More than 11 000 retirement fund members employed by 200 companies face losing up to 2.3 percent and possibly more of their retirement savings, because yet another administrator seems to have failed fund members.
Last year, Personal Finance revealed that financial services company Glenrand MIB put its administration company into liquidation to avoid the costs associated with sorting out the maladministration of about 200 retirement funds (see “Glenrand debacle sparks shake-up”, below).
This time, the offending company is little-known Dynam-ique Consultants & Actuaries, which until 2008 was the administrator of four umbrella retirement funds. In 2008, the South African arm of global financial services company Aon took over the administration of the funds after it bought the Dynam-ique administration system but not the company.
Auditing company Deloitte has now been called in to sort out the mess and rebuild the funds’ records.
Dynam-ique, its owner, actuary Tony Kamionsky, and Aon (even though it claims it was not responsible for the mess) face being sued for millions of rands.
According to Aon and John Rollason, the newly appointed chairman of the funds, the funds’ books were in a total mess when Aon took over the administration, to the extent that members do not know how much money they have saved.
Rollason says that so far no signs of fraud have been found; the problem is one of maladministration.
Kamionsky, the former chief executive of Dynam-ique who was at one time the chairman of the funds and the founder of internet-based life assurance company Term Life, which closed down last year, has rejected claims that his company was responsible for the mess.
He also claims that it is unnecessary to rebuild the funds; that the R18 million (2.3 percent of member assets) for the rebuild is too expensive; and that for three years after Aon took over he received no complaints about Dynam-ique’s administration.
Aon chief executive Anton Roux has given the assurance that no other umbrella funds or segregated funds administered by Aon are affected. This was confirmed by Jurgen Boyd, the Financial Services Board (FSB) chief executive in charge of retirement funds, who says the FSB is keeping an eye on the situation.
An entirely new board of trustees for the four funds was appointed in February, apparently to break all links with Dynam-ique.
The new board has agreed to await the outcome of the rebuilding of the funds by Deloitte before it makes a final decision on suing any third party, Rollason says. He says that decision was taken by the previous board based on a legal opinion.
Rollason says that it may take until the end of June for the rebuilding to be fully completed and for the funds to be audited.
Rollason and Roux say there could be further losses to members because of mis-matches between member payments and assets.
The funds’ 2006 financial statements received a qualified audit, which means the auditors were not happy with what they found. The audit was only completed in 2008.
The then trustees of the four funds decided to appoint Deloitte to reconstruct the funds from inception to the end of January 2008.
The accounting and member records of the funds have to be reconstructed for a period of 160 “fund” months prior to the end of January 2008, Roux says.
If any legal action should be successful against Aon, “we will commence our own legal proceedings against Kamionsky”, Roux says.
He says that Aon is not taking action against Kamionsky “on a global level. However, we are taking action in respect of specific actions that may arise in terms of the contractual guarantee that he provided Aon when the transaction was concluded in 2008.”
The four funds, with combined assets of R785 million, are:
* Dynam-ique SA Umbrella Pension Fund, with 937 members and 17 participating employers;
* Dynam-ique SA Umbrella Provident Fund, with 5 343 members and 101 employers;
* Integrated Future Umbrella Pension Fund, with 711 members and 12 employers; and
* Integrated Future Umbrella Provident Fund, with 4 272 members and 70 employers.
Roux says that throughout the rebuild process, the trustees and Aon have kept members, employers, intermediaries and the FSB informed.
Boyd says since the FSB discovered that the funds’ records required reconstruction, Aon and the trustees “have furnished my office with a project plan and provided monthly reports on the progress made”.
GLENRAND DEBACLE SPARKS SHAKE-UP
The Financial Services Board (FSB) is tightening up its requirements for retirement fund administrators to ensure that members are better protected.
The move follows the liquidation last year by financial services company Glenrand MIB of its administration company, Glenrand MIB Benefit Services, to escape its liabilities to 80 000 members of 20 funds the records of which were left in a mess.
Jurgen Boyd, the FSB’s deputy chief executive in charge of retirement funds, says that by the middle of this year more stringent requirements will be imposed on retirement fund administrations.
The Glenrand situation showed that the “regulatory requirements for administrators are not robust enough, hence the much more stringent requirements”. The new requirements will include that administrators must maintain adequate levels of capital at all times, Boyd says.
Global financial services company Aon is in the process of concluding a take-over of Glenrand MIB.
Glenrand MIB Benefit Services and Ten50Six, an associated asset management company, were liquidated to eliminate claims against Glenrand MIB Benefit Services by the retirement funds. The records of the funds were left in a complete mess due to maladministration by Glenrand MIB Benefit Services.
Initially, after the FSB threatened to intervene, Glenrand MIB Benefit Services agreed to call in Absa Consultants & Actuaries to sort out its mess. However, its holding company stopped the process before it was concluded and shut down Glenrand MIB Benefit Services.
The result of the liquidation is that the retirement funds will have to pay at least twice for the same administration service. The funds face or are likely to face other costs, including:
* Legal costs to resolve the administration problems caused by Glenrand MIB Benefit Services. The costs include making extremely difficult and time-consuming claims against the professional indemnity insurance held by Glenrand MIB Benefit Services.
* The high costs of the liquidation of Glenrand MIB Benefit Services, which will further reduce members’ benefits.
To make matters worse, in a number of cases, Glenrand MIB Benefit Services overcharged the funds for the work it failed to do.
Glenrand MIB is trying to claim that it is a concurrent creditor to enable it to claim back more than R35 million in loans made to its administrator.
Some of the funds argue that the loans are subordinated and as such come after claims by concurrent credits (mainly the retirement funds) and should not be repaid to Glenrand MIB. Repaying the loans would further reduce fund member claims. Some of the larger funds are considering taking legal action to recover their losses.