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PFA threatened with legal action by complainant

31 January 2018Muvhango Lukhaimane, PFA
Muvhango Lukhaimane, Pension Funds Adjudicator.

Muvhango Lukhaimane, Pension Funds Adjudicator.

Pension Funds Adjudicator Muvhango Lukhaimane has read out the riot act to a pension fund and its administrator for failing to willingly provide a response to a complaint.

Ms Lukhaimane has asked the Registrar of Pension Funds to act against the Municipal Employees Pension Fund (first respondent) and Akani Retirement Fund Administrators (second respondent).

This follows a stern letter received from the complainant’s attorneys decrying the failure by the Adjudicator to subpoena the first and second respondents owing to their continued failure to file a response.

Mr HRA Lubbe who had worked for the Polokwane Local Municipality (third respondent) from 1 December 1998 until 31 January 2017 when he retired, complained that the first respondent had failed to compel the third respondent to pay outstanding contributions amounting to R3 017 126.54 on his behalf.

He attached a copy of a letter dated 24 November 2016 from the second respondent, wherein it was stated “….kindly submit the calculations below to your Municipality for the capitalised value (R3 017 126.54) to be processed, to enable the fund to place you on retirement due to retrenchment…”

He averred that the first respondent’s board had failed to take the necessary steps as enjoined to do so by section 7D of the Pension Funds Act to ensure that contributions were paid by the third respondent to the first respondent on his behalf.

In its response, the first respondent attached a letter dated 2 February 2017 addressed to the complainant wherein it confirmed receipt of a retirement notice with effect from 31 January 2017.

In the said letter, the first respondent indicated that following his retirement, a retirement benefit was payable in terms of Rule 33(1). This letter further mentioned that an amount of R907 674.44 was to be paid to the complainant as a gratuity, with an annual pension of R395 081.15 translating to a monthly pension of R32 923.42 (excluding tax).

In her determination, Ms Lukhaimane said the complainant reached retirement age on 1 February 2017. The first respondent attached a claim form signed by the complainant on 3 January 2017 reflecting that the complainant’s service was to be terminated on 31 January 2017 and the reason cited for termination of service was retirement.

The first respondent further attached a copy of a letter dated 2 February 2017 addressed to the complainant indicating that his notice of retirement with effect from 31 January 2017 had been received and that he was entitled to a retirement benefit calculated in terms of Rule 33(1) which governs the payment of retirement benefits.

“Therefore, the benefit that became payable to the complainant is a retirement benefit, which means that a rule governing the payment of retirement benefits was applicable to him.

“In light of the above, if one gives a microscopic view on the provisions of Rule 35, it becomes evident that this rule is only applicable in an instance where a member’s service is terminated by reason of retrenchment due to reorganisation.

“It follows therefore that, Rule 35 is not applicable to members whose reason for termination of service is retirement. Thus, the complainant’s submission that Rule 35 is applicable to him is incorrect and misplaced,” said Ms Lukhaimane.

However, she went further and stated that what appeared to have triggered the complainant’s assumption that Rule 35 was applicable to him and that the third respondent owed the first respondent contributions was the letter dated 24 November 2016 addressed to the complainant bearing the signature of the second respondent’s Managing Director.

“This letter indicates that the complainant’s retrenchment benefit has been calculated by the Actuary of the first respondent. It further states that he must submit to the third respondent the calculations contained therein for the capitalised value in the amount of R3 017 126.54 to be processed in order to enable the first respondent to place him on retirement due to retrenchment.

“The first and second respondents did not explain under what circumstances the said letter was issued to the complainant. Instead, the first respondent indicated that this is an employer and employee related issue which falls within the ambit of the LRA.

“The first respondent further stated that the complainant was entitled to a retirement benefit following his retirement, is currently a pensioner and receives a monthly pension from it. This Tribunal finds it unacceptable for the first and second respondents to issue misleading and inaccurate statements which confuse members, as is the case herein.

“The conduct of the first respondent goes against the grain of section 7D of the Act which requires pension funds to provide members with accurate and adequate information, which appears to have been breached in this instance.

“Thus, the first respondent is cautioned against issuing incorrect and misleading information to members. Noting that there is an uncertainty as to what triggered the letter in question from the second respondent, be that as it may, it is irregular because any service termination circumstances must be communicated by the employer to the first respondent.

“In the circumstance, this Tribunal finds that there is no basis to sustain the complainant’s assertion that the third respondent owes contributions on his behalf to the first respondent as the basis of his assumption, i.e. the letter of 24 November 2016, is flawed.

“Therefore, the complainant’s request for this Tribunal to compel the first respondent to seek outstanding contributions from the third respondent cannot be granted.”

Ms Lukhaimane said the conduct of the first and second respondents must be brought to the attention of the Registrar of Pension Funds in order that he would take note of the inconvenience and financial prejudice that members incur (such as engaging the services of attorneys) as a result of their conduct of issuing incorrect information to members and failing to explain basic queries.

Ms Lukhaimane said the conduct of the first and second respondents in failing to file a response also needed to be dealt with.

“This Tribunal had to endure threats of legal action by the complainant’s legal representative accusing us of dereliction of duty and responsibility by not invoking the provisions of the Commissions Act to compel the first and second respondents to submit the required information.

“It is noteworthy that, it was only after this Tribunal had threatened to summon the Principal Officer of the first respondent and the board’s Chairman that a response was submitted to this Tribunal.

“This Tribunal would like to make an impassioned plea for the first and second respondents to change their ways and improve the service they provide to their members and respect the authority and mandate of this Tribunal in order that we do not have to resort to drastic measures such as the invocation of the Commissions Act,” Ms Lukhaimane said.

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