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PFA: Complainant’s omission to act absolves fund of liability

11 April 2011 PFA
Acting Pensions Fund Adjudicator (PFA), Dr Elmarie de la Rey

Acting Pensions Fund Adjudicator (PFA), Dr Elmarie de la Rey

Failing to respond to correspondence from your pension fund could be seen as an act of omission against which you have no recourse. So says the Acting Pensions Fund Adjudicator (PFA), Dr Elmarie de la Rey, who recently dismissed the complaint of a municipal worker who failed to instruct his pension fund regarding a switch in his pension portfolio.

TL Matlou, a resident of Seshego, Limpopo Province and employee of Capricorn Municipality, claimed to have been financially prejudiced by the decision of the National Fund for Municipal Workers to switch his investment benefit from higher risk to lower risk without his authority.

Matlou said the reduction would affect his planned retirement benefits and requested the PFA’s assistance in keeping his original benefits.

The fund was established in 1987 in an agreement with most local authorities, which stated both the local authority and the fund’s members would make monthly contributions of 2% of their total remuneration. This would provide for retirement benefits and death and disability benefits.

But in 2007 the fund’s trustees opted to reduce its risk benefits default option due to an increase in the underwriter’s risk premiums. Members were given three options and had to elect one.

Risk benefits would by default be reduced from 3 x annual salary risk benefit at death and disability to 1 x annual risk benefit at death and disability. Both members and the employers were to contribute 2% of salary towards this category so as to enhance retirement benefits and provide members with additional benefits. All three options offered funeral benefits of R5 000 for the member and qualifying spouse and R3 000 for qualifying children.

Should members have wanted to retain a higher risk option of 2 x annual risk benefit at death and disability or 3 x annual risk benefit at death and disability, with higher savings contributions respectively, they would need to state this expressly by completing a risk option form by the end of May 2007.

Despite the complainant’s claims to the contrary, the fund was able to prove it had issued a notice to members to this effect. It said it had acted within the parameters of the Act and its rules, and had a fiduciary duty towards its members to ensure they retired as financially sound as possible.

The fund said Matlou had not signed nor returned an option form and this implied he did not elect to have the higher risk benefit.

In ruling, Dr de la Rey, said “On the evidence before this tribunal, I cannot find any impropriety in the conduct of the respondent’s trustees. The complainant failed to exercise an election which was given to him and since no choice was made, his risk benefits were changed to the default risk choice.

“Similarly, there is no evidence before this tribunal supporting the complainant’s submission that the introduction of the new portfolio has financially prejudiced him. The complainant’s retirement benefits have moreover not been impacted in any way, as it is simply his risk benefits that have been reduced. Therefore the complaint cannot succeed and is hereby dismissed.”

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