Poor retirement fund administration services and members’ lack of trust in their funds and their administrators gave rise to two-thirds of the complaints lodged with the office of Pension Funds Adjudicator (PFA), the adjudicator’s annual report for 2011/12 shows.
The annual report, released this week by Muvhango Lukhaimane, who was appointed as the deputy PFA in June this year, reveals that 69 percent of the more than 5 000 cases the adjudicator resolved last year related to withdrawal benefits.
The main issues, Lukhaimane says, were the delay in the payment of benefits and the amount that members were paid when they left a fund after they resigned or were fired or retrenched.
The annual report also reveals that a significant number of complaints – nine percent – were about death benefits that became due when a member died.
Lukhaimane says fund members and their beneficiaries are generally uninformed about who is entitled to benefits and that trustees are obliged, in terms of the Pension Funds Act, to determine whether a member had dependants and, if he or she did, to distribute the benefits equitably between them.
The failure of funds to comply with the Act’s requirement that they distribute death benefits within 12 months of a benefit claim being lodged is also the reason for numerous complaints about fund members’ death benefits, Lukhaimane says.
At the close of the office of the PFA’s financial year at the end of March, 8 330 cases were still open, despite the office having dealt with 5 306 complaints during the financial year.
The office started the financial year with a backlog of 8 268 cases and received 5 368 new complaints in the year to the end of March. By comparison, the office received some 6 220 complaints in the year to March 2011 and resolved 6 110 cases.
However, in the year to March 2012, the adjudicator’s office issued more determinations than in the previous financial year – 1 866 determinations this past year, compared with 1 430 in the previous year.
Only 150 of the older cases with which the office is still dealing were lodged before January 1, 2009, she says.
The deputy adjudicator has committed her office to dealing with complaints within 12 months of their being received. To meet this ambitious target, she says the computer system has been upgraded, an improved case management system will be introduced and a case manager will be appointed.
Lukhaimane says consideration will also be given to enforcing a provision of the Pension Funds Act that stipulates that you, as a member or beneficiary, must first lodge any complaint you have in writing with a fund and give it 30 days to respond. Only if the fund fails to respond or you are not happy with the response, will you be able to lodge a written complaint with the adjudicator’s office.
The office of the PFA plans to flag employers or employer groups, funds and administrators “whose non-compliance is of concern to us arising out of the number of complaints or the seriousness of the complaint”, Lukhaimane says.
The deputy adjudicator says she will interact with stakeholders to consider suggestions to improve the efficiency of the office.
Finance Minister Pravin Gordhan, in his comments on the deputy adjudicator’s annual report, says a greater focus on market conduct practices in the pension funds industry is required and there is an even more critical role for both a regulator of market conduct and the office of the PFA.
DEATH BENEFITS: ANNUITY IS FULL PAYMENT
If the trustees of a retirement fund have allocated you, as an adult beneficiary, a portion of the lump sum death benefits that become due after a fund member has died, the fund is obliged in terms of the Pension Funds Act to pay you the amount in full.
However, the Act does say that an adult beneficiary can agree in writing to receive the benefits in more than one payment, the 2011/12 annual report of the Pension Funds Adjudicator (PFA) says. Although this agreement can be cancelled by either the fund or the beneficiary, if the fund has bought an annuity (monthly pension) for a beneficiary, this constitutes full payment by the fund, former acting adjudicator Elmarie de la Rey found.
The PFA’s annual report details a complaint from the 2011/12 financial year of the husband of a deceased member of the Sanlam Retirement Fund. The trustees, after taking into account the widower’s circumstances, awarded him a small lump sum to cover outstanding medical bills and debt, and then used most of the death benefit of more than R650 000 that had been allocated to him to buy the widower an annuity for life.
According to the annual report, the trustees had established that he was unemployed, had depended on the fund member and was not in a position to manage large sums of money prudently.
The widower had agreed to the purchase of the annuity, but he later ran into financial difficulty and wanted access to the lump sum. The fund would not oblige.
The former acting adjudicator found that the widower had agreed to the annuity and that this constituted full payment by the fund. His complaint was dismissed.
* You can contact the office of the PFA as follows: telephone 087 942 2700; fax 087 942 2644; write to PO Box 651826, Benmore, 2010; or email [email protected]