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PFA raps fund for deducting “housing” loan from pension interest

06 February 2012 Pension Funds Adjudicator
Dr Elmarie de la Rey, acting Pension Funds Adjudicator

Dr Elmarie de la Rey, acting Pension Funds Adjudicator

A pension fund cannot deduct a portion of a housing loan from a non-member spouse in the event of a divorce if in fact the loan was not used for housing.

Also, there is a responsibility on the part of a fund to ensure a loan is used for the purpose for which it is granted.

These are the strong messages that emerged from a ruling by Dr Elmarie de la Rey, acting Pension Funds Adjudicator, in a matter in which a woman complained that deductions had been made for a housing loan from the non-member’s portion of the pension interest although her former husband never owned a house and she was unaware of the loan.

The woman received only R5 300 instead of the more than R51 000 she would have received had 50% of the housing loan not been deducted from her pension interest.

The complainant said not only was she unaware of the existence of the housing loan but her former husband never had a house as during the subsistence of the marriage they lived in a relative’s house.

A copy of the determination would be forwarded to the Head: Surveillance and Enforcement of the Registrar of Pension Funds for further investigation.

Mrs GC Zuze had been married to Boy Zuze (third respondent) who was a member of Nampak Contributory Provident Fund (first respondent) which was administered by NBC Fund Administrators (Pty) Ltd (second respondent).

 

The Zuzes were divorced on 17 May 2005. In terms of a divorce settlement agreement, the complainant became entitled to 50% of the third respondent’s pension interest in the first respondent as at the date of divorce.

At some stage during the subsistence of the marriage the third respondent had received loans which were guaranteed by the first respondent. There was an outstanding loan balance when the pension interest claim was lodged in 2008.

On 1 December 2008 the complainant’s share of the pension interest was paid and a deduction was made from this payment for the settlement of half of the outstanding guaranteed amount for the housing loan.

The complainant submitted that the deduction of half of the outstanding guaranteed amount for the housing loan from her share of the benefit was “illegal”. She said she was not liable for the housing loan granted to the third respondent because her former husband never owned a house and despite being married in community of property, she had never consented to the loan.

The only housing loan for which she and her husband jointly applied was cancelled after the house for which it was procured was found to be substandard.

In responding to the complainant’s claims, the first and second respondents confirmed that the complainant became entitled to 50% of the pension interest due to the member as provided for in the divorce order.

They submitted that the third respondent had an outstanding home loan which was guaranteed by the first respondent, half of which was deducted from the complainant’s benefit.

The third respondent had been granted the following housing loans:

· R9000 on 02 September 1996

· R5000 on 26 May 1999

· R13460 on 3 August 2000

· R5000 on 16 November 2000

· R10000 on 1 March 2001

· R17000 on 23 May 2001

· R6000 on 3 April 2002

· R2956 on 31 July 2002

· R5000 on 22 November 2002

· R20000 on 16 February 2004

· R20000 on 10 May 2005

· R5300 on 14 August 2006

When the divorce order was granted, the housing loan totalled R92.179.33. This outstanding housing loan was settled on 26 August 2006 before a divorce award payment could be made.

The respondents submitted that section 19 of the Act “regulates percentages in which the member can be granted a housing loan” and that this provision was embodied in rule 13 of the first respondent’s rules. They contended that nowhere in the Act or the rules was it stipulated that the member must furnish proof that the money was for a housing loan to build a house or make improvements to a residence.

In her determination, Dr De la Rey said that the housing loan was actually not a single loan but 12 different loans taken over 10 years.

“When the complainant first raised her concerns about deductions she was informed that the deductions were for a housing loan.

“It is apparent from the list of the loans submitted that these loans could not have been for any of the purposes provided for in terms of section 19(5)(a) (ii) and (iii), which is to “acquire, make additions or alterations or to maintain or repair a residence occupied by the member or their dependents”.

“This much is conceded by the first and second respondents, although grudgingly so, in their disclaimer that it’s not their duty to verify what the loans are being used for.”

Dr De la Rey said the third respondent had failed to provide a response to the submissions made by the complainant and to provide proof that these loans were indeed housing loans.

“I can only conclude that the loans in question were not obtained for the purposes for which the Act provides, that is, for a housing loan.

“The attitude of the first and second respondents in declaring that it is not their responsibility to police what members do with the loans obtained or guaranteed by funds is unacceptable.

“Section 19(5B) makes it clear that funds allowing such loans ought to be satisfied that the loans are for housing purposes.

“No questions seems to have been raised about the frequency of the loans and the amounts involved, which ought to have alerted any responsible person that the loans could not have been for housing purposes,” said Dr De la Rey.

Dr De la Rey ruled that the complainant’s pension interest to which she was entitled must, therefore, be enhanced by 50% of the total amount advanced to the member for housing up to the date of divorce, 17 May 2005, i.e. 50% of R 92 179.23 less the capital amount of R5 300 granted on14 August 2006.

 

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