Pension Funds Adjudicator Muvhango Lukhaimane has slammed retirement funds, and their administrators and consultants, for paying lip service to Treating Customers Fairly (TCF) while giving fund members a raw deal.
“At this rate, implementation of TCF might just as well cease, because 100 percent of the time the customer has not been treated fairly at all,” Lukhaimane said in a statement released in March.
The Financial Services Board introduced TCF to ensure that financial services companies deliver clearly articulated “fairness outcomes” to consumers.
She says the 29.4-percent increase in complaints lodged with her office in 2014/5 compared with the previous year was a reflection of the poor service that many members receive from their funds. This may be not providing members with benefit statements or fund information, delays in requests to transfer to other funds, or inordinate delays in the payment of benefits.
“Most members who complain about the payment of benefits or non-payment of contributions by their employers often have no written communication from the fund or administrator regarding the status of their membership.
“The number of complaints that reach our office when a claim has prescribed also points to lack of knowledge by fund members of their right to enforce claims.”
Lukhaimane says the service-level agreements that funds sign with administrators and consultants often include “responding to complaints” as one of the performance criteria.
“Yet from the complaints received by my office, I am not certain that these agreements are worth the paper they are written on. Neither is it clear how funds monitor the administrator or consultant’s performance,” Lukhaimane says.
She also criticised tracing agents that charge people claiming benefits a fee of R350 and then submit “one-page complaints” with no supporting documents. “These agents are taking money from former members with a promise to trace their unclaimed benefits, yet all they do is submit their name, with no other information, to our office for investigation.”
Lukhaimane says retirement funds are supposed to publicise her office as a free complaint resolution service, but they are not doing this enough. She asked that funds and employers refer members and former members who have claims to benefits directly to her office.
She says her office also continues to be overwhelmed by complaints against retirement funds serving certain industrial sectors, such as the Private Security Sector Provident Fund and the Contract Cleaning National Provident Fund.
“Employees within the private security and contract cleaning industries are marginalised and often paid less-than-satisfactory wages while working extremely long hours under strenuous conditions, only to be robbed of their pension contributions by employers that do not pay over the required contributions, funds that do not monitor employers’ compliance and administrators that often fail to provide information, such as benefit statements, as a matter of course.”
Lukhaimane says it is mainly bank employees who complain to her office that their benefits have been withheld because their employers allege they caused damage or loss through fraud, theft or misconduct.
“Banks and the administrators of their funds are quick to withhold benefits, only to release them when a former employee lodges a complaint with our office.”
She says it is of concern that, while a fund readily agrees to withhold benefits at the instance of the employer, it checks whether it is in compliance with the Pension Funds Act only when it receives a complaint from her office.
In most cases, Lukhaimane says, the fact that there are allegations of misconduct by a member is not sufficient in terms of the Act for benefits to be withheld.
Lukhaimane also criticised the moratorium that prevents local government employees from transferring their benefits from one fund to another. Many members are employed on cost-to-company and fixed-term contracts, but belong to defined-benefit funds, she says. This means that when their contracts expire or if they resign, their benefit is often less than their contributions to the fund, or what they would have received had they belonged to a defined-contribution fund.
Recently, funds such as the Municipal Employees Pension Fund have drastically reduced their resignation benefits, to the detriment of members, because employees are more mobile and the chances of them retiring in the fund are slim. “A defined-benefit fund is clearly not compatible with a cost-to-company remuneration package, nor is it suitable for contract employees or mobile ones,” Lukhaimane says.