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Another provident fund battle heats up

15 June 2007 Gareth Strokes

The Johannesburg High court is preparing to hear a case between the Chemical, Energy, Paper, Printing, Wood and Allied Workers' Union (Ceppwawu) and trustees of the union's provident fund. It appears the legal action is based on a disagreement on the level of control the union should exercise over the trustees in managing nearly R1 billion in the PPWAWU National Provident Fund.

When a union provident fund is established, it is common practice for union members to be elected as trustees to the fund. This was the case at Ceppwawu. However, recent developments indicate dissension in the ranks, with the union unhappy about various decisions the trustees have taken.
 
Trade union versus provident fund

A report in Fin24 alleges that Ceppwawu expelled the provident fund's principal officer and five of its elected trustees from the union. The expulsion followed various incidents which suggested their unwillingness to report back to the union on trustee decisions. The trustees had, for instance, voted to amend the rules of the fund without notifying the union of their intention, or of the outcome of the vote.

The trustees felt that the union's demands for greater control impeded on the "fiduciary duties of the trustees, the board's obligation and entitlement to amend rules of the fund and the exercise of independent judgment by the trustees."

Their expulsion was confirmed by Albert Shabalala, principal officer of the fund. Said Shabalala, "the union wants us to implement what is against the law. We apply our minds in the best interest of the members."  The ongoing disagreement led to a court motion being brought on behalf of the trustees to stamp out the excessive interference by the union in the affairs of the members' provident fund.

Ceppwawu general secretary, Welile Nolingo was not available for comment. However, the answering affidavit lodged at the Johannesburg High court denies union interference, and claims instead: "there is nothing wrong, improper or unlawful in requiring trustees who are union members and who are appointed by the union to account to the union for their conduct as trustees of the fund."

Beneficiaries will be the long-term losers

The beneficiaries of the PPWAWU National Provident Fund will be the real losers in this battle. Legal costs are likely to run into thousands of rand as the adversaries take the case through all possible avenues of appeal.

And if this were not enough, the PPWAWU National Provident Fund has already been placed with a number of different pension fund administrators. The fund was established when a number of unions merged to form Ceppwawu and has already been managed by no less than four pension fund administrators. It was initially placed with Alexander Forbes before being transferred to NBC and then to Southern Negotiated Retirement Funds Services. The fund is now with Lekana Employee Benefit Solutions.

It will be interesting to determine exactly how much value was lost in each of these moves to administration and asset re-allocation fees.

Trustee independence is critical

Quoted in the Fin24 report, Actuarial consultant Donald Molema was quick to point out that once a provident fund is established, it achieves status as a legal entity in its own right, free of influence from the union.

"The pension fund is run by a board of trustees which is elected by members. In the case of industry funds, trustees are often shop-stewards or union officials, simultaneously representing workers as fund members and members of the trade union.
 
"From time to time, the question of the independence of trustees from the union arises. Whatever its meaning, independence does not seem to derive from law, at least not in the strictest sense of the word independence."

Editor's thoughts:
Managing retirement savings is a serious business. While we believe that retirement fund administrators and trustees would focus on ensuring inflation beating return, all too often, management issues at these funds become political, with factions within an organisation attempting to gain 'personal' control of 'their' funds. How important is the concept of trustee independence? Send your comments to
gareth@fanews.co.za


 

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