News

Industries

Companies

Jobs

Events

People

Video

Audio

Galleries

My Biz

Submit content

My Account

Advertise with us

Infrastructure & Utilities News South Africa

FSB urged to act against fund for failing to provide information

The conduct of a pension fund, its chairperson and its administrator have been forwarded to the Financial Services Board (FSB) by the pension funds adjudicator for remedial action after they repeatedly failed to provide requested information.
Muvhango Lukhaimane, the pension funds adjudicator. Photo: Corruption Watch
Muvhango Lukhaimane, the pension funds adjudicator. Photo: Corruption Watch

Muvhango Lukhaimane, the pension funds adjudicator, wants the FSB to appreciate “the gravity of the problem posed by the conduct” of Municipal Employees Pension Fund and Akani Retirement Fund Administrators (Pty) Ltd, the first and second respondents respectively.

The complaint

The complainant OF Hlungwane was employed by Ba-Phalaborwa Local Municipality, and was dissatisfied with the computation of his withdrawal benefit.

He submitted that when he joined the first respondent, the rule on termination of service provided that a member was entitled to three times the total contributions. However, to his surprise, he was not informed that the rule changed to provide that a member who resigns was only entitled to 1.5 times the employer’s contributions.

Following the termination of his service, the complainant was paid a net withdrawal benefit in the amount of R500,884.03 in August 2016. He said his benefit statement as at 30 November 2015 indicated that his resignation benefit was in the amount of R732,356. He said the first respondent owed him a further benefit in the amount of R127,223.04.

The first and second respondents submitted that the complainant’s termination forms were received in 2016 and that any fund benefit reflected on a member’s benefit statement was for illustrative purposes only.

The first respondent submitted that the resignation benefit prior to 1 April 2013 was calculated as a sum of the complainant’s own contributions multiplied by three.

It submitted that the board took a resolution in 2013 based on actuarial advice that it ran the risk of not meeting its future liabilities and may not be able to pay out benefits if adjustments were not effected on resignation benefits. Thus the benefits were amended to the member’s own contributions multiplied by one comma five.

The complainant resigned from service after the effective date of the rule amendment. Therefore, he was entitled to the revised resignation benefit.

Adjudication

In her determination, Lukhaimane said a fund, its legal status, and the rights and obligations of its members and the employer, were governed by the rules of the fund, relevant legislation and the common law.

“The complainant left employment on 30 April 2016. Rule amendment 5 was approved and registered by the Registrar on 1 April 2014.

“Therefore it was already effective at the time the complainant’s claim to a withdrawal benefit arose. Therefore, it applied to his benefit.

“This means that although prior to April 2013, the complainant had been informed that he would be entitled to a resignation benefit that is equivalent to his own contributions multiplied by three, after the approval of rule amendment 5, the applicable multiple, which is applicable to his benefit, was reduced to one comma five.”

She added, however, that it was imperative to note that the complainant’s benefit statement as at 30 November 2015, reflected that his resignation benefit was in the amount of R732,356.

“This Tribunal notes the second respondent’s submission that benefit statements are for illustrative values only. However, that cannot be accepted.

“The fund has a responsibility to provide its members with accurate information, which is consistent with the provisions of section 7D of the Act. At the time of printing the statements, all the information must be accurate.

“This is unlike a projection in terms of retirement annuities. Thus, a future benefit at retirement might be illustrative, but a benefit as at a particular date must be accurate.

“Moreover, where there is a gaping difference between what is estimated in the benefit statement and the amount of the benefit that is eventually paid to a member, this Tribunal cannot condone the act of hiding behind the cloak of this principle to prejudice members.

“In the present matter, the difference between the illustrative amount as per the benefit statement and the net benefit paid is R231,471.97.

“It was against the above background that this tribunal, on numerous occasions, requested the respondents to provide an explanation as to what factors could have resulted in the significant difference between the illustrative value and the benefit paid.

“Characteristic of what has defined the respondents, they failed to provide this tribunal with any submissions other than to reiterate the stance of the illustrative values being for information purposes only.”

Failure to respond

Lukhaimane said when the respondents were reminded that they had not addressed the concern raised by this tribunal, they once again failed to file further submissions.

“This compelled this tribunal to write a letter dated 11 July 2017 to the chairperson of the first respondent’s board highlighting the challenges this tribunal is experiencing in its dealings with the first respondent and its administrator (the second respondent).

“The chairperson of the first respondent’s board was given until 21 July 2017 to make submissions and assist this tribunal in achieving its mandate.

“The chairperson failed to respond to the said letter on 21 July 2017. On 31 July 2017, the chairperson was reminded of his failure to file a response and afforded another opportunity to file a response by no later than 4 August 2017. Unfortunately, even in this instance, he failed to file a response.

“In light of the above, it is difficult for this tribunal to finalise this matter without input from the first respondent explaining if the computation of the complainant’s benefit was above board.

“In the circumstance, the appropriate remedy is to order the first respondent to provide the complainant and this tribunal with a detailed explanation of what caused the difference between the amount appearing on his benefit statement and the amount of the benefit paid.

“If the first respondent fails to comply with this tribunal’s order, the complainant will have a right to approach the high court in order to compel it to comply with the order.

“As regards the conduct of the first respondent, its chairperson and its administrator, this matter will be forwarded to the Financial Services Board so that it can see the gravity of the problem posed by the conduct of the respondents, with the hope that eventually, corrective measures are taken against the said parties,” said Lukhaimane.

Let's do Biz