Trustees grapple with pension benefits

The fair distribution of retirement fund death benefits continues to be a problem for trustees of retirement funds, giving rise to hundreds of complaints to the Pension Funds Adjudicator. Angelique Ardé reports

Almost 70 percent of all complaints finalised by the office of the Pension Funds Adjudicator (PFA) in the 2013/2014 financial year related to death benefits and withdrawal benefits, according to the PFA’s latest annual report.

A retirement fund death benefit is a sum of money paid to a beneficiary, or beneficiaries, on the death of a member of the fund. A withdrawal benefit is a lump sum due to the member of a retirement fund when the member leaves the fund or transfers his or her retirement savings to another fund. It’s made up of the member’s contributions to the fund plus investment growth.

Adjudicator Muvhango Lukhaimane this week said that complaints relating to the non-payment of withdrawal benefits or to the amounts paid out was, in many instances, the fault of employers not timeously remitting members’ contributions and contribution schedules to funds and their administrators.

“Also, fund administrators are either involved in rebuild processes that take excessively longer than expected or have long periods where contributions have gone unallocated,” Lukhaimane says.

A “rebuild process” is when a fund administrator cleans up member records The office of the Pension Funds Adjudicator is a statutory body established to resolve disputes in a procedurally fair, economical and expeditious manner. The office investigates and determines complaints of abuse of power, maladministration, disputes of fact or law and employer dereliction of duty in respect of pension funds.

For enquiries or to lodge a complaint, visit www.pfa.org.za, call 012 346 1738 or email enquiries@pfa.org.za that have not been properly maintained.

Of further concern, she says, is the number of industry sector funds, often representing vulnerable workers.

Industry sector funds present a problem because often, between the employers and the fund, there are middlemen, such as bargaining councils, which are often tasked with the collection of contributions, the PFA says. This is often not done, and the internal processes to try to get outstanding contributions, if followed at all, are often lengthy. The employer is also far removed from the goings-on in the fund, yet membership is a condition of service.

“Most of the issues [in such funds] would have been identified earlier had the funds been fulfilling one of their basic tasks – of providing annual benefit statements to members,” she says.

Lukhaimane says the Private Security Sector Provident Fund (PSSPF) continues to attract the “most significant number of complaints”. The PSSPF is an umbrella fund for the private security sector. By law, all private security companies are required to sign up as participating employers of the fund. However, it is fraught with problems.

Employers have been known to sign up, but fail to send the members’ contributions to the fund, or they don’t sign up yet deduct contributions from employees and pocket the money.

Meetings have been held with both the PSSPF’s legal representatives and the administrator, Absa Consultants and Actuaries, in order to resolve complaints, the annual report says.

Included in the PFA’s report are “important determinations” relating to the penalty charges levied on retirement annuity (RA) members when they seek to either stop contributions or transfer to another RA.

These include the case of Ms M, who was made to pay penalty charges on her RA when she made her policy paid-up, despite Liberty Life giving her an undertaking that no penalties would be charged if she terminated the policy. Personal Finance reported on this case in February (“Penalties: assurers seem deaf to outcry”), as well as on the case of Mr Esterhuyze in June last year (“Investment penalty excesses uncovered”).

Esterhuyze was a member of the Momentum RA Fund. After he complained to the PFA, Momentum agreed to reduce a penalty of R172 095 for four “causal events” by R38 386 to R133 709.

“It is hoped that the introduction of Treating Customers Fairly legislation will alleviate this burden by demanding transparency of products and eliminating post-sale barriers, especially portability,” Lukhaimane says.