Pension fund ordered to pay after loss of member’s records

A pension fund which underwent several changes in administration and “lost” a member’s benefits data in the process has been ordered by the Acting Pension Funds Adjudicator to cough up and pay.

Beulah Bonugli of Benoryn, Benoni lodged the complaint with the Office of the Adjudicator after various administrators of Unibank Provident Fund would not take responsibility for payment of her benefit because her details had not been properly transferred during the fund’s administration changeovers.

In her ruling Adjudicator Dr Elmarie de la Rey said a registered pension fund organisation has fiduciary obligations to ensure 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.”

The complainant belonged to Unibank Provident Fund by virtue of her employment with Union Finance (Pty) Ltd.

Upon her resignation from Union Finance in January 2000, she opted to leave the funds with Unibank Provident Fund as a paid-up benefit.

In June 2007, seven and a half years after resigning from Union Finance, Bonugli requested payment of her paid-up benefit in the fund. However, its previous administrators claimed they had no records of the complainant’s benefits or that she was a paid-up member. They were not prepared to assist or take responsibility for the payment.

The complainant said she had received a retirement quotation from Unibank Provident 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 Investec Employee Benefits in August 2003. These responses indicated her records were still available at the time.

Changeovers

In its recent history the fund had been managed by Investec Employee Benefits before its administration was taken over by the third respondent Liberty Group Limited until the end of February 2002. It was then taken over by the fourth respondent Momentum Group Limited from March 2002 until June 2003. The transfer data then would have included a list of all benefits due by the first respondent, as is required in terms of the Pension Funds Act.

From June 2003, the fund was administered by the second respondent Absa Consultants & Actuaries (Pty) Ltd, which had received data transferred from Lekana Employee Benefits, a subsidiary of Momentum Group.

Responses

In its response Absa Consultants & Actuaries said the transfer data it received from Momentum Group and its subsidiary did not include the complainant’s records.

It added the complainant would have received annual benefit statements if she was a paid-up member of the fund and it was not in a position to assist in the absence of proof of her paid-up status.

By law administrators are required to maintain records for up to five years. Therefore, Absa Consultants & Actuaries submitted it would not have had the complainant’s records from 10 years ago.

In its response Liberty Group said the complainant had been among members who were transferred to the Momentum Group in March 2002. It submitted a schedule which reflected this. It said it was the responsibility of the new administrators of Momentum Group to maintain members’ records and fund values.

However, while payments were made from Liberty Group to Momentum, in May 2008 current administrator Absa Consultants & Actuaries had requested proof of payment specifically in respect of the complainant, which Liberty Group argued it was not able to supply as transfers were done in bulk.

Upon further investigation Liberty Group discovered that paid-up members and additional voluntary contributions had not in fact been included on its original schedule. Thus the complainant and her paid-up benefit had actually been excluded.

Liberty Group subsequently requested its actuarial department to verify the complainant’s share of fund as at 1 March 2002, including the paid-up benefit and additional voluntary contributions. Thereafter Liberty Group issued a corrected schedule and sent it to Absa in February 2009.

Momentum Group thus argued that the complainant did not appear on Liberty Group’s membership data when it took over administration. It assumed the complainant had resigned and exited the fund in January 2000, two years before the administration of the fund was transferred to its subsidiary Lekana Employee Benefits.

Lekana Employee Benefits also sent a separate response in which it submitted that it did not have records in respect of the complainant’s benefit as it related to a matter that occurred more than eight years before it assumed administration. It further contended that there was no record of the complainant from the electronic data it received from Liberty Group.

Ruling

In considering the submissions 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.

The submissions showed the discrepancy occurred when Liberty Group transferred its initial data to Momentum Group. An updated, corrected schedule was provided by Liberty to Absa only six years later.

Dr De la Rey said the fact that all the fund’s monies were paid to each administrator when they assumed management, meant that the complainant remained a member of the fund despite changes in its 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 first respondent’s rules also confirms that membership only ceases once a member has received all her benefits,” said De la Rey.

The facts confirm that the complainant did not receive her benefit when she resigned from employment although she had elected to remain a paid-up member.

Thus De la Rey ruled the 63 year old complainant was entitled to receive her early retirement benefit from the fund as her membership never terminated and she was never paid.

“The change of administrators during the complainant’s membership does not affect her entitlement to a benefit from the first respondent,” she said.