PFA Annual report – Substantial increase in pension fund complaints

“The Office of the Pension Funds Adjudicator (OPFA) has contributed immensely in the country’s priorities of social protection by ensuring consumers of pension fund products and services are empowered and that there are accountability mechanisms”, Mr AM Sithole, FSCA Commissioner, commented in the recently released PFA Annual Report. Tito Mboweni, Minister of Finance, stated:“…from the government side, efforts will continue to be made to ensure that all reforms implemented and envisaged are for the benefit of members and provide a platform for the continued growth of the South African retirement funds’ sector in an orderly manner, including supporting growth, employment and the eradication of poverty”.

The mission of the OPFA is to resolve complaints in terms of the Act in order to uphold the integrity of the pension funds industry and to protect the interests of pension fund members. Its vision is to be a respected institution that is the final arbiter in pension fund complaints submitted to it in terms of the Act. How did the OPFA perform against its mission and vision this year?

Unpacking the Annual Report

The report indicates that complaints increased to a record number in the past year. For the 2018/19 year, 11 399 new complaints were received, 16.38% more than the previous year.

As a result of the increase, the OPFA’s turnaround times suffered. Complaints that were submitted out of the prescribed time limits as well as incomplete complaints also impacted on turnaround times.

The following challenges have been persistently prevalent in the past few years:

non-compliance with section 13A of the Pension Funds Act on payment of contributions
section 37C on death benefit lump sum payments
delays in the payments of benefits to beneficiaries
lack of adequate documentation and records management; and
poor quality/delayed responses by funds to the OPFA.

“All these challenges, especially in the current economic conditions, have a direct impact on pension fund members’ welfare, and at times, right to human dignity”, Sithole highlighted.

Summary of complaints

A total of 10 289 complaints were finalised, 16.81% more than the previous year
8 234 complaints were finalised through the case management process
2 055 complaints were finalised at assessment stage by the New Complaints Unit
Of the complaints closed, 5 319 complaints were determined, 20.75% up from last year
1 932 complaints were deemed out of jurisdiction, down 24.85% from last year
2 405 complaints were settled, up 64.5% from last year
633 complaints were closed for other reasons, up 72.5% from last year.

The report further highlights that funds and administrators are not faring well with regards to the Treating Customers Fairly (TCF) outcomes:

73.83% of complaints received relating to TCF outcome 3. Complainants are often not provided with information relating to benefits, etc.; sometimes they are provided with insufficient or incorrect information.
12.04% of complaints relate to TCF outcome 5 where complainants are dissatisfied with the performance of their products. This indicates that complainants are slowly becoming aware of the gap between expected/ promised performance and actual performance.

“Notwithstanding the OPFA’s performance, the unprecedented increase in the number of complaints received is of concern and requires our undivided attention. There has been an increased engagement with funds, fund administrators and the regulator to find ways of collaborating to address existing challenges, sometimes in the forms of early warnings, whilst in some instances the OPFA reports on trends that must be monitored”, Sithole remarked.

Sithole also welcomed the increase in the number of settlements, especially in those matters where there were no outstanding contributions. In some cases funds were able to pay the benefit complained about to the complainant even before the finalisation of the complaint. “This level of initiation and cooperation by funds motivates the OPFA and fuels it to continue engaging the industry at large and tell the good stories”, Sithole stated.

An interesting development is the huge increase in walk-in complaints. We welcome the following comment, as it expresses a need which we have been advocating for many years:

“…this underscores the need for a national footprint for a pension funds complaints’ tribunal. Hence, the OPFA’s unwavering support for a single financial services complaints’ tribunal that will leverage resources across all sectors to ensure a national footprint.”

Click here to download the PFA Annual Report.

In the next few weeks, some of the determinations highlighted in the report will be published.

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