PFA orders fund to pay balance of members' benefits

01 September 2015 PFA

A provident fund which paid only half of benefits due because it had invested in companies that went broke has been ordered by the Pension Funds Adjudicator to pay the balance with interest.

MJ Makhaye who had been employed by the Msunduzi Municipality (third respondent) from 1971 until June 2014 complained to Pension Funds Adjudicator Muvhango Lukhaimane that Pietermaritzburg Corporation Provident Fund (first respondent”), administered by AON South Africa (Pty) Ltd (second respondent), paid him only R170 352.91on 23 October 2014 after his services were terminated.

He said he had contacted the first respondent on numerous occasions but nobody could give him an answer on the funds due to him.

Ms BS Madlala complained that she received only R517 514.70 from the first respondent following the death of her husband TM Madlala who had also worked for the third respondent.

She too said she could not get a satisfactory response from the first respondent.

In response to both complaints, the first respondent’s broker submitted that its board resolved to pay 50% of funds because the first respondent’s funds were invested into a company called CMM which was under curatorship. The first respondent’s funds were also invested into a company called Sharemax which went into liquidation.

The broker also said financials for the first respondent had not been prepared since 2006. Also, in 2008 there was a resolution signed by the employer to increase contributions from 5% to 12% and this has not yet been implemented.

The broker stated that due to the abovementioned reasons, the FSB had recommended that claims be paid at 50% until such time that the financial affairs of the first respondent were brought to order.

In her determination, Ms Lukhaimane said rules of a fund were supreme and binding on its officials, members, shareholders and beneficiaries and anyone so claiming from the fund.

She said Section 7C(2) of the Pension Funds Act dealing with the statutory duties of trustees states that a fund’s board shall “take all reasonable steps to ensure that the interests of members in terms of the rules of the fund are protected at all times”.

The board shall also have “a fiduciary duty to members and beneficiaries in respect of accrued benefits or any amount accrued to provide a benefit, as well as a fiduciary duty to the fund, to ensure that the fund is financially sound and is responsibly managed and governed”.

“This Tribunal notes with concern the first respondent’s failure to take reasonable steps to ensure that the interests of its members are protected at all times as it is one of the duties of its board in terms of section 7C(2) of the Act.

“The resolution to pay 50% of the benefits to exiting members is not in the best interests of the first respondent’s members.

“From both the submissions provided by the FSB, this is an indication that the first respondent failed to ensure that proper records are kept and that adequate and appropriate information is communicated to members and beneficiaries of the fund informing them of their rights, benefits and duties in terms of its rules as required in terms of section 7D(1)(a) and (c) of the Act.

“The board of the first respondent also failed to act with due care and diligence in dealing with the property of the first respondent.”

With regard to the first respondent’s submission that in 2008 there was a resolution signed by the employer to increase contributions from 5% to 12% and that this had not been implemented, Ms Lukhaimane said the first respondent must apply the rules that were applicable at the time of accrual of the benefit.

“The first respondent cannot use the non-implementation of a resolution signed by the employer to increase contributions from 5% to 12% as an excuse not to pay the complainant’s full retirement benefit,” she said.

Ms Lukhaimane ordered the first respondent to pay both complainants the outstanding retirement benefits plus fund growth.

The board of the first respondent was ordered to submit a plan to the Registrar of Pensions on how it aims to proceed regarding the payment of full benefits to members and a comprehensive report on whether the investments in CMM and Sharemax were prudent and compliant with the Regulations.

The first respondent was also ordered to provide a report on its non-compliance with
Section 15 of the Act regarding the submission of financial statements and to establish the level of its data accuracy in respect of the complainant.

Quick Polls


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


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