PFA: Plain language needed to stop claim such as R3 608 037 049

The need for pension fund administrators to use plain language with minimal jargon and legalese has come into sharp focus following two recent determinations issued by the Office of the Pension Funds Adjudicator.

The rulings have prompted acting Pension Funds Adjudicator Dr Elmarie de la Rey to draw attention to the need for “very clear and simple communication” with pension fund members.

“It difficult to be too prescriptive about the manner of communication.

“But all I want to ask is that trustees and administrators take care when issuing benefit statements to members, ensuring that the language used is clear and straightforward,” Dr De la Rey said, adding there were many administrators who were already using simpler language.

In one determination, the complainant did not seem to understand that you must be dead for a death benefit to be paid out.

The aggrieved member, a bus driver, complained that since a death benefit was part of his contributions to a pension fund, he was entitled to be paid the death benefit over and above the withdrawal benefit of R25428 .53 that he was paid.

He did not understand that the death benefit that he was referring to was not part of the withdrawal benefit, but a group life assurance cover. The group life assurance cover would have become payable to the complainant if he had died while still in service.

“A death benefit is only payable after the member’s death and while he is still a member of the fund.

“In light of the above, the complainant is not entitled to receive a death benefit,” said Dr De la Rey, thus dismissing the complaint.

More worrying is a complaint received from a retired Johannesburg City Parks employee that he should have been paid R3 608 037049 (R3, 6 milliard) by the Municipal Gratuity Fund – the entire assets of the fund – because that was the figure reflected in the fund’s financial statement for its entire membership.

The complainant was employed by Johannesburg City Parks from 1966 until he retired on 30 September 2007. He was paid a retirement benefit in the amount of R440 358.74. In trying to do the right thing by being transparent, the fund had sent him a copy of the full financials.

The complainant was dissatisfied with the amount of R440358 .74 and requested a second payment in the amount of R3 608 037 049 as reflected in the summary of the financial statements for the 2002/3 financial year.

Coris Capital (second respondent), in filing a response on behalf of the first respondent, said that upon retirement, the complainant became entitled to a retirement benefit in the amount of R440 358.74. This was paid to him and the second respondent had thus duly discharged its liability towards him.

In her determination, Dr De la Rey said the facts showed that the complainant’s retirement

benefit was correctly computed in terms of the first respondent’s rules.

“The second payment of R3 608 037 049 claimed by the complainant is the total value of the

first respondent’s assets as reflected in its 2002/2003 financial statements.

“The complainant is not entitled to this amount because the rules do not provide for it and it

would mean that the remaining members would not have any benefits if this amount

was paid to him.

“In the result, the complaint is dismissed.”