The Pension Funds Adjudicator has asked the Registrar of Pension Funds to set timelines for a fund that has been rebuilding its member records since 2010.
This follows a complaint to the adjudicator, Muvhango Lukhaimane, by a member of the Dynam-ique SA Umbrella Provident Fund, who was paid only a portion of his withdrawal benefit in May last year after he was retrenched.
Lukhaimane also dealt with a complaint from a member about the lack of benefit statements from the fund (see “Retirement fund members have a right to statements”, below). In that ruling, she “notes with concern the amount of time that has lapsed since the rebuild exercise of the [Dynam-ique] fund commenced”.
She says some members have left the fund and not been paid in full while others have transferred to new funds without their full fund values being transferred, due to the fund’s failure to complete the rebuild of member records.
The trustees have failed, as required by the Pension Funds Act, to take reasonable steps to ensure that members’ interests are protected, she says.
Lukhaimane says the Registrar of Pension Funds should investigate the fund’s failure to complete the rebuild and the “excessively long” time it has taken, as it appears to be prejudicing members.
But Rosemary Hunter, the deputy executive officer for retirement funds at the Financial Services Board (FSB), says the FSB has no reason to believe that the boards of the affected funds are not taking all reasonable steps to protect members interests and bring the funds to closure as soon as possible.
The member who complained about the partial payment of his withdrawal benefit, NS, worked for a participating employer in the Dynam-ique SA Umbrella Provident Fund from 2006 until his retrenchment last year. The fund paid him only 80 percent of his benefit, amounting to R135 483, and NS complained that he could not get answers as to when he would receive the balance.
The Dynam-ique SA Umbrella Provident Fund is one of four umbrella funds that were originally sponsored and administered by Dynam-ique Consultants & Actuaries. An actuarial valuation has found that three funds have a deficit.
The Dynam-ique SA Umbrella Provident Fund told the adjudicator that it had a deficit of R7.4 million. It said that until it has taken remedial action to recover the deficit and until an amendment to its rules to pay out a lower benefit has been approved, it cannot finalise the benefits due to any of its members.
The administration of the four umbrella funds originally administered by Dynam-ique was taken over by financial services company Aon in 2008, and the funds’ problems came to light in 2011, after the funds’ trustees ordered the rebuild of the members’ records at a cost of R20 million.
The trustees then reached a settlement agreement with Tony Kamionsky, the chief executive of Dynam-ique Consultants & Actuaries, in terms of which he paid the funds R1 million.
In 2013, Lukhaimane ordered the trustees to repay the R20 million to the four funds, saying they had failed to exercise oversight over the funds’ administration. The trustees have taken the case on appeal, which is pending.
Aon has subsequently terminated its administration agreements with the funds, and participating employers have had to look for new administrators.
In some cases, employers have applied for employees’ benefits to be transferred to other umbrella funds, under section 14 of the Pension Funds Act, but these transfers have been delayed because of the lack of clarity regarding the benefits.
In Lukhaimane’s latest ruling, the Dynam-ique SA Umbrella Provident Fund says that if it is forced to pay NS out in full, incorrect values may be paid, and this would prejudice the other members of the fund.
The fund told the adjudicator it was unlikely that the R7.4 million deficit would be “recovered substantially”.
The fund told the adjudicator it had engaged the Registrar of Pension Funds to authorise a lower benefit payment, but the registrar had recommended that the fund be liquidated and the fund is considering alternatives.
Hunter told Personal Finance a number of complex legal issues had to be considered, but it should soon be possible for the affected funds to adjust the amounts held for members and to enable transfers to other funds.
Lukhaimane says it would be “undesirable” for the adjudicator’s office to decide on NS’s outstanding benefit and to order the fund to pay while there is a deficit in the fund. She says it would be “presumptuous” of her office to decide what should happen should the attempts to recover the deficit fail, as that issue is currently before the registrar.
She therefore dismissed the complaint, but added: “This tribunal urges the Registrar to insist on timelines from the [fund] for the finalisation of this matter as members continue to be prejudiced as a result of the delay.”
RETIREMENT FUND MEMBERS HAVE A RIGHT TO STATEMENTS
Your retirement fund is obliged to send you a statement even if it has been subject to administrative bungling and is unable to determine with certainty what benefits you will receive.
This is according to a ruling issued by the Pension Funds Adjudicator in which the Dynam-ique SA Umbrella Provident Fund is ordered to send a member of the fund all his outstanding benefit statements. The adjudicator, Muvhango Lukhaimane, received a complaint from a member, DR, that he had not received a benefit statement for several years.
The fund is subject to a rebuild of its records, and actuarial valuations have revealed that it has a R7.4 million deficit.
The member told the adjudicator he had managed to get an estimate of 80 percent of his fund value, but no information about how the funds have been invested and the growth on these funds. He said he would like to know who would be responsible if there is a 20 percent shortfall in the fund, and asked for clarity on the timeline for rebuilding the members’ records.
The adjudicator says the Pension Funds Act requires the board of a fund to provide adequate and appropriate information to members and beneficiaries of their rights, benefits and duties in terms of the rules of the fund.
She found the member had been informed that the fund was subject to a rebuild of its records and the progress on this. However, it had failed to provide the member with statements directly. Instead it had sent these to a financial adviser appointed by the member’s employer, PS Consult Corporate.
Lukhaimane says by sending the annual benefit statements to the adviser to send on to the members, the board “has abandoned its duty to ensure adequate information is communicated to members”. She ordered the fund to send the statements directly to the member.
The ruling notes that the rules of the fund determine how frequently you should be sent a fund statement, but most funds send these annually. A circular issued by the Financial Services Board requires funds to send out statements annually, six months after the end of the fund’s financial year.