Return to sender?

23 August 2005 Angelo Coppola

The pension funds adjudicator has issued another ruling against Liberty Life, this time in its capacity as an administrator of an umbrella pension fund.

The background

During July 2002, the complainant, a participating employer in the Corporate Selection Retirement Fund (an umbrella fund administered by Liberty Corporate Benefits), had instructed the second respondent (its broker in respect of the umbrella fund) to convey its instructions to Liberty to effect a section 14 merger of the assets of its sub-fund for staff with those of its sub-fund for management fund into a new sub-fund for all its employees.

In order to protect the assets in the staff fund from negative investment performance pending the section 14 process, the employer had conveyed a further instruction to Liberty,via its broker, to switch the assets to more conservative portfolios.

In August 2002, Liberty sent a letter to the complainant indicating that the assets were invested in the new portfolios.

It is only after the section 14 process had been completed, when it received the members’ benefits statements in the new fund, that the employer realized that the assets of the staff fund had not been re-invested according to its instructions.

The damage

There was a combined drop of R145 312-50 in the members’ values from what they were in 2002, which was ascribed to the relatively poor investment performance of the assets in the original portfolios when compared to those in the preferred ones.

Although it conceded that the drop in the members’ values was caused by poor investment performance, LCB denied that it had received the instruction to switch the assets to the preferred portfolios.

The examination

The Adjudicator examined the facts and correspondence between the parties and concluded that the instruction was conveyed to and received by Liberty.

The ruling

Therefore, the Adjudicator made a damages award against Liberty in the amount of R145 312-50, in favour of those members of the staff fund who were affected by the drop in values.

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