Just because your pension fund contribution is deducted regularly from your salary, do not assume that it is paid over to your pension fund.
This warning comes from Tim Cumming, MD of Old Mutual Corporate, in the wake of a recent ruling by the Pension Funds Adjudicator (PFA), Vuyani Ngalwana, against an employer who failed to transfer an employees monthly contributions to his pension fund.
Cumming said the PFA regarded this in such a serious light that he has sent a copy of his determination to the Minister of Finance and the Financial Services Board with a request that the penalties be increased. The PFA also said in his ruling the non-payment of contributions was a "punishable offence" and he has asked the National Director of Public Prosecutions to take action against the company.
"Members should take responsibility for all aspects of their financial well being which include checking up on their pension fund contributions. They must ensure that their contributions to a pension fund are not only deducted, but that it is paid over regularly to the pension fund as it should be", says Cumming.
"In the light of what has happened, members of pension funds should be far more vigilant. It is the same with checking your bank statements regularly," he says.
Cumming said that while the majority of trustees of pension funds took their role of protecting the interests of their members very seriously, there are undoubtedly trustees who are not on top of all the issues as they are required to be. "In the interest of good governance, such trustees need to be more meticulous in the execution of their duties".
Cumming says by law members of pension funds should at least receive an annual statement from their pension fund showing the contributions made to the fund. Ideally they should be receiving quarterly statements from their pension fund or pension fund administrator.
Cumming also emphasises the importance of employing the services of a reliable and robust pension fund administrator. He says good fund administrators typically have the following characteristics in common:
They are transparent in their dealings with members; they have a single point of ontact; they have accurate member records that are maintained for members to access at their convenience, data integrity is maintained; and benefit claims are processed accurately and efficiently.
Cumming says that where employees belong to an umbrella retirement fund, members can maintain their involvement in their fund by setting up member committees to represent them at participating employer level. This can be a good mechanism to facilitate better communication with members. Member elected trustees must be vigilant and report to members regularly.
"Members ought to take a far more serious interest in the workings of their retirement fund and should question their trustees and administrator if they are in doubt about any issue," he says.