Posted on February 25th, 2011 in Industry News
A recent adjudicator case has held the fund responsible for the payment of a benefit after the member’s data was lost by administrators. This clarifies a number of principles which should be noted by Trustees:
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a fund’s board is and remains accountable for the management of a fund,
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a fund may delegate or outsource some duties, such as the administration of the fund, but should insist on regular report backs from service providers;
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a fund’s board should take extra care on administration change-overs to ensure that the proper records are transferred, especially records of unclaimed benefits, paid-up benefits (deferred pensioners) and disability claimants.
The Acting Pension Funds Adjudicator, Dr Elmarie de la Rey, issued a determination in B. Bonugli v Unibank Provident Fund. The fund was ordered to pay a member’s benefit after the member’s membership data was lost due to several changes in the administration of the pension fund.
The complainant, Ms Bonugli, lodged the complaint with the Adjudicator after various administrators of Unibank Provident Fund would not take responsibility for payment of her benefit as her details had not been properly transferred during the fund’s administration changeovers.
The complainant resigned from her employer in January 2000 and opted to leave her benefit in the fund as a paid-up benefit.
She retired from the fund 7 years later and requested payment of her paid-up benefit, but was told by the fund that they had no records of her benefits or that she was a paid-up member.
The complainant had received a retirement quotation from the Fund following her resignation in 2000. She had also received responses to enquiries about her fund value three years after resigning, as well as a retirement quotation from the administrators of the Fund in 2003. These responses indicated her records were still available at the time.
The fund had been managed by Investec Employee Benefits (now owned by Liberty Group Limited), Lekana Employee Benefits (now owned by Momentum Group Limited), and ABSA Consultants & Actuaries (Pty) Ltd. The transfer data would have included a list of all benefits due by the fund.
The current administrators, ABSA Consultants & Actuaries, said the transfer data it received from Momentum Group and its subsidiary did not include the complainant’s records.
In her determination, the Adjudicator said a registered pension fund is entrusted with the management and control of property for the benefit of its members.
“Although a fund may delegate some of its functions to a service provider, it has a duty to exercise an oversight function over the service provider,” she said.
“The duty to keep proper records in respect of members is critical as these are used to determine the benefits of members. Any failure to maintain proper systems and to keep proper books and records will prejudice members.”
Dr De la Rey said the Pension Funds Act was clear that a fund’s board should “act with due care, diligence and good faith” and “ensure that proper registers, books and records of the operations of the fund are kept, inclusive of proper minutes of all resolutions passed by the board; ensure that proper control systems are employed by or on behalf of the board …”
The Financial Services Board also stipulates that a board could outsource this role but should have regular report backs to ensure it remained responsible and accountable to its members’ assets and properly fulfilled its oversight role.
Dr De la Rey said the fact that all the fund’s monies were transferred to each administrator when they assumed management, meant that the complainant remained a member of the fund despite changes in administrators since January 2000.
“In terms of the definition of a ‘member’ in section 1 of the Act, membership of a fund only ceases when a member has received payment of all her benefits that are due to her. The Fund’s rules also confirm that membership only ceases once a member has received all her benefits,” said De la Rey.
The facts confirmed that the complainant did not receive her benefit when she resigned from employment, although she had elected to remain a paid-up member.
“The change of administrators during the complainant’s membership does not affect her entitlement to a benefit from the fund,” she said.
The Adjudicator ordered the Fund to pay the 63 year old complainant her early retirement benefit from the fund, together with all investment returns from January 2000 to the date of the determination, as her membership never terminated and she was never paid.
Adri du Plessis
Legal and Compliance Manager
