Challenging year for the PFA

As we wind down to the end of the year, we get to see quite a few annual reports which highlight the performance of their specific sector for the year. This year proved to be a challenging year for the Office of the Pension Funds Adjudicator (PFA) as it had to deal with a large number of determinations as employers are increasingly trying to test the limits of the law.

While there is marked improvement in many areas, there are still many pieces that the PFA wants to fit into the puzzle in order to achieve the bigger picture of an improved industry.

Bring on the cases

Before we discuss the performance of the pension funds industry in 2013/14, it is worthwhile to note that it reached a significant milestone of clearing its backlog. This means that all new cases which come into the PFA can receive individual attention and can be resolved within a reasonable timeframe.

However, the PFA does face growing obstacles. Muvhango Lukhaimane, PFA, reports that during the year, the PFA received 5 405 new complaints, which is a 4.7% increase in complaints received during 2012/13. “Of the complaints received, 6 643 complaints were resolved, which is a decrease of 22.3% on the previous period. This decrease is understandable owing to the number of outstanding complaints which were finalised during the 2012/13 period.

There has also been an improved relationship between the public and their funds. Lukhaimane said that the Office of the PFA had to insist that it implements Section 30A of the Pension Funds Act which states that complainants need to approach their funds before they approach the PFA. If this was not adhered to, there would have been unnecessary delays in resolving complaints which would have resulted in prejudice to complaints.

The private security sector is still proving to be a challenging sector for the PFA as the Private Security Sector Provident Fund (PSSPF) continues to be a thorn in the PFA’s side with the most complaints. However, complaints from this fund decreased since the last reporting period.

Resolutions in sight

During the current reporting period, 3 651 determinations were issued by the PFA. This was a decrease of 13.2% on the number of determinations issued during the 2012/13 reporting period. “It is heartening to note that the office has turned the corner and has issued a negligible number of default determinations where a fund has failed to lodge a response,” says Lukhaimane.

She adds that a total of 14 appeals were lodged against determinations. This was a 40% reduction from the previous reporting period. The PFA continues to function without an enforcement mandate, and stakeholder management initiatives have been implemented to achieve compliance with determinations.

This is a matter which has always concerned the industry. Once a determination is handed down, there are always questions on how the complainants will receive their money.

Lukhaimane says that determinations are filed with the relevant courts and become court orders. The complainants then have to wait for the law to take its course in order for them to get restitution. This may prove challenging as legal processes are long, drawn out, and cost money. “We are engaging with a number of courts in order to find out if there is any way in which we can speed up legal proceedings. There are also cases where funds initiate processes which unnecessarily stall the cases. We are engaging with legal centres and Legal Aid who often offer to help the complainants fight the case. This results in a lot more funds coming to us with settlement offers before cases are concluded or reach an advanced stage,” says Lukhaimane.

Errant participants

One of the areas of great concern for the PFA is a number of industry sector funds (often representing vulnerable workers) who are not compliant with sections of the Pension Funds Act. The majority of complaints would have been identified much earlier had the funds been fulfilling one of their basic tasks of providing benefit statements on an annual basis to fund members. By fulfilling this task, members would be timeously informed of any non-compliance with the Act.

“The number of instances where death benefit allocations by boards of management have been set aside owing to misdirecting themselves by considering irrelevant information, thus confirming their discretion, is also of concern,” says Lukhaimane.

She adds that the time it takes to allocate funds is also concerning. “The overreliance on uncorroborated affidavits to establish legal relationships and factual dependency is of great concern and where challenged, most allocations have been set aside due to the lack of proper investigation. Funds and administrators are not to lose sight of the legislature’s intention to promulgate this,” says Lukhaimane.

Editor’s Thoughts:
While clearing the backlog is a major achievement for the PFA, the pension funds industry is far from being free of companies who want to test the letter of the law. Now that the PFA can concentrate on the complaints that come into it without worrying about the backlog, it must engage with the Financial Services Board (FSB) and the Courts to make sure that enforcement takes place. If there is visible enforcement, perhaps employers and funds will think twice before breaking the law. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.