Umbrella fund slammed for transfer delay

The Pension Funds Adjudicator has referred to the Registrar of Pension Funds at the Financial Services Board a complaint from a provident fund member whose attempts to move his savings to another fund were frustrated for more than three years

The adjudicator, Muvhango Lukhaimane, is requesting the registrar’s “urgent” intervention in what she refers to as “maladministration” of the Chemical Industries National Provident Fund, a ruling she released this week reveals.

The fund member, LL Barlow, joined the Chemical Industries National Provident Fund, an umbrella trade union fund administered by NBC Fund Administration Services, in 1996, when he joined Aspen Pharmacare.

According to the adjudicator’s ruling, he decided in 2011 that he wanted to move his savings, through what is known as a section 14 (of the Pension Funds Act) transfer, to the Aspen Provident Fund.

These transfers have to be approved by the Registrar of Pension Funds, and are often subject to delays as a result of the documentation not being completed correctly.

In this case, however, the fund has a rule that states that members who want to transfer their savings out of the fund while they are still employed in the industry must make written representation to the trustees through a local advisory committee. Umbrella funds typically set up these committees in a region or at an employer to assist the trustees.

The Chemical Industries National Provident Fund’s rules go on to say that the trustees must investigate the representation and confirm it before submitting a section 14 application to the Registrar of Pension Funds. The rules say the fund needs to communicate with the member or members to ensure they understand any consequences of the move and, with that knowledge, wish to go ahead with the transfer.

The adjudicator’s ruling reveals that, in addition, the fund rules state that the trustees must be “satisfied that the transfer is reasonable and equitable and that it accords full recognition to the rights and reasonable expectations of the transferring member or members”.

According to the ruling, Barlow submitted that he followed every step required by the rules and that meetings were held and he was interviewed, but by the time he laid his complaint in September last year, the transfer had still not taken place.

The fund’s administrator NBC told the adjudicator that it had not received the representation from the local advisory committee and therefore the trustees were unable to fulfil their role of investigating the request and communicating with the member.

Lukhaimane’s ruling points out that in terms of the Pension Funds Act’s provisions relating to transfers, it is the duty of the Registrar of Pension Funds to determine whether a transfer between funds is equitable and reasonable.

She says the duty of a fund that receives an application for a section 14 transfer is to fulfil the administrative process with the fund to which the member wishes to transfer his or her savings and to ensure the registrar receives all the required information.

The fund must process and forward the transfer application to the registrar and not “usurp the duties of the registrar”, the adjudicator says.

Her ruling indicates that she has received a number of such complaints about the Chemical Industries National Provident Fund, leading her to conclude that the conduct of the board of trustees amounts to “maladministration”.

The adjudicator has ordered Barlow to submit his representation for the transfer to the local advisory committee, and the board to investigate and assess the representation within two weeks of the advisory committee receiving it.

Lukhaimane ordered the fund to compile a report on its findings and submit this to the Registrar of Pension Funds within two weeks of finalising its investigations.

The ruling records that in his complaint to the adjudicator, Barlow said that “the board of the fund and NBC Fund Administration Services” were using delaying tactics “for unknown reasons”. He said neither his employer nor the fund was taking his request seriously.

Balan Chetty, the NBC Holdings chief operating officer, told Personal Finance that if the adjudicator’s ruling has created the impression that the member was being frustrated in his attempts to leave the umbrella fund and transfer to another fund of his choice, this is regrettable. He says NBC denies any conduct on its part that could be construed as frustrating Barlow’s attempts to leave the umbrella fund.

Chetty says unfortunately the adjudicator deals in “uncorroborated and untested hearsay” – a necessary shortcoming in the interests of expediting its workload and ensuring ease of access to all potential complainants.

Chetty says NBC’s duties as fund administrator do not extend to “ensuring that the required parties comply with the rules” beyond the discharge of the administrator’s contracted obligations and it is not able to usurp the roles of the trustees or any members of the fund’s sub-committees.