If correspondence from your retirement fund asks you to respond by a certain date, you may lose out on your benefits if you fail to do so by the deadline. A fund member found this out the hard way when the Pension Funds Adjudicator (PFA) dismissed his complaint recently.
Titus Matlou complained to the PFA in November 2007 that the National Fund for Municipal Workers had reduced his risk benefits.
When the National Fund for Municipal Workers was established in 1987, it was agreed that the local municipality and the fund member would each make monthly contributions of two percent of the member’s salary, making total contributions of four percent that would be used to fund both risk benefits and retirement savings.
In May 2007, the fund sent a letter to all its members, including Matlou, an employee of the Capricorn District Municipality in Limpopo, informing them that the trustees had decided to amend the risk benefits.
At the time, Matlou had a death benefit of three times his annual salary and a disability benefit of three times his annual salary.
The National Fund for Municipal Workers told De la Rey that the letter informed fund members that they had to choose one of three options.
These options were:
* Default option. A death benefit equal to a year’s salary, a disability benefit equal to a year’s salary, a funeral benefit of R5 000 for the fund member and his or her spouse, and a funeral benefit of R3 000 for each of the fund member’s children.
Risk contributions for the default option were two percent of a member’s salary, which would be covered by the employer’s contribution. The entire two percent of the member’s contribution would go towards retirement savings.
* First individual choice. A death benefit equal to two years’ salary, a disability benefit equal to two years’ salary and the same funeral benefits as the default option. Only members who were entitled to similar risk benefits were allowed to choose this option.
Risk contributions for the first option amounted to 3.31 percent of the member’s salary, leaving only 0.69 percent of the total contributions (four percent) for retirement savings.
* Second individual choice. A death benefit equal to three years’ salary, a disability benefit equal to three years’ salary and the same funeral benefits as the default option. Only members who were entitled to similar risk benefits were allowed to choose this option.
If a member chose the second option, his or her total contributions would be increased by 0.6 percent. The total cost of this benefit amounted to 4.6 percent of the member’s salary.
The letter stated that “all members shall be placed on the default option ... until such time that an individual risk choice form has been received. Eligible members choosing option two or three must return the enclosed option form, duly signed, in the envelope provided before May 31, 2007.”
The National Fund for Municipal Workers told De la Rey that Matlou did not return the risk option form and so he was placed on the default option.
De la Rey dismissed Matlou’s complaint, saying he had failed to exercise the choice offered to him.
CONTACT
The Acting Pension Funds Adjudicator is Dr Elmarie de la Rey.
Telephone: 087 942 2700
Fax: 087 942 2644