Latest news with #PensionFundsAdjudicator
IOL News
11-05-2025
- Business
- IOL News
Pension funds must comply with PFA information requests, says Muvhango Lukhaimane
The Pension Funds Adjudicator, Muvhango Lukhaimane, asserts that pension funds must provide requested information without beneficiary consent, clarifying the PFA's authority under the Protection of Personal Information Act. A pension fund is obliged to provide the Pension Funds Adjudicator (PFA) with requested information without obtaining consent from beneficiaries, says Muvhango Lukhaimane, the PFA. According to Lukhaimane, funds cannot use the Protection of Personal Information Act (POPIA) as an excuse to withhold information from the PFA. She says that as a public body, as defined in the Act, the PFA has the right to access personal information when performing its duties. This came to light in a recent determination, where Lukhaimane made it clear that the PFA falls within the definition of a tribunal under POPIA and is permitted to collect personal information when necessary for its investigations. The issue arose when a fund initially refused to provide its investigation report to the PFA, citing the need to protect beneficiaries' personal details. Only after being reminded that POPIA allows the PFA to process personal information in the exercise of its powers and duties, did the fund comply with the request. Lukhaimane clarified that, in matters involving death benefits, the PFA's role is to assess whether the board acted rationally, reasonably, and within the law. 'Therefore, a fund cannot hide behind POPIA and bears the onus of demonstrating that it has conducted a proper investigation per section 37C,' she says. The Financial Services Tribunal further reinforced this point, stating that the PFA should insist on investigation reports to confirm that funds have provided sufficient information to justify their allocations. A recent complaint brought before the PFA highlighted the consequences of inadequate investigations. The case involved the Eskom Pension and Provident Fund, which was tasked with allocating a lump sum death benefit of R560,160 following the passing of a pension fund member. The board distributed the benefit among the deceased's customary spouse, life partner, and children, but Lukhaimane was not satisfied that a thorough investigation had been conducted to justify the final distribution. She ruled that the fund had a duty to actively investigate the extent of each beneficiary's financial dependency on the deceased to ensure an equitable allocation. The deceased had nominated his customary spouse to receive 80% of the benefit, with 10% allocated to his life partner and the remainder to two of his children. However, the actual allocation deviated significantly from his wishes: 28% was allocated to his customary spouse 28% to his life partner Two percent each to five major children 30% to a minor child Two percent each to two other minor children The fund justified its decision by arguing that the life partner qualified as the deceased's factual dependant, given that she was 50 years old, unemployed, and had no immediate income prospects. However, Lukhaimane found that the board had failed to give sufficient weight to the beneficiary nomination form, which must be a substantial factor in any decision on death benefits. Lukhaimane stressed that the law recognises three categories of dependants: Legal dependants – Those for whom the deceased had a legal duty of support, such as spouses and children. Factual dependants – Individuals who relied on the deceased for financial support, but for whom there was no legal obligation. Future dependants – Those who could have become financially reliant on the deceased over time. While qualifying as a legal or factual dependant does not automatically entitle someone to a portion of the benefit, the determining factor remains financial dependency. Lukhaimane says dependants must not be left destitute by the death of the deceased, which places an obligation on the funds to actively investigate the financial circumstances of each beneficiary. 'There must be a good reason for a fund not to give effect to a nomination, to justify its decision to deviate from the wishes of the deceased,' she ruled. She also criticised the Eskom Pension and Provident Fund for failing to gather adequate proof of dependency, stating: 'The fund indicated that the complainant and the deceased's major children failed to provide proof of the extent of their financial dependency on the deceased. However, there is a duty on the fund to actively investigate this before making an allocation.' In this case, the board's decision was set aside, reinforcing the importance of transparent and fair decision-making in pension funds. Ultimately, she says pension funds have a duty to ensure that dependants receive what they are entitled to, not through assumption or incomplete investigations, but through rigorous and well-documented financial assessments. PERSONAL FINANCE
IOL News
06-05-2025
- Business
- IOL News
Understanding the exemption of legacy policies in the new pension system
Any policy in respect of a retirement annuity plan entered into before 1 September 2024 - is exempted from the two-component benefit system. Members of pension funds must understand the implications of the new two-component retirement system and how legacy policies are exempted from it, following a recent ruling by the Pension Funds Adjudicator. Any policy in respect of a retirement annuity plan entered into before 1 September 2024 - is exempted from the two-component benefit system. The two-component pension system, implemented on 1 September 2024, splits retirement fund contributions into a "Savings Component" and a "Retirement Component". One-third of contributions goes to the Savings Component, which allows members to withdraw funds before retirement, while the remaining two-thirds go to the Retirement Component, which must be used to purchase a retirement income product. Muvhango Lukhaimane, the Pension Funds Adjudicator, recently ruled on a complaint received from a fund member, who was aggrieved that the South African Retirement Annuity Fund denied him his right to withdraw from his savings component. The complainant's policy commenced on February 1, 1998, with a contractual retirement option date of February 1, 2028. The complainant had a fund credit of R63 134.74 on June 15, 2024. The fund submitted the Income Tax Act (ITA) provides for the exclusion of legacy policies, defined as pre-universal life and universal life policies. It indicated that the complainant's policy fell under this category and was, therefore, excluded from the new two-component retirement system. In compliance with the rules of the Financial Services Conduct Authority, the fund amended its rules to provide that the relevant elements of the two-component system would not apply to legacy retirement annuity policies. The fund submitted that the complainant had an option to transfer his current policy to a two-component compliant retirement annuity to benefit from the new system. The deadline for this transfer was August 1, 2024, and the fund did not receive a transfer request within this period. The fund indicated that the complainant may transfer this contract to a compliant retirement annuity. However, he would need to reinstate the premiums to start accumulating value in the savings component going forward to exercise a savings withdrawal in terms of the two-component retirement system. In her determination, Lukhaimane said it was clear from the fund's submissions that the complainant's policy was exempted from the two-component retirement system in terms of section 1 of the ITA and the fund rules. She said she was satisfied the fund acted lawfully in terms of its rules, the ITA and the policy contract in refusing to pay the complainant the withdrawal he requests. The complaint was dismissed. The Office of the Pension Funds Adjudicator is a statutory body established to resolve disputes in a procedurally fair, economical, and expeditious manner. The adjudicator's office investigates and determines complaints of abuse of power, maladministration, disputes of fact or law and employer dereliction of duty in respect of pension funds. THE POST
IOL News
03-05-2025
- Business
- IOL News
Words on wealth: understanding the challenges of retirement fund benefit disbursement
Explore the challenges surrounding delays in retirement fund benefit disbursement and the recent regulatory changes aimed at streamlining the process. Martin Hesse I believe there should be increased efforts by regulators and the financial services industry to reduce delays by retirement funds and their administrators in disbursing benefits to members or transferring benefits to another fund. The longer a fund sits on money that should be disbursed or transferred, the longer it receives the administration fees on that money. In terms of the Pension Funds Act and the rules of the fund, a retirement fund has to finalise a payout to a member or effect a transfer of benefits 'within a reasonable time' of receiving instruction from the member. If the member has died, the process is more involved, because the fund needs to consider dependants not necessarily named on the beneficiary form when distributing the benefit, which would typically be part retirement savings and part group life insurance payout. In death-benefit cases, the time limit is a year. Individual payouts on resignation are typically done within about three months, but the files of the Pension Funds Adjudicator are full of cases where payouts have taken inordinately longer than that. The introduction of the two-pot system last year and the subsequent deluge of savings-pot withdrawal applications forced many funds to streamline their processes for cash withdrawals. Over time, it will only be savings-pot withdrawals that funds will have to contend with, as withdrawals of vested benefits on resignation will eventually fall away. However, it is when individuals want to voluntarily transfer savings from one fund or one provider to another that unwarranted delays persist, in my view. Transfers are governed by Section 14 of the Pension Funds Act, which requires approval from the Financial Sector Conduct Authority (FSCA), among other things. You would think that transferring savings in a preservation fund or retirement annuity (RA) from one provider to another could be accomplished within a week or two. But no. It can take six months or longer, according to financial advisers I have spoken to. Draft notice So it was with some optimism that I read of the FSCA's recent decision, via a draft notice, to exempt retail RA and preservation fund transfers from the requirements of Section 14(1) of the Act. The notice is open to input from the retirement industry until June 5. The problem with the legislation is that it applies equally to full-scale transfers of the collective assets of one occupational fund to another or the amalgamation of such funds as it does to an individual in a retail RA or preservation fund transferring his or her savings to a similar fund offered by another provider. Section 14(1) ensures that collective transfers or amalgamations are correctly, carried out under the watchful eye of the registrar to ensure that actuarial valuations are correct, the funds are in a sound financial state, and that the rights of all members of the relevant funds regarding their retirement benefits are respected. The FSCA notice states that, pursuant to section 14(9) of the Pension Funds Act (which gives the FSCA the power to exempt a transaction from the provisions of section 14), the FSCA exempts retail fund transactions involving amalgamations or transfers from the requirements of section 14(1) of the Act insofar as the transactions relate to: Transfers between retirement annuity funds; Transfers between preservation funds; or Transfers from a preservation fund to a retirement annuity fund. The notice says the exemption is subject to the following conditions, among others: Retail funds keep proper records of all such transactions; The assets and liabilities are transferred within 180 days of the effective date of transfer; and Any assets transferred must be increased or decreased with the fund return from the effective date until the date of final settlement. Although the notice provides for 180 days for the transfer to be effected, I am hoping that, with fewer hurdles to clear, providers will process transfers more expeditiously. Let's wait and see. Financial advice You are likely to undertake this type of transfer on advice from a financial adviser, in which case it is worthwhile to consider the following points by Momentum in a trustee newsletter: The most important question to ask is: will I be better off in retirement after moving my money? 'The promise of better returns shouldn't be the only consideration – the only thing you should be focusing on is your investment goal and if you're on track to achieve that goal,' Momentum says. You will not be taxed on the transfer, although there could be costs, and in some instances, penalties or cancellation fees, involved. All costs must be disclosed to you by the adviser. No initial financial adviser fee is allowed to be charged on transfer. However, the adviser may charge an ongoing annual advice fee on the investment, depending on your fee agreement. You can turn to the Pension Funds Adjudicator if your retirement fund is taking an unreasonably long time to transfer or pay out your savings. Go to * Hesse is the former editor of Personal Finance. PERSONAL FINANCE
