A ”generally apathetic attitude” characterised the administration of South Africa’s pension funds, according to the Pension Funds Adjudicator.
”That things are no better in other countries, like England, is no reason for the generally apathetic attitude that appears to have taken root here,” the 2005 annual report of the Office of the Pension Funds Adjudicator, released on Friday, said.
There was a climate of ”generally wanton disregard” for members’ rights in the industry, read the report.
Adjudicator Vuyani Ngalwana wrote that the problem was ”particularly acute” in retirement-annuity funds and umbrella funds.
Here the relationship between fund trustees, on the one hand, and the administering or underwriting life insurer, on the other could best be described as incestuous.
”I say so because trustees — including the principal officer — tend to be employees of the insurance company administering the business of the fund and performing asset-management duties on behalf of the fund.”
He said this had to stop as it inevitably led, as numerous cases had demonstrated, to conflict of interest and maladministration of ”staggering proportions”.
Of the complaints disposed of by the office between April 2004 and March 2005, 1 137 out of 1 680 (67%) dealt with benefit amounts.
Complaints relating to ”paltry investment returns” were one of the negative effects of the rush away from defined benefit funds to defined contribution funds, he wrote.
”Management of the assets of the fund is an aspect of fund administration of which trustees generally wash their hands and rely blindly on the supposed expertise of asset managers -‒ typically life-insurance companies,” Ngalwana wrote.
Given that the benchmark used by these asset managers is generally to ensure they do not perform worse than the average of their peers, it is not surprising that the vast majority of complaints related to dissatisfaction with the amount of the benefit paid.
”It is no wonder that most South Africans retire with inadequate retirement savings.”
He said it is no surprise that in a climate where asset managers are paid an asset-management fee whether they perform or not, it comes as no surprise that active management of retirement-fund money is the last thing on their minds.
”This, in our view, can be remedied by introducing remunerated retirement-fund trustees — both executive and non-executive as in companies — part of whose remuneration must be based on their performance …”
One factor hampering the effectiveness of the office is the existence of at least 13 forums to which retirement fund-related disputes can be referred. These include the high and magistrate’s courts, the Commission for Conciliation, Mediation and Arbitration and the Labour Court, and had resulted in parties engaging in ”forum-shopping”.
The office suggested that it should decide whether a retirement aspect in a dispute is so inconsequential as not to warrant the office’s attention.
”In this way, there will be no confusion as regards where jurisdiction lies in respect of retirement-related issues, however seemingly inconsequential.”
According to the report, the number of new complaints received has ”increased significantly” since 2003. Between 2001 and 2003, the complaint rate was constant at approximately 120 per month. In the last quarter of 2004 new complaints flooded in at an average of 300 cases per month.
More than 2 000 new complaints were lodged in the 2005 period, a substantial increase when compared with previous years.
Of concern is that a high number of cases, 753, had been abandoned.
”It indicates to us that retirement-fund trustees or administrators of these funds generally do not communicate effectively with fund members.”
Many of these cases were abandoned as soon as the office had sought and obtained clarity from the fund or administrator on the issue that the complainant had unsuccessfully raised with the fund and/or administrator.
”It is sad that members and their dependants should be ignored in this fashion.”
Of the 2 580 cases closed in the 2005 period, 96 were resolved by formal determinations, 1 308 were informal determinations (by letter), 276 were settlements and 147 were out of the offices’ jurisdiction. A total of 753 were abandoned, mainly after Ngalwana’s office intervened. — Sapa