PFA: Only three years allowed to lodge pension complaints and avoid prescription

You should keep a close tab on your pension affairs lest you lose track of transactions and exceed the three year time-bar to lodge any formal complaint with the Office of the Pension Funds Adjudicator. You may also fall foul of provisions of the Prescription Act of 1969 which relates to unclaimed benefits.

Recently the complaint of J.P. du Preez of Petit, Johannesburg was dismissed by the Acting Pension Funds Adjudicator Dr Elmarie de la Rey.

He complained he was not receiving a pension from his former employer, foam manufacturer Strandfoam Group, and Strandfoam Pension Fund, which he had been a member of for 23 years from June 1978 until his resignation in March 2001 at the age of 54.

Du Preez said he was informed he would receive his benefit within three to six months of his resignation but decided to leave his benefit in the fund to earn interest.

But in considering the facts Dr De la Rey said his benefit could only have become a pension if he used his resignation benefit to purchase an annuity to provide a pension for himself. The fund’s rules did not actually allow for an option to defer a benefit.

It emerged he had actually used his resignation benefit in 2001 to purchase a new annuity from the then administrator of the fund, Sanlam Life Insurance.

Time Barring

In its response first respondent Strandfoam Pension Fund said nearly eight years had lapsed between the complainant’s resignation from Strandfoam Group in March 2001 and his October 2008 complaint.

The fund itself was not aware of the issue until 2010 when the PFA contacted it. The complainant had only notified the fund’s former administrator Sanlam Insurance in 2009 and Sanlam had ceased its administration in 2003.

The fund therefore argued for the Acting PFA to dismiss the case because it exceeded the three year time-bar for complaints to be lodged with the office.

It also said the complainant had not proved he had a case against the fund itself and the complaint should be directed to Sanlam Life Insurance regarding the policy he had purchased. This complaint could then fall within the jurisdiction of the Office of the Ombudsman for Long-Term Insurance.

Changeovers

The issue was further complicated because Strandfoam Pension Fund underwent three administration changes following Du Preez’s resignation. His unclaimed benefit “fell through the cracks” because of inadequate information between two administrators.

Du Preez said he had engaged three brokers to try resolve the issue without success.

The fund was administered by Sanlam Life Insurance until 1 September 2003, then Absa Consultants and Actuaries (third respondent) until 1 March 2007, then M Cubed Employee Benefits (fourth respondent) until 1 November 2009.

During these changes the records of those members who left, as the complainant did, were destroyed as they were no longer required.

When Du Preez followed up with Sanlam Life Insurance in October 2008 he was informed that his policy was cancelled and he must have been paid his benefit. This he refuted.

He then contacted the next administrator Absa Consultants and Actuaries who stated his name was indicated as inactive on the list of members transferred to it.

Fund’s Response

The fund argued that, had the complainant remained an active member, his records would not have been removed and he would have been included in the various transfers from Sanlam to Absa in 2003.

It said the reason he was not on the transfer list was because he resigned in 2001 and used his benefit to purchase a policy from Sanlam.

The fund had no excess funds that could be used for the benefit of the complainant, which indicates that none was ever transferred.

Strandform Pension Fund is also in the process of deregistering as a pension fund with the Financial Services Board and all but ten members were transferred to the Allan Grey Retirement Annuity Fund in November 2010 in preparation for this. The complainant’s records were nowhere among these.

Sanlam’s response

In its response the second respondent Sanlam Life Insurance said the fund’s assets were transferred to the third respondent Absa Consultants and Actuaries during a change of administration.

Due to tax problems Sanlam Life Insurance was unable to pay out the complainant’s withdrawal benefit prior to the asset transfer to Absa Consultants and Actuaries.

It confirmed the complainant’s withdrawal benefit with annual interest included was transferred to Absa Consultants and Actuaries as part of the total fund assets.

Sanlam said it advised Absa that the complainant’s benefit had not been paid out as at 10 February 2004 and that the benefit would be transferred as part of the fund assets to the Absa, making Absa liable for payment thereof.

Absa’s response

However in its response Absa said the transfer data from Sanlam did not make mention of the complainant. It said it administered the fund on the basis that the available money was only for the active members as they appeared on the transfer spreadsheet.

Sanlam queried the complainant’s benefit and over time it was eventually discovered that the fund assets that were transferred did indeed include Du Preez’s benefit.

It could be argued that the current members had been unfairly enriched because the complainant’s benefit was not earmarked separately and was distributed to other active members as part of the distribution of reserves.

Absa said if it was still the administrator of the fund it would recommend that each member’s fund value be minimally reduced to determine the assets to be paid to the complainant, since his money was included with other members’ fund values over time.

Absa did not however notify M Cubed Employee Benefits of the matter when transferring the administration as the incident was never officially registered as unclaimed.

M Cubed’s response

The fourth respondent M Cubed advised that when it took over the administration of the first respondent it did not receive any transfer of assets for the complainant.

Further, during its period of administration the complainant was not a member of the fund.

Therefore, it argued if there were any benefits owing to the complainant they would still be with the third respondent Absa Consultants and Actuaries.

Prescription

Because the benefit remained unclaimed Du Preez’s claim became subject to prescription.

Prescription commences as soon as a debt becomes due and applies in circumstances where the creditor has knowledge of the identity of the debtor and of the facts from which the debt arises, provided he could acquire this knowledge by exercising reasonable care.

In ruling the PFA tribunal found Du Preez did not address the matter timeously despite knowing the correct channels of communication via Sanlam Insurance and knowing that he was entitled to a withdrawal benefit, as evidenced in a letter to him from his employer in March 2001 and benefit statements attached to his complaint.

Dr de la Rey ruled, “The Adjudicator has no authority to investigate and adjudicate any complaint which is time-barred in terms of section 30I of the Pension Funds Act, that is any complaint where the act or omission to which it relates occurred more than three years before the date on which the complaint is received by this office in writing.”

She said inordinate delays in litigation damaged the interests of justice by protracting disputes and prolonging uncertainty.

The complaint was therefore dismissed.