John Murphy, the Pension Funds Adjudicator, is urging pension funds to make provision for interest payments to members on benefits which are overdue.
At the moment there is no guarantee that you will be paid interest because many funds do not have rules that allow for interest payments to members. But there are ways around this, as Murphy showed when he recently ordered the Argus Pension Fund to pay interest to a former fund member who had to wait two years for his money through no fault of his own.
The fund was also rapped over the knuckles for threatening to take action against the member for fraud in "an attempt to intimidate him" when he requested that interest be paid to him.
The member, Lex Brockbank, resigned from Natal Newspapers in May 1995. The fund sent him a letter setting out his options which included taking a cash withdrawal benefit of about R18 000, transferring to a retirement annuity or preservation fund, or opting to be a deferred pensioner.
Brockbank chose to transfer his money, which amounted to about R43 000, to a preservation fund. In the interim, on an assumption that he wanted the cash benefit, the fund deposited a cheque of just over R14 000 (the early withdrawal benefit less tax) into his bank account.
The money was returned to the fund twice with requests that it be transferred to the preservation fund and Brockbank was asked to fill in a transfer form again because the fund was unable to trace the original documents.
Two years later, Brockbank's adviser received a cheque which was paid into a preservation fund. When the fund refused to pay interest on the money, Brockbank complained to
Murphy. Murphy found that the rules of the fund stipulated that benefits should be
paid within three months of a member leaving the service of the company, or sooner, as determined by the trustees.
In response to Brockbank's request for interest, the fund's principal officer sent him a letter saying he was not entitled to any interest because he had been paid out more than was due to him in terms of the rules of the fund. She also threatened to take action against him for defrauding the fund.
Naleen Jeram, one of Murphy's investigators, says the principal officer was mistaken when she assumed Brockbank had received more than he was entitled to. He says she did not substantiate her allegation that he had defrauded the fund and it appeared to be "an attempt to intimidate" him. Her statement was "unwarranted and irresponsible", Jeram says.
In an interim order, Murphy instructed that the fund pay interest to Brockbank within six weeks of his ruling or to prove why he should not make the ruling.
As a general rule you are not entitled to interest on pension benefits due to you but not yet received. You are only entitled to interest on a benefit if the rules of your fund
say so or if you have a contract with your fund which states that interest is due. The third case in which you can claim interest is under a legal principal in terms of which a debtor is liable for interest for not paying on time under a contract.
In order for you to claim interest:
* It must be possible to pay the pension benefit despite the delay;
* The benefit must be due and enforceable;
* The delay by the pension fund must be wrongful; and
* The delay must be the fault of the fund.
Murphy says a debt becomes due and enforceable when the time period set for payment has elapsed. If there is no reference to time, you must send the fund a letter of demand claiming your benefit otherwise you cannot claim interest.
All these points applied in Brockbank's case, which is why Murphy could rule in his favour.