A further 23 rulings involving retirement annuity (RA) funds and insurers were issued by the office of the Pension Funds Adjudicator this week. In six of the cases, the parties reached settlement agreements. This brings the total number of RA rulings issued by Vuyani Ngalwana this year to 103.
In two of this week's cases, Ngalwana, suggested the complainants refer their cases to the Competition Commission because the rules of the funds did not allow the members to move to other RA funds:
- HJ Zietsman, a member of the Professional Provident Society (PPS) Fund, administered by Sanlam Life
, requested Sanlam Life to cancel his policy and reimburse his contributions of R23 000, when he became dissatisfied with the performance of the fund. Ngalwana says that while the Income Tax Act allows for the transfer from one RA fund to another, the rules of the PPS fund did not allow it and therefore Zietsman did not have this option.
- C Fair
, a member of the Central RA Fund (CRAF) which is administered by Sanlam, complained that he was not allowed to move a different RA fund. Ngalwana could not help him with this aspect of his complaint because the fund's rules did not allow it. He suggested Fair approach the Competition Commission. The fund's rules force members to remain with the fund even when the returns are poorer than in other retirement funds.
Fair also complained of a premium termination fee of more than R27 000 when he stopped contributing to the fund. The adjudicator found that there was no authority either in the rules or the policy document to deduct a premium termination fee.
Penalties
The bulk of the determinations against funds and insurers involved early termination penalties or penalties for reducing contributions to the fund. In all these cases, the fund and administrator were ordered to reinstate the penalties deducted because such fees or penalties were not spelt out in the rules of the funds. In some cases the adjudicator also found that where the member bears the investment risk, the fund and insurer cannot be held responsible for lower than expected benefits. The cases involving penalties include:
- M Steyn v CRAF and Sanlam.
The value of Steyn's fund dropped from R15 500 (the amount of contributions he had made) to R5 398.41 after he stopped contributions due to being unemployed.
- J Kirsten v CRAF and Sanlam.
Kirsten was charged a R7 321 as a "premium termination fee" when Kirsten ceased contributions to his fund in December 2004.
- WAS Engelbrecht v CRAF and Sanlam.
Engelbrecht was charged a policy termination fee of more than R8 000 when he stopped contributions when he retired five years earlier than the chosen date. However, Ngalwana dismissed Engelbrecht's request to be paid the two-thirds of his benefit from the fund from which he was receiving a pension, because such payment is not allowed in the rules of the fund.
- SP Botha v PPS Fund and Sanlam.
Botha retired three years earlier than his elected retirement date and was charged almost R46 500.
- MWN Gird v PPS Fund and Sanlam.
Gird reduced his recurring contributions from R3 000 to R750 and was hit with a premium reduction fee of R9 271 by Sanlam.
- B Martin v PPS Fund and Sanlam.
Martin terminated his contributions after making payments totalling R24 044.
He was charged a termination adjustment fee of almost R6 000.
- N Deenadayalu v Lifestyle RA Fund and Liberty Life.
When Deenadayalu reduced his monthly contribution from R1 925 to R825, his fund value was reduced by R10 955.84 from R46 500 as at February 26, 2005 to R35 544.16 as at April 30, 2005.
- B Martin v Lifestyle RA Fund and Liberty Life.
When Martin ceased making contributions to his fund after paying monthly contributions of R3 300, Liberty "lapsed" his policy on the basis that the outstanding expenses of R3 400 exceeded the investment value of R2 375 in the fund. Ngalwana ruled that the accelerated recovery of unrecouped expenses of R2 375 was not allowed.
- JH Theron v Lifestyle RA Fund and Liberty Life.
Theron received R1 190 less than he expected from his retirement benefit when he retired 20 months earlier than his selected retirement date.
- L Munasur v South African RA Fund and Old Mutual.
Munasur was unable to continue paying contributions due to ill health and asked the fund to pay him an early retirement benefit. Old Mutual charged him a benefit reduction fee because he retired early.
Dismissed cases
Ngalwana dismissed five of the 17 cases in which he made determinations.
- G Lange, a member of the Sanlam's CRAF
, was due to retire on November 2004, at which date two-thirds of his retirement lump sum would have given him a fixed pension of R324 a month. But when he postponed his retirement to March, 1 2005, on that date the pension amounted to R299. Ngalwana accepted the fund's explanation that a decrease in the interest rate accounted for the lower monthly pension offered to Lange four months later.
- NA Fredericks
was dissatisfied with her monthly pension of about R106 from the South African RA Fund, administered by Old Mutual and wanted the rest of her benefit paid out in cash. After examining the fund's rules and the Income Tax Act, Ngalwana concluded that she was not entitled to commute the full amount of the benefit .
- OG Low
, a member of the South African RA Fund, complained about the fee Old Mutual wanted to charge him if he decided to change his retirement date. The function of the adjudicator's office is to investigate and determine actual complaints and the fee had
not yet been charged to Low, says the adjudicator.
- P Mawa v Metropolitan RA Fund.
Subsequent to lodging a complaint challenging the repudiation of his claim for a disability benefit by the Metropolitan RA Fund, Mawa entered into a settlement agreement with Metropolitan Life and the Metropolitan RA Fund. He was offered and accepted R2 500 in full and final settlement of any present and future claims. The adjudicator says he is bound by the settlement agreement.
- C Ridgard
, who joined the CRAF in June 1990 and retired in June this year, complained that she received half the pension originally quoted to her. But Ngalwana says that the illustrative values when she joined the fund were not guaranteed and depended on bonus rates declared and the rate of inflation. He was satisfied that Ridgard had been adequately informed in this regard.