity, and improved responses from funds and administrators.