A high number of complaints and lack of service
The retirement industry has been in the spotlight a lot this year with the media highlighting some of the challenges that the industry needs to overcome if it is to become world class.
This has really cast a spotlight on the severe lack of education that exists when it comes to retirement. The public are not always aware of the products that they are purchasing and are in some cases being taken advantage of by product providers in the industry.
This situation was highlighted in the 2015/16 Annual Report released by the office of the Pension Funds Adjudicator (PFA) where Muvhango Lukhaimane, the Pension Funds Adjudicator, said that, sadly, the high number of complaints received by the PFA points to a lack of service excellence and voluntary compliance on the part of certain funds.
Dodgy dealings
One complaint in particular was brought to the fore in the annual report.
TW Masina who claimed his employer, Crime Stop Pretoria (second respondent) had failed to pay over contributions and submit schedules to Private Security Sector Provident Fund (first respondent).
The complainant commenced employment with the second respondent from 1 October 2003 to date. He was a member of the first respondent by virtue of his employment. The first respondent was administered by Absa Consultants & Actuaries.
It appeared that although the second respondent deducted provident fund contributions from the complainant’s salary, it did not remit all payments to the first respondent. The complainant provided the PFA with a copy of his payslip for 15 January 2014 reflecting a deduction for provident fund contribution purposes in the amount of R220.35 from his salary.
The complainant submitted that upon contacting the first respondent with respect to the status of his retirement benefits, he was informed that the second respondent did not appear on its records.
Further accusations
The complainant further stated that the second respondent merged with another entity known as MCS Security in 2010 and since then provident fund deductions were made from his salary.
However, it appeared that the second respondent did not remit payments to the first respondent.
The complainant submitted that he did not have proof that his employment commenced in 2004 and confirmed that his employment commenced in October 2003 as submitted by the second respondent.
The first respondent submitted that according to its records, the second respondent registered as a participating employer on 1 November 2002 and was non-compliant in terms of section 13A of the Act. Contributions were received up to April 2015 and allocated up to June 2011.
The first respondent further indicated that the complainant was enrolled as its member from May 2008 and has a fund credit of R21 776.95, representing contributions received on his behalf for the period May 2008 to July 2008, October 2008 to July 2010, September 2010 and December 2010 to September 2014. It attached the complainant’s transactional history report showing details of contributions made on his behalf.
Further explanation
It submitted that ACA required claim documentation in order to process the complainant’s withdrawal benefit.
The second respondent submitted that the complainant had been in its employ since October 2003 and he was enrolled as a member of the first respondent from February 2005. The second respondent further attached a certificate of compliance for December 2014, ostensibly from the first respondent whose validity was for the period 15 January 2015 to 15 February 2015, indicating that the second respondent had submitted membership schedules in respect of the payments made.
Despite explanations from the respondents, the PFA found in favour of the complainant. The first respondent was ordered to compute the complainant’s outstanding contributions, together with late payment interest owed by the second respondent.
The second respondent was ordered to pay all the complainant’s arrear contributions together with late payment interest.
Editor’s Thoughts:
It always amazes me how Treating Customers Fairly has been in the industry for over five years now; yet, we are further away from embracing fair customer outcomes than ever before in some cases. Maybe it’s time for the powers that be to come down harder on these companies? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
Comments
Lets get some context:
Exhibit 1
The Pension adjudicator's office cost R47,6 million to run equalling R5,000 per claim! (R4,929 actually)
Exhibit 2
9,667 claims from a 3 Trillion Rand industry with 5,150 funds and 15,9 million members. Complainants equal 0.061% of members. At this rate it would take 1,644 years for all the members to complain Report Abuse
We found the following to be the most important reasons for things going wrong:
1.) In the attempt to reduce costs, administrators work very hard and invest a lot of capital to automate contribution billing systems and other functions. This often leads to a reduction in quality staff at the administrator and passing the buck to the other stake holders.
2.) Intermediaries often think that they have no obligation to oversee proper servicing of the fund and become complacent with the recurring commission they get from the fund. Furthermore insurers would prefer them to rather spoof more individual business from the fund members.
Those very few intermediaries who do actively service their funds properly, are grossly underpaid since Reg 28 commission scales had no inflationary adjustment for more than 15 years.
3.) Many participarting employers see the retirement fund as just another pain in the backside compliance issue. They often ignore the basic rules (which they signed for) and some are very seldom available for revision meetings and annual member audit of their fund.
4.) Members often have a careless outlook as retirement fund contribution is seen as just another grudge expense deducted from salary. We found that more than 50% of members do not even bother to read their annual benefit statements.
Not to mention that ALL 4 stakeholders often fail dismally when it comes to member communication.
Put all these shortcomings together and you get the perfect recipe for disaster.
FAIS compliance practices are not geared to monitor the conduct of an EB practice. And worst of all, a very large number of intermediaries have dangerously little knowledge, and inadequate infrastructure to service employee benefit schemes.
I am certainly not surprised that the PFA gets flooded with complaints.
Does the industry need a shake-up? You bet.
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