PFA absolves pension fund and manager of complainant’s investment losses:

04 February 2011 Pension Fund Adjudicator
Dr Elmarie de la Rey, Acting Pension Funds Adjudicator

Dr Elmarie de la Rey, Acting Pension Funds Adjudicator

The Acting Pension Fund Adjudicator has ruled that a pension fund and its administrator could not be held liable for poor advice received from an independent financial advisor, which resulted in meagre investment returns on a complainant’s pension preservation fund.

In June 2008 J Hill of Durban North lodged a complaint with the Acting Pension Funds Adjudicator, Elmarie de la Rey. Hill claimed the MM Pension Preservation Fund and its administrator, Momentum Group had “misrepresented the security and credibility of the fund when she joined it” after she was dissatisfied with the growth on her investment.

Hill became a member of the fund on 1 November 2000 and her chosen retirement date was 1 November 2008. An amount of R54 949.12 was transferred from the complainant’s previous fund, the Naspers Retirement Fund. The complainant chose to invest in an offshore linked investment portfolio managed by the Momentum Group, known as the Equity International portfolio.

She submitted that she received a policy statement during 2002 which reflected an illustrative maturity value of R85213.00 if the investment grew by 6%, or R120766.00 if it grew by 12%. Her fund value on 1 March 2002 was R57 558.00, with which she was satisfied.

The statement further read that the actual values of the policy at the end of the selected term would depend on the performance of the chosen investment portfolio.

However in March 2003 the complainant received a benefit statement, which showed a current fund value of R34137, an illustrative maturity value at 5% growth of R41522 and an illustrated maturity value at 10% growth of R54985.

The complainant made enquiries and was advised that the figures were correct. According to her, the benefit had decreased by R18308.00 and no explanation was given about the cause of the decrease in her fund value.

Eight years after first investing in the fund, the complainant’s final statement dated 31 March 2008 reflected the illustrative value as R54778 at current market growth, R57463 at 4% growth or R58548 at 10% growth.

In its response to the tribunal the second respondent, Momentum Group, confirmed the complainant had been assisted by an independent financial advisor when she decided to become a member and - under the advisor’s guidance - had chosen to invest in the Equity International portfolio.

It added that the complainant was informed at inception that her fund value would fluctuate according to the performance of her chosen investment portfolio, as highlighted in all annual statements. The second respondent also asserted that the complainant’s policy document confirmed there were no investment guarantees.

Taking into consideration both arguments, de la Rey ruled that the complaint could not succeed and should be dismissed. She determined that the complainant and her advisor had had freedom to decide on her investment portfolio, that the respondents had not played any role in advising her how to invest her benefit and that they could not be held liable for her investment choice or any resulting losses.

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