At a Pension Lawyers Association breakfast earlier this year, acting Pension Funds Adjudicator (PFA), Elmarie de la Rey stressed the need for pension funds to have very clear and simple communication with fund members so that the members better understand how the retirement fund works and what their choices are. This was borne out by two complaints her office dealt with recently.
1. In the first case, Somara Mashimbye complained to De la Rey’s office in August 2009 about the amount he received when his retirement benefit was paid out by the Municipal Gratuity Fund.
Mashimbye was employed by Johannesburg City Parks from 1966 until he retired in September 2007, when he was paid out a retirement benefit of R440 358. He told the PFA he was due a second benefit payment of R3.6 billion as reflected in the fund’s financial statements, provided to him by the Municipal Gratuity Fund.
The fund administrator, Coris Capital, told the PFA that the amount of R3.6 billion was the total value of the Municipal Gratuity Fund’s assets. Coris Capital told De la Rey that the remaining fund members would not have any retirement benefits if this amount was paid over to Mashimbye.
Coris Capital was also able to show the PFA a full fund build-up for Mashimbye, showing how his retirement benefit had accumulated from the time he had joined the fund until his retirement and was able to prove that his benefit of R440 358 had been calculated correctly. De la Rey dismissed the complaint.
2. In the second case, the complainant did not appear to be aware of the difference between his retirement benefits and the risk benefits he was getting as a member of a retirement fund. In February 2009, Thokwe Mogupudi complained to the office of the PFA that the Old Mutual Superfund Pension Fund had failed to pay his death benefit when he left the fund.
Mogupudi was employed by Midbank Bus Services from November 2000 until February 2008. He was a member of the Old Mutual Superfund Pension Fund from March 2001 to February 2008. When he left Midbank Bus Services, the fund paid him out a withdrawal benefit of R25 428. However, Mogupudi complained that he was also entitled at the time to receive his death benefit.
The Old Mutual Superfund Pension Fund told De la Rey that the death benefit was not part of the withdrawal benefit but was group life assurance cover. The death benefit would have been payable to Mogupudi’s dependants if he had died while working for Midbank Bus Services, as a fund member. Old Mutual confirmed that Mogupudi was not entitled to the death benefit because he is still alive and it would have been payable only on his death.
De la Rey says trustees and administrators need to take care when issuing benefit statements to members, ensuring that the language used is clear and straightforward. “For example, instead of a heading stating Death Benefits, it would be clearer to say: ‘If you die while still working for your employer, your dependants will be paid R…..’.” She dismissed the complaint.
- This article was first published in Personal Finance newspaper on 16 April 2011.