Your retirement fund has a duty to you, as a member, to protect your retirement savings and to act in your best interests and those of your beneficiaries. Often, fund trustees must weigh up the interests of an individual against those of the members as a group. But sometimes they simply fail to uphold the standard of duty required, which can be as basic as helping a potential beneficiary with a claim.
Trustees’ duties are clearly spelled out in the Pension Funds Act: “The board shall take all reasonable steps to ensure that the interests of members… are protected at all times ... [The trustees must] act with due care, diligence and good faith; avoid conflicts of interest; act with impartiality in respect of all members and beneficiaries; act independently; [and they] have a fiduciary duty to members and beneficiaries in respect of accrued benefits or any amount accrued to provide a benefit, as well as a fiduciary duty to the fund, to ensure that the fund is financially sound and is responsibly managed and governed ...”
Trustees must ensure that “adequate and appropriate information is communicated to the members and beneficiaries of the fund, informing them of their rights, benefits and duties in terms of the rules of the fund”.
The Pension Funds Adjudicator, Muvhango Lukhaimane, has her hands full dealing with complaints from members and beneficiaries and, in many cases, she finds that funds and their administrators have fallen short of what is required by the law.
To be fair, the Act is onerous on trustees, whose job is far from easy, especially when dealing with death benefits. These must be distributed equitably among beneficiaries, with a deceased member’s dependants taking priority over nominated beneficiaries. This can be a nightmare when claimants start popping out of the woodwork, particularly if it is after the benefits have been distributed. If the claimants have valid claims in these cases, a fund is often unable, practically, to “redistribute” a benefit, and may be obliged to make an additional payment, which directly affects the interests of existing members.
A recent case, in which a claimant disputed a fund’s distribution of his father’s death benefit 13 years after the distribution was made, exemplifies the difficulties. The benefit, almost a quarter of a million rands, had been distributed after Mr M’s father’s death in December 2003, when Mr M was just six years old, and the distribution did not include him or his mother. The deceased had been an employee of the Ekurhuleni Metropolitan Municipality and a member of the Municipal Gratuity Fund (MGF) administered by Sanlam.
Mr M said it was only after he turned 18 that he attained “the legal capacity to challenge the decision” of the fund’s board back in 2003.
The MGF responded with a technical defence: the debt had prescribed. In other words, Mr M had waited too long to claim, and, according to the laws governing the prescription of debt, the claim was time-barred. However, it said, if this defence was dismissed by the adjudicator, and if there was a prima facie case that the complainant had been prejudiced, the board and the fund administrator would consider an ex gratia payment. According to the fund, the debt prescribed on November 10, 2016. Mr M filed his complaint just 12 days later, on November 22.
For reasons too technical to detail here, the adjudicator dismissed the MGF’s argument that the debt had prescribed. She was also particularly disapproving of how the MGF had dealt with Mr M’s claim. According to her determination: “[Mr M] stated that he is an indigent person who, together with his mother, had made several attempts to enquire about the distribution of the death benefit. However, [the MGF] sent them from pillar to post. [Mr M] avers that he went to the extent of approaching the Law Society, which led to him receiving legal assistance and lodging this complaint.
“The inescapable conclusion this tribunal arrives at is that had [the MGF] acted fairly and provided [Mr M] and his mother with adequate information with respect to the distribution of the death benefit and explained to them that if they were unhappy with the distribution they had recourse by approaching this tribunal, the complaint would not have been time-barred against [Mr M].”
Lukhaimane ordered the 2003 decision of the fund regarding the distribution of Mr M’s father’s death benefit to be set aside, and the fund’s trustees to re-evaluate the matter, taking into consideration the issues raised in her determination.
PRESCRIPTION AS A DEFENCE
In 2015, the Pension Funds Adjudicator, Muvhango Lukhaimane, made a plea to pension funds not to use the prescription of debt as a defence in cases where beneficiaries were claiming against funds, particularly where the benefits were unclaimed.
A feature of the Prescription Act is that it takes effect only if it is successfully invoked as a defence for not paying a debt. In other words, a debt does not prescribe automatically.
Lukhaimane said her office had no jurisdiction over cases where a fund had legitimately cited prescription as a reason not to pay a benefit, and refers such cases to the FSB. But she said she had asked funds not to use this defence.
“In certain instances, pension fund consultants advise funds to respond on the technicality that the claim has prescribed, even though they are holding a benefit for a member or dependant. I raised this issue with the industry and have held meetings with administrators that have been advising funds to respond like this. Given the huge problem with unclaimed benefits, we encourage funds not to raise the technicality of prescription, so that we can do our bit to assist,” Lukhaimane said.