Pension Funds Adjudicator Vuyani Ngalwana’s proposal to have hidden pension charges declared illegal can be achieved with registrar’s recommendation and minister’s consent, the Mail & Guardian has established.
“The registrar and the minister have the power under the provisions [of Section 32A of the Pension Funds Act] to declare such practices undesirable,” Ngalwana’s deputy, Naleen Jeram, told the M&G.
This formed part of the ruling in which Ngalwana recommended that the Registrar of Pension Funds, Dube Tshidi, and Finance Minister Trevor Manuel offer protection for consumers by declaring such acts “irregular or undesirable practices”.
According to the provisions of the Act, once a practice has been declared undesirable, the registrar can direct any fund that had been practising such actions to “rectify” anything that was caused by such an action.
The ruling involved an annuity fund administered by Metropolitan Life in which dependants of a deceased, Sarah Radebe, were not granted death benefits despite her contributions, of almost two years, to the fund.
When she stopped paying, almost all her contributions were debited as expenses, leaving her policy with R238,35, which according to Metropolitan was “trivial to administer and the policy was lapsed”.
Ngalwana said it was not the first time the adjudicator had to issue a ruling against a retirement annuity fund and the practice appeared to be standard among companies underwriting such funds.
Life Offices Association executive director Gerhard Joubert said the organisation was studying the ruling.
“We are not allowed by the Income Tax Act to pay out the money before a member’s retirement even if it’s a small amount,” said Joubert.
He said a small amount would in any case be depleted by administration charges and that the cost and charges were disclosed in policy documents of various companies, but the adjudicator wanted them set in the fund rules.