KEEP UP TO DATE WITH ALL THE IMPORTANT COVID-19 INFORMATIONCOVID-19 RESOURCE PORTAL

FANews
FANews
RELATED CATEGORIES

PFA reports fund to regulator for unlawfully withholding benefits

06 July 2020 Office of the Pension Funds Adjudicator (OPFA)
Muvhango Lukhaimane at Office of the Pension Funds Adjudicator (OPFA)

Muvhango Lukhaimane at Office of the Pension Funds Adjudicator (OPFA)

A pension fund with a history of unlawfully withholding withdrawal benefits has been referred by the Pension Funds Adjudicator to the regulator for investigation into its conduct.

In yet another determination against Oasis Crescent Retirement Fund, Muvhango Lukhaimane said her office had received several complaints against the fund for the unlawful withholding of benefits.

She said despite alerting the fund that withholding of a benefit as a result of a breach of employment contracts was unlawful, the fund had not refrained from such conduct.

“Such wilful non-compliance requires regulatory intervention which would ultimately ensure that members’ interests are not prejudiced by the first respondent’s failure to adhere to the Pension Funds Act and its Rules.

“Further, this Tribunal can avail to the Financial Services Conduct Authority similar complaints against the fund to assist in its investigation process,” Ms Lukhaimane said.

She was commenting in the wake of two determinations she issued against Oasis Crescent Retirement Fund.

In the first case, the complainant was employed by Oasis Group Holdings (Pty) Ltd (third respondent) from 1 October 2014 until 28 September 2018. She said when she resigned, she elected to transfer her withdrawal benefit from Allan Gray to Old Mutual. However, despite several follow ups, Oasis Crescent Retirement Fund (the first respondent) failed to effect the said transfer. She had a fund credit of R39 301.64 as at March 2018.

The complainant said while there was an alleged act of misconduct or dishonesty on her part, the first respondent made no mention of this in its response to her. The first respondent had not laid a basis for withholding her benefit.

The first respondent submitted that it was notified by the third respondent of its intention to institute legal proceedings against the complainant for damages caused to the latter by the complainant’s misconduct and dishonest acts. Thus, the payment of the complainant’s withdrawal benefit had been put on hold.

The third respondent said sufficient grounds existed to facilitate a successful claim for damages against the complainant, arising from the breach of her employment contract. It averred that the claim for R53 729.00 included costs incurred in remedying the complainant’s misconduct for dishonest acts in absconding from work.

Oasis Crescent Retirement Solutions (Pty) Ltd (the second respondent) said Section 37D(1)(b)(ii) of the Pension Funds Act provides for a deduction from a pension benefit to be effected and the amount paid over to an employer in respect of damage caused by a member through theft, dishonesty, fraud or misconduct.

In her determination, Ms Lukhaimane said a registered fund may deduct any amount due by a member to his employer in respect of any damage caused to the employer by reason of any theft, dishonesty, fraud or misconduct by the member, and in respect of which the member has in writing admitted liability to the employer; or judgment has been obtained against the member in any court.

She said before a fund can withhold a benefit at the request of an employer, the member’s misconduct must fall within the ambit of section 37D(1)(b)(ii) of the Act.

However, the complainant’s actions which resulted in the breach of her employment contract in respect of her allegedly absconding from work, did not fall within the misconduct as contemplated in section 37D(1)(b)(ii). Thus, any withholding of her benefit on this ground was unlawful.

“The alleged misconduct by the complainant relates to a breach of a contract of employment and not misconduct that caused damage to an employer as contemplated by section 37D(1)(b)(ii) of the Act,” said Ms Lukhaimane.

“A fund must satisfy itself that wilful and dishonest conduct did occur and that damages have resulted in consequence thereof. Unless there is strict compliance with the requirements for withholding a benefit, the deduction is not allowed,” said Ms Lukhaimane.

Ms Lukhaimane expressed concern about the passive role adopted by the first respondent by failing to request reasons for the withholding of the benefit.

“If the first respondent made this simple request at the onset, it would be in a better position to assess the claim based on the merits thus, preventing the complainant from incurring prejudice.”

Oasis Crescent Retirement Fund was ordered to transfer the complainant’s withdrawal benefit as requested plus late payment interest.

In a second similar complaint, another complainant said he too was in the employ of Oasis Group Holdings (Pty) Ltd (third respondent).

He said when he resigned on 27 June 2016, he was not paid his withdrawal benefit.
He did not sign an admission of liability and no judgement was issued against him. He said he was served with summons which reflected that he owed the company an outstanding amount of R118 945.66 in respect of recruitment costs.

The first respondent submitted that it was notified by the third respondent that summons had been issued against the complainant. Thus, the payment of the complainant’s withdrawal benefit had been put on hold.

The third respondent said the complainant was employed with it from 29 January 2016 for five months. The company had incurred recruitment costs in the amount of R188 100. In terms of clause 28(3) of his employment contract, the cost incurred would be pro-rated by the number of months worked. The pro-rated amount totalled R148 912.50. It contended that it recovered the amount of R29 966.84 and the outstanding amount was R118 945.66.

In her determination, Ms Lukhaimane said the failure of the complainant to comply with his employment contract, in respect of his alleged failure to reimburse expenses incurred by his employer on his behalf, did not fall within the ambit of misconduct as contemplated in section 37D(1)(b)(ii). Thus, any withholding of his benefit on this ground was unlawful.

Oasis Crescent Retirement Fund was ordered to pay the complainant his withdrawal benefit plus late payment interest.

Quick Polls

QUESTION

Which of the following business models do you favour to achieve a sustainable succession outcome in your financial advice practice?

ANSWER

[a] I will find an independent financial planner to buy my business
[b] I will sell a portion of my advice practice to a large corporate
[c] I will join a large firm and give up my independence
[d] I will invite another independent financial planner to join me
[e] I will partner with a large firm
fanews magazine
FAnews November 2020 Get the latest issue of FAnews

This month's headlines

Customer experience in the ‘now’ generation
Is our industry a tainted industry?
How to keep brokers out of the firing line
Getting to grips with contractual versus delictual liability
International trusts and tax consequences
The COVID-19 pandemic and medical schemes
Subscribe now