Pension Fund complaints surge amid trust and accountability concerns

Complaints about pensions increased again this year and the Pension Funds Adjudicator believes it is partly due to a lack of accountability on the side of the funds or a trust deficit between members and funds.

It could also be due to the fact that more pension fund members are aware of the existence of her office, Muvhango Lukhaimane, the adjudicator, says in the annual report for her office released this week.

Lukhaimane attributes the increase to more awareness of her office and its function and the level of trust from complainants that the office will fulfil its mandate, as well as that funds are simply not doing enough to resolve disputes internally.

According to the report 659 complaints were closed as abandoned, withdrawn or duplicates, while 7 809 complaints were investigated and finalised as determinations, out of jurisdiction or settlements, a decrease of 7% compared to the previous year.

“The decrease can be attributed to certain retirement funds being habitually uncooperative by failing to provide proper responses to complaints or funds undergoing some form of regulatory intervention by the FSCA where the grievances raised by complainants are of secondary concern to the statutory manager or section 26(2) board member appointed.”

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What pension funds members complain about the most

Non-payment or late payment of claims was the highest at 72% of complaints, followed by complaints about poor service (37.14%) and lack of information at 7,53%. The top three outcomes contributed 95% of complaints.

Anyone who does not agree with the decision of the adjudicator can apply to the Financial Services Tribunal for reconsideration. During the year 72 applications for reconsideration were submitted and the tribunal issued 69 decisions, with 37 decisions of the adjudicator upheld and 32 were remitted for reconsideration.

Withdrawal benefits dominant category of complaints

Complaints about withdrawal benefits continued to be the most dominant category of complaints investigated and closed, together with non-compliance with non-payment of contributions by participating employers. These two categories constitute 84% of the total closed complaints categories. Almost 50% of these types of complaints were from members of the Private Security Sector Provident Fund (PSSPF).

The adjudicator also picked up a new trend linked to the Covid-19 relief offered by the Financial Services Conduct Authority (FSCA) that enabled funds to amend their rules to suspend contributions payable by employers. Unscrupulous employers then continued to deduct contributions from members’ wages but failed to pay them over to the fund.

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Private Security Sector Provident Fund

The Private Security Sector Provident Fund (PSSPF) remained the biggest contributor to new complaints. Membership of the fund is compulsory in the private security sector due to a collective agreement, according to the report.

Turnaround times for responses to complaints improved after various engagements, but the report points out that there are still lingering concerns about the quality of responses the office receives that often require follow-ups and clarifications.

The fund has also failed to take advantage of the refer-to-fund process. There appears to be very little or no attempt at all on its part to resolve complaints directly with its members, according to the report. The requirement for compulsory membership in the PSSPF is also questioned, as several employers fail to comply with the requirement to pay contributions.

“Furthermore, the fund does not appear to achieve its purpose of providing retirement benefits since the majority of its members do not remain in the fund until retirement age given the nature of the job.”

The report states that the PSSPF also failed to allocate hundreds of millions of contributions paid by employers, leading to utter frustration for employers and members.

“It does not seem as if there is a plan to bring the allocation of contributions up to date anytime soon. The PSSPF also took advantage of the Covid-19 relief to reduce contribution rates for both members and employer, but it is unable to monitor compliance.”