Vuyani Ngalwana, the Pension Funds Adjudicator, has made it clear in his latest rulings that he will not tolerate employers using pension funds as their fiefdoms, and that all parties involved in managing retirement funds must abide by the rules of the funds and the Pension Funds Act.
Shell Southern Africa Pension Fund and Shell South Africa Energy (Pty) Ltd.
Ngalwana ordered the Shell Southern Africa Pension Fund to boost a former member's pension by R520 000 in recognition of her part-time employment with Shell South Africa for eight years. He also ordered the fund's participating employer, Shell South Africa, to make good the shortfall that could result from increasing the member's benefit.
JM Smallberger worked for Shell since 1962, and worked part time between 1979 and 1987. Smallberger says she was refused membership of the pension fund because she was over 35 years of age in 1979.
During the years she worked part time, Smallberger was not allowed to join the pension fund, and therefore this period was not recognised when the fund calculated her retirement benefit. However, Ngalwana found that the fund had two rules that gave the fund and the employer the discretion to take her period of part-time employment into account.
Ngalwana says the reasons given by the fund and Shell for not taking those years into account when calculating Smallberger's pensionable service were not sound in law. He says bearing in mind that Shell could afford to pay the additional amounts required and the purpose behind the rules, the fund's trustees should have adjusted Smallberger's benefit.
One of the excuses used by Shell for not recognising Smallberger's service during the years she worked part time was its fear that doing so would set a precedent for the company's 144 temporary employees, who are not entitled to receive any pension benefits.
Ngalwana says this view betrays a misconception of the nature of a discretionary power and that each must be determined on its merits. Furthermore, the discretionary rules do not apply to Shell's temporary - as opposed to its part-time - employees.
Ngalwana points out that Smallberger did not ask for the pension benefit as a temporary employee, but as a pensioner-member of the fund.
Land Link Customs Clearing and Forwarding.
Mr KO worked for Land Link Customs Clearing and Forwarding, which is a participating employer in Old Mutual's umbrella Orion Money Purchase Pension Fund.
When Mr KO left the company, it refused to complete the withdrawal notification form to the fund, because Mr KO had failed to settle a loan of R10 080 taken out with Link Customs Clearing and Forwarding. As a result of the company's refusal, the fund was unable to pay Mr KO his benefit.
Ngalwana ruled that the Pension Funds Act sets out limited circumstances under which money can be deducted from a pension benefit. A personal loan due to an employer is not one of the allowable deductions.
Ngalwana says Land Link Clearing and Forwarding abused its powers by not completing the withdrawal form. He ordered the fund to pay the benefit and the employer to pay the interest on the benefit for the period it was outstanding.
L'Oreal SA Provident Fund and L'Oreal SA (Pty) Ltd.
L'Oreal tried to claim the benefits of two employees who were dismissed for dishonesty. The company said it was entitled to the two employees' benefits of R99 135.78 and R183 188.93, because their misconduct had resulted in L'Oreal suffering a loss.
Ngalwana found that the Pension Funds Act permitted L'Oreal to take such action. However, L'Oreal had not followed the correct procedure: the employer must request the fund in writing to withhold the benefits. The fund and the employer failed to provide the adjudicator with proof of a written instruction. Ngalwana thus ordered the fund to pay the benefits to the former employees.
Stanlib Collective Investments Ltd and Boock Signs and Graphics CC.
P Maart complained to the adjudicator about the value of her investment with Stanlib Collective Investments when she left the employ of Boock Signs and Graphics CC.
Ngalwana could not help Maart because her complaint involved an investment made directly with a unit trust company, and not by a retirement fund.
Boock Signs and Graphics, which employed 12 people, told Ngalwana that it considered establishing a retirement fund for its employees, but found that the management fees in setting up either a retirement annuity, provident fund or pension fund would amount to 38 percent of each staff member's contributions. The employees were not willing to sacrifice such a large percentage of their contributions to fees.
Ngalwana referred a copy of his determination to the Minister of Finance and the Registrar of Pension Funds. Naleen Jeram, the deputy adjudicator says the costs issue needs to be fully investigated. It is worrying that an employer would not establish a pension or provident fund - notwithstanding the favourable tax treatment due to the high costs involved. It undermines the culture of savings and serves as a disincentive for people to save or join pension funds, he says.