Two retirement funds have been ordered to repay members due to significant administrative failures in processing benefit payments, as ruled by the Pension Funds Adjudicator.
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Two retirement funds have been ordered to repay members after the Pension Funds Adjudicator found that benefits were paid incorrectly, highlighting serious lapses in administrative controls and oversight.
In separate rulings, Adjudicator Lebogang Mogashoa concluded that the funds failed in their duty to properly verify claims before making payments, in contravention of the Pension Funds Act.
“This includes exercising an oversight function over its administrator and ensuring that processes, especially the payment of benefits, are carried out properly,” Mogashoa says, stressing that funds are legally required to act in the best interests of their members.
In the first case, a former employee of PricewaterhouseCoopers South Africa transferred his retirement savings to the Alexander Forbes Preservation Fund after leaving his job in 2007.
Years later, in November 2024, he requested payment of his benefit, only to be told that it had already been paid in December 2011 by cheque.
The complainant denied ever submitting a withdrawal claim or receiving any payment.
The fund argued that an administrative error, an incorrect member number captured by the employer, resulted in records being swapped, leading to a payment being made in error. It provided a bank statement showing that funds had left its account, but failed to demonstrate where the money was ultimately paid.
Crucially, it could not produce a withdrawal claim form signed by the member.
Mogashoa found this to be a decisive failure.
“Thus, it can be inferred that the complainant never submitted a withdrawal claim form to receive his fund benefit. It stands to reason that if the complainant did not submit a withdrawal claim, electing to receive his fund benefit in the preservation fund, then the fund could not have processed his withdrawal benefit payment without the necessary information from him,” he says.
“Based on the submissions, the Adjudicator finds that the preservation fund did not provide sufficient evidence that the complainant elected to claim his withdrawal benefit and cashed in the cheque allegedly made to him. Thus, the complainant is still entitled to his fund benefit in the preservation fund,” says Mogashoa.
The fund has been ordered to recalculate the member’s benefit, including all investment returns that would have accrued had the money remained invested, and to pay the full amount.
In a separate matter, a former employee of Kempston Motor Group discovered that his withdrawal benefit, just over R17,000, had been paid to a two-year-old child.
The member, who belonged to the Motor Industry Provident Fund, says he never submitted a claim and did not recognise the signatures on the documentation used to process the payment.
The fund maintained that it had received completed claim forms supported by certified documents, including an identity document and bank details. The payment was made into an account held in the name of a minor who shared the complainant’s surname.
However, Mogashoa identified critical inconsistencies in the paperwork. The section of the form requiring signatures from both the member and the account holder had been signed by only one individual, a discrepancy that the fund failed to explain.
“Section 7C(1) of the Act places a positive duty on the fund to act in the best interests of its members. This includes exercising an oversight function over its administrator and ensuring that processes, especially the payment of benefits, are carried out properly and with due care and diligence without adversely affecting members,” he says.
“In terms of section 7D(1) of the Act, the board of the fund is responsible for ensuring, inter alia, that proper control systems are employed by it.”
He found that the fund had failed to implement adequate verification processes and, on a balance of probabilities, had paid the benefit to the wrong person.
The fund was ordered to repay the complainant his full withdrawal benefit, together with investment returns calculated from March 2012 to the date of payment.
Mogashoa also rejected the fund’s attempt to make repayment conditional on the outcome of a criminal investigation into possible fraud.
He noted that the standards of proof in criminal proceedings differ from those applied in adjudication processes, and that the member’s entitlement to his benefit could not be delayed on that basis.
PERSONAL FINANCE