The Financial Services Tribunal (FST) recently handed down a decision relating to retirement fund members’ right to share in surpluses after leaving a fund.
The Nampak Group Pension Fund lodged a complaint with the Pension Funds Adjudicator after the Nampak Contributory Provident Fund excluded a share of the risk reserves from the transfer value when 299 members of the provident fund moved to the pension fund.
As the FST put it, “the crux” of the pension fund’s complaint related to the calculation and transfer of the true value of the members’ right to share in the surplus accounts on exit. The fund relied on section 15G(1) of the Pension Funds Act (PFA):
“Notwithstanding anything to the contrary in the rules, members who cease to be members of the fund should receive, as part of their transfer values or benefit payments, a share of any credit balances in the member surplus account, the investment reserve account and such contingency reserve accounts as the board deems appropriate, in the ratio that the liability of the fund in respect of the past service of the members leaving the fund bears to the liability of the fund towards all its members in respect of past service at that date: Provided that the board may use a reasonable alternative if there are sound administrative reasons why such a calculation cannot be performed.”
The sub-section deals with three accounts: the member surplus account, the investment reserve account, and the risk contingency reserve account. The complaint related to the third account.
The boards of trustees of the respective funds concluded an agreement, as envisaged by the rules of the provident fund, and application was made to the then Registrar of Pension Funds, who, in August 2014, certified that the provisions of section 14(1) of the PFA had been complied with.
Adjudicator dismisses the complaint
The Adjudicator analysed the section 14 application and approval and concluded that including a share of the risk reserve account was part of the issues submitted to the FSCA for consideration prior to its approval of the transfer. However, no provision was made for a share of the risk reserve account to be included in the transfer value.
The Adjudicator dismissed the complaint on the basis that she did not have jurisdiction to investigate and determine matters relating to a section 14 transfer in which the FSCA has already issued a section 14(1)(e) certificate. Furthermore, she did not have the authority to set aside a decision of the FSCA.
‘Agterskot’ transfer
In February 2018, the FSCA certified the transfer of an “agterskot” from the provident fund to the pension fund.
Board Notice 208 of 2011 defines an “agterskot” as “any additional benefit that a member becomes entitled to as a result of that member’s current or past membership of a fund”.
It also states that:
- The Registrar will permit an adjustment to the quantum of assets of a previously approved transfer where the valuator or the board determines that, with the benefit of hindsight, a revised quantum of assets should be transferred.
- The application for an “agterskot” adjustment must refer back to one or more previous transfer applications that were approved by the Registrar and must exclusively address the quantum of assets transferred.
The “agterskot” transfer certified by the FSCA did not include any part of the risk reserve fund but concerned an underpayment relating to the investment reserve account.
Pension fund’s (shifting) grounds for reconsideration
The Nampak Group Pension Fund applied to the FST for it to order the Adjudicator to reconsider her decision.
The pension fund submitted that its complaint related to something that post-dated the FSCA’s certification of the section 14 transfer.
Specifically, it concerned the failure of the provident fund’s trustees to make a subsequent decision in respect of the risk reserve account that was required to be made in terms of section 15G(1) when determining the “agterskot” application. Alternatively, the trustees had acted incorrectly and unlawfully in excluding from the “agterskot” any portion of the risk reserve account. That being so, it was unnecessary to set aside the registrar’s certification of the section 14 transfer.
But the FST said this did not “change the answer” provided by the Adjudicator when she dismissed the complaint.
The tribunal said the pension fund, in its augmented grounds for reconsideration, “sought to shift its ground again” by submitting that the FSCA, when issuing the section 14 certificate, did so in the expectation that the board of the provident fund would still consider its duties under section 15G. The board failed to do so. The complaint relating to that issue was distinct from a challenge to the FSCA’s section 14 approval.
The FST’s response was that this was not the complaint submitted to the Adjudicator, and it was inconsistent with the complaint and the grounds for reconsideration.
“The problem is and remains that both section 14 applications were by agreement by the two boards and that a certificate cannot be interpreted with reference to an expectation. It says what it says, and it does not say what it does not say.”
In summary, the tribunal said the Adjudicator cannot “overrule” or change a transfer of assets between funds under section 14, whether directly or indirectly, and the Adjudicator cannot exercise a discretion on behalf of the board of trustees and order it to transfer assets not permitted by a section 14(1) certificate.
The FST dismissed the reconsideration application.
Surplus from 1995 -2010
My Name is Peter Magase. My Father s Name is Phakamile Abram Magase. He died 2011. 2012 we receive papers from Nampak about his provident fund. We send everything but till now nothing .