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Another ruling by the PFA (25.11.05)

27 November 2005 Angelo Coppola

The latest rulings by the PFA relate to penalties imposed on the cessation of contributions, reduction of contributions, advancement of retirement age. The issue of illustrated values was also canvasses in the rulings.

The complainant, whose membership of the Sentinel Mining Industry Retirement Fund in terminated in October 2004, received an undisclosed amount as a withdrawal benefit from that fund.

Before he had made up his mind about the appropriate investment vehicle in which to invest a sum of R50 000 from the proceeds of his benefit, he was approached by a financial intermediary in the employ of Old Mutual who volunteered to assist him in investing his money.

The complainant specifically informed the intermediary that he needed to invest in a vehicle which would allow him regular and unrestricted access to his investment. The intermediary advised him to invest in a retirement annuity from SARAF, stating that the product was suitable for the complainant’s stated needs and that he could withdraw funds therefrom as regularly as he wished.

It is only a month after the complainant had made the investment, when received the investment contract and related documents that he realized that he could not access his funds before reaching the age of 55 years. The respondents were also of the view that if the adjudicator concluded that there was no meeting of minds then they would be prepared to refund the monies to the transferring fund.

The Adjudicator found that a material and reasonable mistake on the complainant’s part, which had been induced by a third party, had resulted in there being no meeting of minds between the contracting parties, and that therefore no valid contract came into being.

He ordered SARAF to transfer the invested amount together with interest thereon at the average inflation rate, back to the complainant’s previous fund to enable him to make an election in terms of the rules of that fund regarding payment of his benefit.

Regarding the conduct of the advisor, the complainant, if he so wished, could refer the matter to the FAIS Ombud.

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