Retirement funds could face stiff new penalties if they or their administrators unnecessarily delay resolving complaints by fund members, Pension Funds Adjudicator Mamodupi Mohlala says.
Mohlala says she is considering increasing the penalty interest (currently 15.5 percent) that is levied when funds do not treat members according to legislation, the rules of a fund and the precedents set by her office for the payment of benefits.
Higher penalty interest will have a knock-on effect on fund members' savings because it will have to be paid by the fund.
"There must be a consequence for the failure to deal with matters efficiently," Mohlala says.
Her warning comes against the background of an ever-increasing number of retirement fund members complaining to her office, resulting in a near backlog of unresolved cases. Complaints have risen from about 300 a month in 2007 to 500 a month currently.
Retirement fund trustees and principal officers must try to resolve your complaints instead of merely referring them to fund administrators, Mohlala says.
Trustees and principal officers too easily delegate their fiduciary duties to ser-vice providers and then fail to ensure that administrators deal with the complaints promptly and equitably, she says.
Mohlala says she is concerned that some administrators delay resolving complaints until the last minute so they can charge higher fees.
The result of trustees failing to meet their fiduciary duties is a greater workload for the adjudicator's office, a delay in members receiving what is due to them and the possible erosion of members' retirement savings because of the additional costs of administrators.
Mohlala says her office finds that many administrators and funds delay settling complaints until the conciliation process is about to start.
"This is unacceptable. There must be basic compliance."
The problem of delays is being compounded by retirement funds simply not meeting the terms of a settlement, particularly where a member or a former member has to be compensated.
Mohlala says if principal officers attended to complaints, it would seldom be necessary for complaints to be brought to her office. Trustees must apply their minds and reach a decision that is fair and equitable as quickly as possible, she says.
It is absolutely unacceptable, for example, for widows to wait for two years for the payment of death benefits, she says.
Prescription period
Mohlala says she is also increasingly concerned about the use of prescription by funds and their administrators to avoid meeting commitments to members and their dependants. Prescription is the period defined in law after which one party cannot claim, for example, an outstanding debt, against another.
She says many funds argue that prescription starts three years after a specific event, such as death, which should have resulted in the payment of a benefit.
This is incorrect, Mohlala says. The Prescription Act states that the three-year period starts to run only from the date on which the claimant or complainant becomes aware or could reasonably have been expected to have become aware that the event should have resulted in him or her receiving payment.
She is investigating whether in fact, in the case of benefits due to a minor child, the three years should start ticking only when the child reaches majority at the age of 18.