Pension fund turns tables on complainant

Jonathan Faurie, FAnews Journalist

Most of the determinations that we receive involve members of the public taking a pension fund to the Pension Funds Adjudicator (PFA) alleging that they have been treated unfairly. In most of the cases, the PFA rules in favour of the public.

There is an old English proverb which says: what is good for the goose is good for the gander. The public will be quick to hide behind legislation such as Treating Customers Fairly (TCF) believing that they have now been put in the pound seats, but have they taken into consideration that TCF can possibly be used by insurers against them?

One for the books

The PFA must have been rubbing their eyes when the Consolidated Benefit Pension Fund (the complainant) lodged a complaint with the PFA against Amazingwe Holdings (the respondent) alleging that the respondent was not complying with the rules set out by the fund.

The nature of the complaint was that although the respondent was a participating employer at Consolidated Benefit Pension Fund, and was tasked with making provident fund deductions from its employees’ salaries and effect payment of such contributions to the complainant, it had failed to do so.

The complainant submitted that the respondent was in arrears with the payment of contributions for the period of August 2013, October 2013, November 2013, December 2013 and January 2014 and had not submitted contribution schedules.

This is really taking TCF to a new level by showing its concern for the fund members.

Dancing around the issue

The respondent did not dispute that it was in arrears with respect to the payment of contributions.

The respondent explained that the strike in the mining sector in the North-West Province had negatively affected its business. The respondent further stated that it was owed some money by the Provincial Department of Education and due to system failures, payments had been delayed. It anticipated that the situation would have been rectified by the 15^th of May 2014.

The respondent paid some arrear contributions and undertook to bring the outstanding contributions up to date as soon as it received money owed by external parties.

The defence put forward by the respondent is valid, provided that the respondent’s workers were involved in the strike and that the respondent adopted a no work no pay policy. If the workers were not being paid, the respondent would not be able to make any pension deductions. However, if the respondent was making these deductions, why were the contributions not being handed over to the complainant?

Casting a sceptical eye

In its determination, the PFA said the respondent had a duty placed on it by the provisions of sections of the Pension Funds Act and the rules of the complainant to pay contributions and submit schedules to the complainant.

“The Act states that such contributions must be paid directly into the fund’s account not later than seven days after the end of that month for which such contributions are payable. Rule five of the complainant’s rules stipulates that each participating employer shall contribute to the fund for retirement benefits for its members in its employ in accordance with the categories and contribution rates set out in the special rules,” says Muvhango Lukhaimane, the PFA.

She added that the respondent did not dispute that it was in arrears with respect to the payment of contributions to the complainant and had submitted reasons for such non-payment.

“While this Tribunal takes note of the respondent’s submissions, its failure to pay contributions, however, will have a devastating effect on its employees who are members of the complainant and their beneficiaries. Therefore, the respondent is ordered to pay all of the outstanding contributions in light of its undertaking that it is expecting payments from its debtors,” says Lukhaimane.

If the respondent’s workers were on strike and there Were no salaries to make relevant deductions from, the PFA would have taken this into account and would have had sympathy with it during the respondent’s defence. One can only assume that the respondent was taking a chance with its defence.

The respondent was ordered to submit all outstanding contribution schedules to the complainant in order to facilitate the computation of arrear contributions and to pay the outstanding arrear contributions together with late payment interest.

A good acid test

The purpose of legislation is to protect as many parties as possible. This includes parties that could possibly sit on both sides of the fence. While TCF will offer increased protection to the public, there have been concerns that the public will simply hide behind it.

“This Tribunal cannot condone a situation where contributions go unpaid for extended periods of time, and in that respect, the actions of the complainant to protect its members and ensure that its rules are adhered to, must be commended,” said Lukhaimane.

There is no doubt that with TCF, the focus will be on companies to make sure that they are treating their customers with due care and diligence. However, we cannot expect legislation such as TCF to create a Wild West industry where every second person can take a company to the Ombud and expect a favourable outcome. If the public is given increased protection, the same courtesy needs to be offered to the industry. After all, we do live in a country where you are innocent until proven guilty.

Editor’s Thoughts:|
Product providers do not mind all of the regulation that the Financial Services Board (FSB) wants to impose provided that a balanced industry is created. This determination is a good example of how TCF can be used to benefit the policyholder as well as the product provider. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.