FANews
FANews
RELATED CATEGORIES

PFA: Fund cannot unlawfully deduct money from benefit to offset a loan

04 October 2016 Pension Funds Adjudicator (PFA)
Muvhango Lukhaimane, PFA

Muvhango Lukhaimane, PFA

The Pension Funds Adjudicator has expressed concern that a large pension fund is able to unlawfully deduct money from a withdrawal benefit to offset a loan.

Muvhango Lukhaimane said the fund will be reported to the Registrar of Pension Funds, given that there must be many employees who were victims of the abuse of powers by employers who failed to comply with the Pension Funds Act. 

In his complaint, JEC Sweetland said he was in the employ of Rush Trailers cc, trading as The Pumpsmith (third respondent) from 16 March 2011 to 28 September 2015. 

He was a member of the Corporate Selection Umbrella Retirement Fund Number 2 (first respondent), administered by Liberty Group Limited (second respondent). 

Following the termination of the complainant’s employment, he was entitled to payment of a withdrawal benefit. The complainant was paid a withdrawal benefit in the amount of R18 512.44 on 11 January 2016 by the first respondent. 

It transpired that not all contributions were paid to the first respondent on behalf of the complainant. He attached a copy of his payslip for 11 September 2015 as proof that a deduction in the amount of R288.09 was made from his salary for purposes of provident fund contributions.  

The second respondent filed a response in its capacity as the first respondent’s administrator. It said a withdrawal claim had not been processed as yet as it only received the signed withdrawal form on 25 November 2015. 

It submitted that there was an acknowledgment of debt attached which it queried with the third respondent as there was no reference to theft, fraud, dishonesty or misconduct. 

It said the complainant’s fund value was R49 688.54 and it was in the process of making payment to the complainant. It attached a copy of the complainant’s acknowledgment of debt authorising the third respondent to deduct an amount of R24 362.20 from his provident fund. 

In its further response on 15 January 2016, the second respondent stated that payment of R18 512.44 was made to the complainant on 11 January 2016 and attached proof of payment thereof. 

The third respondent submitted that it had established that not all contributions were paid on behalf of the complainant. 

It said it was in the process of establishing the quantum of those contributions plus late payment interest as well as the reason why they were not paid. It requested an extension to file its response by 24 June 2016. However it was not received. 

In her determination, Ms Lukhaimane said it appeared that the first respondent deducted loan money owed by the complainant to the third respondent from his withdrawal benefit. 

She said the loan money owed by the complainant to the third respondent did not fall

within the permissible deductions in terms of section 37(D) of the Pension Funds Act. 

“By deducting the loan money owed by the complainant to the third respondent from his withdrawal benefit, the first respondent acted contrary to the provisions of section 37D of the Act. 

“The deduction of the loan money owed by the complainant to the third respondent was, therefore, unlawful and in contravention of the first respondent’s master rules. 

“The first respondent acted beyond its powers and this behaviour will be reported to the Registrar of Pension Funds given the fact that employers are required to act in terms of the Act and its rules and funds are expected to enforce such compliance.” 

Ms Lukhaimane said Section 37A(2) of the Act deems the set-off of any debt, or the deduction of a debt in terms of the rules of the fund, to be a reduction of benefit, which was prohibited. 

“This Tribunal notes with concern the first respondent’s conduct in unlawfully deducting the loan money owed by the complainant to the third respondent from his withdrawal benefit. 

“This is a clear indication that if a fund as large as the first respondent is able to unlawfully deduct money from the complainant’s withdrawal benefit in favour of the third respondent without complying with the provisions of the Act and its rules, there should be many other employees (as evidenced by the amount of settlements facilitated by this Tribunal in other instances of withholding of benefits not in compliance with the Act), other than those who lodged their complaints with the Tribunal, who fall within the abuse of powers by employers facilitated by funds.” 

Ms Lukhaimane set aside the decision of the first respondent to deduct an amount of R24 362.73 in respect of the loan owed by the complainant to the third respondent from his benefit despite him signing the acknowledgement of debt “as a person cannot consent to an unlawful act”. 

She ordered the first respondent to pay the complainant the amount of R24 362.73 together with late payment interest.

 

Quick Polls

QUESTION

What is your one-liner for the 2024 National Budget speech?

ANSWER

Creepy failure to adjust income tax, medical tax credits
Overall happy, it should support economic growth
Overall unhappy, soaring public sector wages and broken SOEs suck..
There are too few taxpayers, too many grant recipients.
fanews magazine
FAnews February 2024 Get the latest issue of FAnews

This month's headlines

On the insurance industry’s radar in 2024
Insurers, risk managers unsure of AI’s judgement credentials
Is offshore the place to be in 2024?
Gap claims: erosion of medical benefits, soaring specialist fees
Investments and retirement… is conventional wisdom under threat?
Subscribe now