The Pension Fund Adjudicator published her annual report last week. It contains some very positive indicators, as well as concerns for the industry, and the public.
In the message from the Minister of Finance, Pravin Gordhan, quotes the following statistics which point at major improvements in the handling of complaints:
The Office of the Pension Fund Adjudicator (OPFA) came into being on 1 January 1998 to dispose of complaints lodged under the Pension Funds Act, 24 of 1956 in a procedurally fair, economical and expeditious manner. While the organisation has established itself as a critical component of the financial services industry, it has nonetheless experienced several challenges, chief amongst which has been the backlog of complaints, which can be traced as far back as 2007. I am pleased to note, however, that such backlogs have been addressed and significant progress made. Indeed, the OPFA has succeeded through the implementation of a new case management system in clearing the backlog of complaints received as far back as 2007. The resolution of complaints continues to see a marked improvement. In comparison to the 2011-2012 financial year, the New Complaints Unit resolved 22% more complaints while the Conciliation Unit and the Adjudication Unit finalised 52% and 93% more complaints respectively. A total of 8127 complaints have been dealt with in the current financial year, representing a 65% increase from the previous year.
Abel Sithole, Chairman of the Financial Services Board, points out that the new case management system addressed an inherent problem in the OPFA:
The overhauling of the complaints management system contributed in no small measure to the reduction of time-lines but also ensured that line managers assessed correspondence at the earliest possible time by eliminating the churning of complaints between the three departments, viz. the New Complaints Unit, Conciliation and Adjudication.
Another concern pointed out by Mr Sithole was …the lack of co-operation and trust between pension fund members and beneficiaries on the one hand, and administrators, pension funds and boards of trustees on the other hand. In the reporting period, 4 127 determinations were handed down, of which, in 2 399 cases, relief was granted to the complainant. This clearly points to the need for fund trustees and administrators to work harder at communicating and educating members and beneficiaries about fund rules and benefits.
Both Gordhan and Sithole expressed concern about the predominance of complaints about the Private Security Sector Provident Fund (PSSPF). These included arrear contributions, none or late payment of withdrawal benefits, the payment of death benefits and provision of benefit statements in. These made up almost 60% of the total complaints received. Whilst the number of complaints against the PSSPF decreased to a third by 31 March 2013, the report points out that this situation is untenable as the PSSPF’s non-compliance with various aspects of the Pension Funds Act is …overly engaging the OPFA, much to the prejudice of the pension funds industry as a whole, its members who pay levies and beneficiaries.
It appears that most of the credit for the turnaround must go to Ms Muvhango Lukhaimane, the recently promoted Pension Funds Adjudicator. In her report, she also noted some challenges:
The OPFA was unable to enforce section 30A of the Act, requiring that a complainant should first attempt to lodge a written complaint with the fund and give the fund 30 days to respond in writing. This was largely due to the fact that most funds that were subject to complaints did not have their records in order, more especially with regard to membership and contribution details. This situation continues to prevail and hampers the ability of the OPFA to discharge its mandate. It, therefore, becomes difficult to insist that complainants who are lodging complaints against a particular fund, where the OPFA is already aware of an existing record-keeping and compliance problem, to first approach the fund for a written response as this would not be given.
It is also not ideal for the OPFA to be issuing default determinations; ie orders against respondents who do not bother to lodge a response to a complaint despite numerous requests to do so. It is a statutory requirement that parties need to respond when requested to do so by the OPFA and, therefore, non-compliance is a contravention of the Act. However, we cannot grant parties, especially funds, employers and administrators, countless opportunities to respond as this defeats the purpose of having a tribunal of this nature.
A further issue that needs to be addressed, appears to be that orders by the OPFA are not always complied with. This renders such an order ineffective, and Ms Lukhaimane expressed the need for this to be addressed.
In his contribution, Mr Gordhan referred to his 2013 Budget Speech in which he announced a number of retirement reforms which seek to improve the functioning of the retirement system and to promote long-term household saving.
Included in these reforms is improved and strengthened governance over retirement funds. The shift towards a “twin peaks” system for financial regulation is a further attempt to enhance the regulatory framework and improve the financial services sector. The Office of the Pension Funds Adjudicator (OPFA) plays a critical role in the establishment of a model which will ensure that our financial system continues to feature amongst the best regulated and supervised in the world, with an enhanced focus on market conduct and consumer protection.
One element which is critical in achieving this will be to act decisively against repeat offenders. If you do address the root cause of complaints you will forever be chasing your own tail.
Please click here to download a copy of the annual report, which contains some very educational case studies.