An increase in the number of complaints against pension fund administrators indicates service to contributors is not as it should be, reports the Pension Funds Adjudicator (PFA).
Are retirement savers always getting the best service from their pension funds?
Not always, if the most recent report of the Pension Funds Adjudicator (PFA) is anything to go by. The adjudicator’s office is, effectively, an ombudsman scheme for pension funds, so the level of complaints is something of a barometer of how satisfied the public is with their retirement funds.
What is notable is that of the 8382 complaints finalised in its last year, 95% were decided in favour of the complainant. This suggests that the funds or administrators defending these claims were mostly in the wrong — yet had sat on their hands, rather than resolving the matters.
In all, 45% of the complaints related to withdrawal benefits, while 40% dealt with situations where contributions hadn’t been paid to funds by employers, and the funds hadn’t ensured this amount was collected.
The adjudicator, Muvhango Lukhaimane, described this as a “great concern” since these cases “have been a consistent feature over the years and continue unabated to the detriment of pension fund members”.
Lukhaimane says her office is “engaging” with funds and administrators to get to the root of this problem.
Finance minister Enoch Godongwana weighed in too, writing that while it’s “understandable that financial sustainability for employers and retirement funds has been a challenge in the recent past, it should not be acceptable that pension fund members must bear the brunt.”
Last year, there was a 26% rise in new complaints, but these complaints are being finalised quicker than ever before — in part because Lukhaimane’s office is now demanding a response to a complaint in 20 days, rather than 30.
Of course, it doesn’t help that companies are under more stress than ever.
Last year, according to the Financial Sector Conduct Authority (FSCA), “in nearly 40% of active retirement funds, the employer was in some form of financial distress because they or/and employees approached the fund to ask for a temporary suspension or reduction of retirement contributions due to Covid lockdowns.”
Amidst this financial squeeze, it’s clear some funds and administrators forgot about their customers.
The biggest culprit, when it came to new complaints, was the Private Security Sector Provident Fund (PSSPF).
But the range of issues at the Chemical Industries National Provident Fund (CINPF), which was detailed by Rosemary Hunter in Today’s Trustee last month, occupied much of the adjudicator’s time too.
The CINPF is at the root of a messy governance dispute, after it fired its administrator NBC and hired Akani instead. In June this year, the Supreme Court of Appeal reversed this decision, and effectively ruled that bribes had been paid to the fund’s top brass to get them to pick Akani.
In the annual report, Lukhaimane said that during meetings with the CINPF, “concerns were raised ranging from data issues, poor service and failure of the previous administrator to issue proper benefit statements to members.”
Given that the CINPF is a R6bn fund, with 21,000 members, it’s clear that the focus on sorting out its serious governance flaws is vital.
But the adjudicator also detailed other instances where administrators messed up, to the detriment of pensioners.
This included taking Old Mutual to task for botching a request from a retiree to pay out a lump sum, and then buy two annuities with the remaining funds. Old Mutual not only bungled this task, submitting flawed tax directives to the SA Revenue Service (SARS), it then appeared reluctant to fix the problem.
“The conduct of Old Mutual was held to be inconsistent with what customers expect to experience from financial institutions entrusted with their retirement savings,” said the adjudicator. While Old Mutual offered that retiree a R2500 ex gratia payment, the adjudicator said that “given the behaviour of Old Mutual in this matter and the time spent plus aggravation endured by the complainant and his consultants, an amount of R2500 is a mere pittance and a slap in the face.”
The “bizarre” case of a former adjudicator
Perhaps more intriguingly, the Adjudicator’s annual report also flagged the “bizarre” case involving the Estate Agency Affairs Board, which has since been renamed the Property Practitioners Regulatory Authority (PPRA).
Today’s Trustee readers will be no stranger to this case, in which the authority’s CEO Mamodupi Mohlala-Mulaudzi (who has since been suspended) sent an instruction to its human resources department not to deduct pension fund contributions for five employees.
This led to all sorts of internal ructions at the authority — where it was clear Mohlala-Mulaudzi’s own board disagreed with her.
When the matter ultimately wound its way to the PFA, Lukhaimane was clear that the pension fund contributions shouldn’t have been withheld, and ordered these be collected in arrears, and paid over. In the annual report, Lukhaimane’s office points out that this is also a criminal act under the Pension Funds Act, subject to a fine of up to R10m or imprisonment of up to 10 years.
However, what makes this case particularly compelling — as Today’s Trustee has written — is that Mohlala-Mulaudzi was herself the former Pension Funds Adjudicator between May 2007 and October 2009, and so should know better.
In the annual report, the Adjudicator wrote of this case under the heading “Estate Agency Affairs Board’s CEO goes rogue”, which is an interesting turn of phrase, considering that Mohlala-Mulaudzi is suing Democratic Alliance MP Emma Powell for defamation for describing her as an “increasingly rogue CEO”.
This suggests there is clearly no love lost between Lukhaimane and her more controversial predecessor.