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PFA Ruling concerning liability of a fund and administrators of the fund for failure to timeously transfer a benefit

29 January 2008 Pension Fund Adjudicator

The Pension Funds Adjudicator has issued a landmark ruling in the matter of C.M.BASSSON vs SOUTH AFRICAN RETIREMENT ANNUITY FUND (first respondent ), OLD MUTUAL LIFE ASSURANCE COMPANY (SA) LIMITED (second respondent) AND INVESTEC INVESTMENT LINK RETIREMENT ANNUITY FUND (third respondent) regarding the liability of the fund and the administrators of the Fund for failure to transfer a retirement benefit at the instance of the member at a time when such benefit had matured with the resultant effect of loss of investment performance in the complainant members retirement benefit.

Facts

The facts of the matter are briefly the following:

Mr Basson the complainant was a member of the first respondent namely Old Mutual Assurance Company (SA) Limited and elected 1 March 2004 as his retirement date at the commencement of his membership. On reaching his retirement date of 01 March 2004 , the complainant wrote a letter to the first respondent informing it that he wanted to transfer his retirement benefit to another retirement annuity fund the third respondent namely Investec investment link retirement annuity fund. The complainant specifically indicated that he wished to merge his different retirement policies into one account with which he could purchase one retirement annuity in another retirement annuity fund, which is his existing retirement fund he had with the third respondent. The complainant further argues that his retirement annuity in the third respondent to which his retirement benefit should have been transferred grew by 27.6% in value while the retirement policy in the first respondent remained static. Therefore as a consequence he alleges that he suffered a loss in the investment performance of his retirement benefit in the first respondent because it would have achieved greater growth if it were transferred to the third respondent as he requested.

 

The Fund advised the complainant that its rules did not allow for section 14 transfers out of the fund (as at 1 March 2004). The Administrator in their response however disputes the stance of the Fund and argues that the complainant was entitled to transfer from the Fund as at date of request as this was provided for in terms of its rules. The Administrator further asserts that on realizing its omission it then made the complainant a compensatory award for the loss that was suffered as a consequence of their conduct. The complainant however rejected the administrators offer as being too low (details paragraph 10 and 13 of determination).

 

The complainant then approached the office of the Pension Fund Adjudicator requesting the Adjudicator seeking the following relief:

· Firstly to compel the first respondent to compensate him for the loss he suffered due to its failure to allow him to transfer his funds to the third respondent.

· And secondly to further compel first respondent to effect a transfer of his retirement benefit to the third respondent together with the amount his retirement policy would have achieved if a transfer was granted when he requested it.

Determination and reasons therefor

 

The Adjudicator in addressing the above two issues held the following:

· Firstly that the Fund was not justified in refusing to allow the complainants request to transfer to another fund as this was permissible in terms of the Fund rules as at date of election in March 2004, a factor that was confirmed by the Administrator. Therefore the Fund and the administrator were ordered to compensate the complainant for the loss he suffered as a result of their failure to transfer his retirement benefit to the third respondent with effect from 1 March 2004, when they ought to have allowed such transfer.

· Secondly on the issue of the amount of the compensation it was held that the value of the complainants loss was R12 755.69 which consists of his retirement value plus investment growth in his investment portfolio in the third respondent if the Fund and the Administrator had allowed him to transfer his benefit on 1 March 2004 to the third respondent.

· The relief that was granted is that

o the Fund and the Administrator are jointly and severally liable and are ordered to pay the complainant the amount of R12 755.69 within 14 days of this determination.

o The first and the second respondents are further ordered to pay interest on the sum of R12 755.69 at the rate of 15.5% per annum, from 1 March 2004 until the date of payment.

Click here to read the full determination (PDF file 43kb)

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