Annual Report 2008|2009 - pfa.org.za...Financial Manager: F Mantsho, Accountant: R Soldaat, HR Manager: P Mhlambi HEAD OFFICE Johannesburg 2nd Floor, Sandown House Sandton Close 2,

Annual Report 2008|2009

M Mohlala (Adjudicator), R Maharaj (Snr Assistant Adjudicator), M Ndaba (Snr Assistant Adjudicator), M Daki (Snr Assistant Adjudicator), E de la Rey (Snr Assistant Adjudicator), S Mothupi (Snr Assistant Adjudicator), T Dooka (Snr Assistant Adjudicator),M Ramabulana (Snr Assistant Adjudicatorr ), L Mbalo (Assistant Adjudicator), P Mphephu (Assistant Adjudicator), C Seabela (Assistant

Adjudicator), P Myokwana (Assistant Adjudicator), L Nevondwe (Assistant Adjudicator), AP Lehana (Assistant Adjudicator), S Mokgara (Assistant Adjudicator), L Molete (Assistant Adjudicator), A Mnqinya (Assistant Adjudicator), T Nawane (AssistantAdjudicator), B Mahlalela (Assistant Adjudicator), G Mothibe (Assistant Adjudicator)

Financial Manager: F Mantsho, Accountant: R Soldaat, HR Manager: P Mhlambi

HEAD OFFICEJohannesburg

2nd Floor, Sandown House

Sandton Close 2, Sandton, 2196PO Box 651826, Benmore, 2010

Tel (011) 884-8454 � Fax (011) 884-1144

E-Mail: enqenquiririesies-jhbhb@[email protected]

Cape Town

4th Floor, Letterstedt House,

Southwing, Cnr Camp Ground &Main Street, Newlands on Main

P O Box 23005, Claremont, 7735Tel (021) 674-0209 � Fax (021) 674-0185

E-mail: [email protected]

Website: www.pfa.org.za

31 July 2009

The Honourable Minister Pravin GordhanMinister of FinancePO Box 29Cape Town8000

Dear Minister

Re: THE ANNUAL REPORT OF THE PENSION FUNDS ADJUDICATOR - 2008/2009

In terms of section 30U of the Pension Fund Act No. 24 of 1956 (“the Act”), find herein enclosed statements of activities of the office of the Pension Funds Adjudicator for the year under review and audited financial statements as approved by the Auditor General in terms of section 30T of the Act.

We trust this is in order.

Yours faithfully

MAMODUPI MOHLALAPENSION FUNDS ADJUDICATOR

Adjudicator’s Prelude 21.

Chairperson’s Report 62.

OPFA Committee Chair’s Report 83.

Staff Profiles 104.

OPFA Divisions 285.

Summary of Determinations 576.

Other Activities of OPFA 847.

Letters of gratitude 888.

Annual Financial Statements 909.

Contents

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In this section, I will layout a foundation and do an introduction by briefly highlighting the successes as well as the operational and administrative challenges experienced by the OPFA in the past financial year.

The year under review has been challenging and exciting for the OPFA. It was marked by the tenth year anniversary of the OPFA which was celebrated by this office in November 2008 in a glittering function attended by the media, industry captains as well as representatives from other institutions. It was at this event that the sterling work which has been and still

done by this office was exhibited through real life cases affecting the most vulnerable of our society and how their lives have been changed pursuant to the intervention by this office. It was also at this event that it was confirmed that this office is an edifice that was created and developed through the contributions of the present and previous Adjudicators.

In the year under review, we have received a high number of complaints also highlighted in the previous annual report as a result of the Pension Funds Amendment Act, No.11 of 2007, which brought three critical sectors under the jurisdiction of the OPFA namely; the Private Security Sector, the Contract Cleaning Sector and the Bargaining Council funds. The other contributing factor to the increase of complaints received in the past year is the continuing shrinking economy (recession) which led to many job losses in various industries. Moreover, the public awareness programme also played a significant role in the avalanche of complaints received by this office.

The past year was also marked by the legislative amendment in the form of the Financial Services Laws General Amendment Act, 22 of 2008, which came into effect on 1 November 2008. The main object of the Act relevant to the OPFA is the provision deeming the date of accrual of the divorce benefit to be the date of divorce and the requirement that the fund must be named or identifiable in the divorce order. This amendment was gladly accepted by the OPFA as it merely confirmed a ground breaking ruling I earlier made in Cockcroft v Mine Employees Pension

Adjudicator’s Prelude

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Fund PFA/WE/11234/2006/LS as yet unreported, where I held that the legislature intended the Act to apply retrospectively to divorce orders issued before the coming into effect of the amended legislation as well.

The other issue that was addressed by the Amendment Act of 2008 is the naming of a fund in a divorce order. This tribunal subsequently issued a determination in the matter of PA Barnard v Municipal Gratuity Fund PFA/GA/24186/08/SM at paragraphs [40] to [55], in which the issue of naming a fund in a divorce was determined. The Amendment Act of 2008 and the Barnard determination resulted from a realisation that most of the complaints involving divorce benefits were not successful as a result of the fact that the fund concerned was not named at all or it was not named properly. The many complaints before this tribunal indicate that pension funds are frequently incorrectly cited, or not mentioned by name at all, even though they can be identified from the context. Further, many of the complaints before this tribunal involve people who are not legally qualified to understand the requirement that a fund should be named clearly in the decree of divorce. It is further clear that the requirement that a fund should be named in the order tends to be costly and time consuming and could result in financial prejudice to the non-member spouse.

The Act also extends the jurisdiction of this office to hear complaints relating to administration of the beneficiary funds registered in terms of the Pension Funds Act. This led to the increased telephone

enquiries received by the office mainly from trust fund beneficiaries. The exact figures of the telephone enquiries are clearly outlined in the section on OPFA Divisions – Functions and Output.

In our pursuit to ensure that the workload of the OPFA is kept under reasonable control we have adopted a few key new initiatives which are mainly the following:

1. RE ENGINEERED NEW COMPLAINTS UNIT (NCU)

We have increased the capacity of the NCU unit by incorporating an additional professional in the unit and we elevated the competency of an additional of the professional in the unit and we elevated the competency of the head of the Unit to a Senior Assistant Adjudicator. These additions to and adjustments the unit have resulted in not only the quantity but also the quality of the unit’s output being immensely improved. This is evidenced by the increased settlement rate of the unit which exceeded 5000 in one year alone; details are laid out in the section of this report that deals with the NCU.

2. SPECIALISED MERIT TEAMS

Realising that we had substantial complaints that had been carried over from previous financial years some dating as far back as 2005 and 2004; I then established specialised teams to dispose of complaints. The teams set up for this purpose were the Private Security Sector Provident Fund team

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and the Retirement Annuities Team. These teams managed to in one financial year dispose of an excess of 4147 complaints. This was remarkable accomplishment requires a real commendation to the New Complaints Unit and the merit team that worked tirelessly to achieve this output.

Another specialised team that was set up was that which dealt with the disposal of all the retirement annuity matters that have been kept on hold by my predecessor pending the outcome of impeding court challenges launched in 2004. We were thankfully finally provided with a court decision on these matters and found that that it did not exclude the jurisdiction of the office with respect to casual event charges complaints, on retirement annuity matters. This then opened the path to with the assistance of an independent actuary to dispose 735 complaints. This hardwork was undertaken by the Retirement Annuities team composed of one senior assistant Adjudicator, three assistant Adjudicators, an administrative assistant and an Actuary.

3. CONCILIATION

The past financial year was marked by the establishment of the OPFA conciliation services as another form of the OPFA dispute resolution process, and the appointment of independent conciliators. I am pleased to advise that the OPFA Conciliation initiative has played a meaningful role and contributed immensely in the reduction of the backlog in the OPFA within its short period of existence. I am certain that if it keeps or maintains its sterling work it has a future in our organisation. I am also pleased to announce that from September 2008 to March 2009; more than 60 percent of matters referred to conciliation were resolved.

4. SCORECARD

Lastly we have put in place the industry scorecard. This is a measurement tool to assess the performance of all the funds against whom complainants are lodged. We believe that this tool will act as both a

deterrent to serial offender funds that provide bad service to members and as an incentive to the funds that strive to provide good and value for money service to their members. The ultimate impact is to provide an industry standard of performance expected of industry players with respect to addressing complaints addressed to the OPFA and doing so we expect this to reduce the number of complainants referred to our the OPFA.

The four combined initiatives outlined above have enabled this office to dispose of a record high amount of complaints. This is the highest number of complaints in its ten year history. For this accolade I have internal gratitude to my staff who have worked tirelessly even under the most trying conditions in order to ensure that we deliver a superior service to funds and their members.

5. HUMAN RESOURCES

Speaking of the OPFA staff we have this financial year created many new key competencies which could not been within the organization, firstly we appointed an in-house human resources manager, an in-house information technology specialist, a new librarian, an office administrator and/or a project co-coordinator and a conciliation co-coordinator. I am pleased to announce that all the above listed appointments are individuals from historically disadvantaged backgrounds and they are all women.

The human resources issues would not be complete without mentioning the impending closure of the Cape Town office scheduled for December 2009. All processes are on track but we regret that as a consequence of this decision we have lost some of our longest standing staff members to the industry. Last but not least from a human resources perspective we had our first set of university graduates appointed on our internship programme for 2008/2009. This, I believe is a true statement of skills creation within the industry that was historically exclusionary to persons from historically disadvantaged background.

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6. FINANCE

Last but not least there have been a few but major changes with respect to our financial competency. Firstly we have increased the staff complement of our finance department by employing both a creditor’s clerk, an in-house information technology technician and created an internal audit function to support our finance manager and his team. These appointments have been in line with the recent listing of the OPFA in terms of the Public Finance Management Act (PFMA) in September 2008. We are in the process of putting in place the relevant structures to meet the imperatives of this Act.

CONCLUSION

In conclusion all the above measures that have been laid out above have assisted this office to operate as a coherent and efficient team. We have not only worked hard together but we have learnt to plan together in order to overcome challenges and meet our legislative mandate.

Mamodupi Mohlala

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2009 marks the beginning of the second decade of the existence of the Office of the Pension Funds Adjudicator (“OPFA”). It represents the continuation of the OPFA’s journey to serve members of retirement funds and their dependants. The OPFA continues to provide an avenue for members of retirement funds to have their complaints with regard to the administration and investments of their funds and its assets addressed.

The sheer number of retirement funds and their membership has meant that the OPFA has had its work cut out. It has faced challenges arising from the growing awareness of its existence and its role as forum for adjudicating complaints as defined in the Pension Funds Act expeditiously and economically as well as the limitations in the number of adjudicators and other resources. To compound these challenges, the scope of OPFA’s jurisdiction has increased as the adjudicators have ensured that all entities that are subject to the Pensions fund Act fall under its jurisdiction and other funds such as the bargaining council fund now fall under its jurisdiction following the amendments to the Pension Funds Act in September 2007. To overcome these challenges, the legislation has been amended to increase the number of adjudicators and efforts are continuing to ensure that the office has sufficient resources.

The current global economic downturn has led to growing loss of employment by workers including members of retirement funds. Increasing numbers of retirement fund members have to draw on their retirement benefits as a result. This has been accompanied by increasing numbers of members querying the treatment of their retirement benefits as they face an uncertain future. This has in turn, contributed to the influx of complaints to the OPFA and a growing backlog.

Chairperson’s Report - FSB

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This backlog reminds us that the solution to the challenges facing or raised by members of retirement funds cannot be addressed by the OPFA alone. The OPFA needs the cooperation of retirement funds and their service providers. It is for this reason that the OPFA endeavours to foster a relationship in terms of which both sides work together to resolve complaints in an amicable and prompt manner without the need for formal determinations where appropriate.

The OPFA continues to develop in its mission to serve members of retirement funds and their funds. To meet this mission, it has increased its staff complement and it continues to contribute to the development of pension law jurisprudence. It continues to strive to reach those who are in the most remote and rural areas of our country through public awareness campaigns in the form of radio interviews, television interviews and articles published in newspapers and community meetings (“Imbizos”).

On behalf of the FSB Board and members of retirement funds I extend our appreciation of the work of the OPFA and encourage its continued courage in carrying out its mandate with the necessary commitment and professionalism.

Mr Abel Sithole

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The Office of the Pension Funds Adjudicator (“OPFA”) is established in terms of Section 30B of the Pension Funds Act (“the Act”). The main object of the OPFA is to dispose of complaints lodged in terms of the Act in a procedurally fair, economical and expeditious manner. The Pension Funds Advisory Committee (“the committee”) of the OPFA is established in terms of section 3B of the Act. Over the years that

the committee has worked with the OPFA, it has observed an organisation that started very small, taking few steps everyday and progressing into a big organisation that is making a difference in people’s lives.

This period under review has been another challenging but interesting year for the OPFA. The OPFA is currently experiencing a growth in the number of complaints as a result of the current high employment cut rate. Due to the world economic meltdown and the recession period that the country is faced with, retirement fund members resort to withdrawing from their pension funds because they are no longer employed. In addition to the above, the OPFA has been receiving new types of complaints, which are from retirement fund members who are still employed but nonetheless are attempting to withdraw from their pension funds due to financial constraints. In the past, complainants would approach the OPFA among other things, when they are no longer employed or they are the dependants of the deceased members of pension funds. Due to these members’ current financial situations the OPFA, in addition to their current workload, are faced with these new types of complaints.

However, the OPFA continues to carry out its directive in terms of the Act, with the spirit of teamwork and the principles that drive the organisation. The

OPFA Committee Chair’s Report

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OPFA’s team has experienced an increase in its staff complement; the legislative development has done away with most of the jurisdictional arguments that were often raised against the office. More citizens of the country now know about the existence of the office and the kind of service it offers through its public awareness initiatives.

In carrying out its mandate, the OPFA has demonstrated that it has the ability to carry on with the challenging task given to it in terms of the Act, with the same spirit and serving the consumer and the country well.

I would like to conclude by mentioning that, as they begin each and every day, carrying on with their legislative objective, the Adjudicator and the office should always have in mind that they have contributed to the retirement industry and to the lives of ordinary South Africans who never had a voice to speak out.

Mrs Jabu Mogadime

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1. Cikizwa Nkuhlu (Senior Assistant Adjudicator)

She holds a BJuris degree from the University of Transkei and an LLB degree from Universitas Natalaliensis. She joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in 2001 and was later promoted to the position of Senior Assistant Adjudicator. She resigned in January 2009

As is evident below, the OPFA has grown substantially pursuant to the introduction of new departments in order to meet the ever growing challenges and incessant complaints in the retirement fund arena. Our staff complement is composed of these valuable individuals as reflected below:-

2. Elmarie de La Rey (Senior Assistant Adjudicator)

She holds a BA degree from the University of Pretoria, an LLB from UNISA and a Doctorate in Company Law from the University of Pretoria. She joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in August 2007 and was later promoted to the position of Senior Assistant Adjudicator in January 2008. Her employment contract ended in April 2008.

3. Fezile Mtayi (Senior Assistant Adjudicator)

He holds a BA LLB degree from the University of Cape Town. He joined the Office of the Pension Funds Adjudicator as a Senior Assistant Adjudicator in August 2004. Resigned in August 2008.

Staff Profiles

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4. Karen Mackenzie (Senior Assistant Adjudicator)

She holds a BMus, BProc and LLB degrees. She is currently studying for her LL.M in Constitutional Law at UCT. She joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in 2001 and was later promoted to the position of Senior Assistant Adjudicator. She resigned in February 2009.

5. Makhubalo Ndaba (Senior Assistant Adjudicator)

He holds a BJuris, LLB from the University of Transkei and an LLM degree from the University of Central Lancashire, UK. He joined the Office of the Pension Funds Adjudicator as a Senior Assistant Adjudicator in January 2008.

6. Mfundo Daki (Senior Assistant Adjudicator)

He holds a BJuris from the University of Transkei and an LLB degree from the University of Natal. He joined the Office of the Pension Funds Adjudicator as a Senior Assistant Adjudicator in January 2008.

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7. Radesh Maharaj (Senior Assistant Adjudicator)

He holds B Com (Honours) in Business Administration and an LLB degree from the University of Natal. He joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in August 2004 and was later promoted to the position of Senior Assistant Adjudicator in 2006.

8. Silas Mothupi (Senior Assistant Adjudicator)

He holds an LLB degree from Vista University and LLM degree from University of South Africa (UNISA). He joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in November 2006 and was later promoted to the position of Senior Assistant Adjudicator in September 2008.

9. Tshepo Dooka (Senior Assistant Adjudicator)

She holds a B.Proc and LL.B degree from the University of Limpopo. She also holds an LL.M degree from the University of Pretoria. She joined the Office of the Pension Funds Adjudicator as a Senior Assistant Adjudicator in October 2008

10. Ayanda Mngqinya (Assistant Adjudicator)

She holds a BProc from Vista University and an LLB degree from the University of Free State. She joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in August 2007.

11. Blessing Mahlalela (Assistant Adjudicator)

He holds a BJuris from the University of Limpopo. He also holds a Certificate of Proficiency from IISA and a Pension Law Certificate from University of the Witwatersrand. He joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in October 2008.

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12. Christian Seabela (Assistant Adjudicator)

He holds Bachelor of Social Sciences and LLB degrees from the University of Natal. He joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in August 2007.

13. Gertrude Mothibe (Assistant Adjudicator)

She holds a BJuris and LLB degree from Vista University. She also holds an Advanced Diploma in Labour Law at the University of Johannesburg. She joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in November 2008.

14. Lerato Molete (Assistant Adjudicator)

She holds an LLB degree from the University of Durban-Westville. She joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in June 2008.

15. Lufuno Nevondwe (Assistant Adjudicator)

He holds an LLB and LLM in Constitutional Law degrees from the University of Venda. He also holds a Certificate in Leadership from Goodenough College, UK. He is currently completing Doctor of Laws (LLD) in Constitutional Law at North-West University. He joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in September 2007 and he was later transferred to the New Conciliation Service Unit in June 2008.

16. Lungile Mbalo (Assistant Adjudicator)

He holds a Diploma in Marketing and Sports Management. He joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in 2004.

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17. Nceba Sihlali (Assistant Adjudicator)

He holds a BProc and LLB degrees from the University of the Western Cape. He joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in October 2006. Resigned in June 2008.

21. Phumelele Myokwana (Assistant Adjudicator)

He holds a BJuris and LLB degrees from the University of the Western Cape. He also holds a Certificate in Compliance Management from the University of Cape Town. He joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in August 2007.

18. Nuku Van Coller (Assistant Adjudicator)

She holds a B.Proc degree from the University of Johannesburg. She also holds a Post Graduate Diploma in the Management Advancement Programme (Wits Business School, 1990) with distinction and a postgraduate diploma in Labour Law (UCT, 1999), with distinction. She joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in 2001. Resigned in September 2008.

19. Patrick Lehana (Assistant Adjudicator)

He holds a BProc and an LLB degree from the University of Zululand. He joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in June 2008.

20. Philda Mphephu (Assistant Adjudicator)

She holds an LLB degree from the University of Witwatersrand. She joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in August 2007.

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23. Tshepo Nawane (Assistant Adjudicator)

He holds a BA and an LLB degree from the University of the Witwatersrand. He joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in June 2008.

25. France Mantsho (Financial Manager)

He holds a Bachelor of Accounting Science from the University of South Africa (UNISA). He joined the Office of the Pension Funds Adjudicator as a Financial Manager in December 2007.

24. Solomzi Gcelu (Assistant Adjudicator)

He holds a BA and LLB degrees from the University of Cape Town. He joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in August 2004. Resigned in October 2008.

26. Patience Mhlambi (Human Resources Manager)

She holds a BA Social Sciences degree from the University of Durban Westville. She also holds a Postgraduate diploma in Labour Relations from University of Natal (Durban). She joined the Office of the Pension Funds Adjudicator as Human Resources Manager in September 2008.

22. Seabi Mokgara (Assistant Adjudicator)

She holds an LLB degree from the University of the Witwatersrand. She joined the Office of the Pension Funds Adjudicator as an Assistant Adjudicator in July 2008.

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30. Ntombifuthi Lutya (Librarian)

She holds a degree in Library and Information Science from University of Zululand. She also holds Certificates in PALS Library System and Computer Literacy. She is currently a Librarian at the Office of the Pension Funds Adjudicator.

29. Mamonyooe Ramahlele (Office Administrator)

She holds a B-Tech degree in Marketing from Central University of Technology and currently completing a B-Tech degree in Project Management. She holds a Certificate in Computer Literacy. She is currently an Office Administrator at the Office of the Pension Funds Adjudicator.

28. Angie Malebe (IT Technician)

She holds a National Diploma in Computer Science from Vaal University of Technology and currently completing a B-Tech degree in Computer Science at Tshwane University of Technology. She also holds a National Certificate in Information Technology. She is currently an IT Technician at the Office of the Pension Funds Adjudicator.

27. Rebolang Soldaat (Accountant)

He holds a Bachelor of Accounting Science degree from the University of South Africa (UNISA). He joined the Office of the Pension Funds Adjudicator as an Accountant in February 2008.

55. Catherine Bowers (Creditors Clerk)

She holds an A Plus Computer Certificate. She is currently a Creditors Clerk at the Office of the Pension Funds Adjudicator.

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33. Lebogang Mogashoa (Legal Intern)

He holds an LLB degree from the University of Limpopo. He joined the Office of the Pension Funds Adjudicator as a Legal Intern in June 2008 and was later promoted to the position of an Assistant Adjudicator.

34. Thuleleni Mbhansa (Legal Intern)

She holds an LLB degree from the University of Zululand. She joined the Office of the Pension Funds Adjudicator as a Legal Intern in May 2008 and was later promoted to the position of an Assistant Adjudicator in the New Conciliation Service Unit.

32. Funani Ndou (Legal Intern)

She holds an LLB degree from the University of Venda. She is currently studying her LLM in Corporate Law at the University of South Africa (UNISA). She joined the Office of the Pension Funds Adjudicator as a Legal Intern in June 2008. Absconded in December 2008.

31. Bibi Zwane (Legal Intern)

He holds an LLB degree from the University of Zululand. He also holds a Certificate in Motor Mechanic from Intec College and Certificate in Industrial Diesel Engine Maintenance. He joined the Office of the Pension Funds Adjudicator as a Legal Intern in June 2008. Resigned in November 2008.

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36. Dinkie Dube (Part-time Conciliator)

She holds an LLM from the University of the Witwatersrand and a certificate in Dispute Resolution system and Strategies from the Singapore Mediation Centre, Singapore. She worked as a Legal Officer for the SAHRC. She also worked as a Director: Consumer Protection in the Department of Trade and Industry. She is currently a Producer & Host of the Consumer Affairs for Soweto TV. She was an Adjudicator for the 2008 dti Awards for Consumer Champions.

37. Buti Zwane (Part-time Conciliator)

He holds a Certificate in Industrial Relations from the University of the Witwatersrand. He attended a Negotiations Course with the International Institute Histadrut in Israel. He attended training in Mediation and Arbitration organised by IMSSA and CCMA. He worked as a Legal Officer for SACCAWU. He is currently a Commissioner in the CCMA.

35. Saleem Seedat (Head of Conciliation Service)

He obtained a B Com (Honours) and an LLB from the University of the Witwatersrand. He holds Certificates in Marketing and Business Management from the University of the Witwatersrand. He has been a panelist in twenty one (21) Conciliation, Mediation and Arbitration Panels in South Africa. He was a member of the Industrial Court and an accredited Trainer, Assessor and Moderator. He is a Senior Commissioner in the CCMA and an Advocate of the High Court of South Africa. He has got 27 years working experience in the field of law and Alternative Dispute Resolution.

CONCILIATORS

38. Danie Sello (Part-time Conciliator)

He holds a Certificate in Labour Law from the University of Johannesburg. He worked for various trade unions since 1991 until 2004 when he was appointed as a Commissioner in the CCMA.

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40. Limakatso Nobanda (Part-time Conciliator)

She holds BA LLB degrees from the University of Cape Town. She has been a practicing Advocate at the Johannesburg Bar for 13 years and she was also a Commissioner in the CCMA.

42. Lavinia Khangala (Part-time Conciliator)

She holds an LLB and LLM degrees from the University of Cape Town. She also holds a Higher Diploma in Financial Planning from UOFS. She has worked for Sanlam, Metropolitan, Old Mutual, Investec, Alexander Forbes and the Bargaining Council of the Jewellery and Precious Metals Pension Fund in various capacities. She is a Board Member of the Principal Officers Association

39. Josephine Ralefatane (Part-time Conciliator)

She holds a BProc and LLB degrees from the University of Limpopo. She also holds an LLM in Labour Law from the University of Johannesburg. She also holds a Certificate in Human Rights and Land Reform. She started working since 1994 for various universities and bargaining councils until she joined the CCMA in 2006 as a Part-time Commissioner.

41. Lungile Zondi (Part-time Conciliator)

She holds a BA (Social Work) and BA (Social Work) Honours from the University of Fort-hare and Zululand respectively. She also holds Certificates in Advanced Labour Law and Management Advancement Programme. She worked for various institutions since 1982 including CCMA and TOKISO.

43. Mbulelo Bikane (Part-time Conciliator)

He holds an LLB degree from the University of the Western Cape. He is a founder member of various employee organisations. He has worked in the CCMA, the Public Service Bargaining Council and the Chemical Bargaining Council. He is an accredited Mediator by a UK based Mediation Service organisation.

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47. Janet Cannan (Executive Secretary)

She holds a Legal Secretarial Diploma. She joined the Office of the Pension Funds Adjudicator as an Executive Secretary in March 1999.

45. Tebogo Mphuti (Part-time Conciliator)

He holds an LLB degree from the University of the Witwatersrand. He is currently a Chief Executive Officer of April 27 Corporate Finance. Prior to forming the company he was the Deputy Director General and Head of Corporate Finance and Transactions Division in the Department of Public Enterprises. He was the Head of Credit Administration at ABN AMRO Bank. He is a banker and a Corporate Lawyer who sits in the boards of several organisations.

44. Thandiwe Tshayana (Part-time Conciliator)

She holds a BJuris and an LLB from the University of South Africa and University of Johannesburg respectively. She also holds an M Phil from the University of Johannesburg. She worked for the CCMA since 1997 as a Case Management Officer, Researcher and later promoted to the position of a Commissioner until to date.

46. Khulie Mdhuli (Conciliation Co-ordinator)

She is currently studying for an Advanced Diploma in Paralegal Studies at Damelin. She also holds a Certificate in Property Law and Conveyancing. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in August 2007 and was later promoted to the position of Conciliation Co-ordinator in the New Conciliation Service Unit.

48. Elizabeth Makgoale (Executive Secretary)

She holds a BA degree and Higher Education Diploma from the University of Limpopo. She also holds a Secretarial Studies Diploma at Rosebank College. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in August 2007.

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49. Camen Kotshoba (Administrative Assistant)

She is currently studying a Diploma in Para-Legal Studies. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in 2005.

53. Karabo Masekela (Administrative Assistant)

She holds a Para-Legal diploma from Boston City Campus. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in August 2007.

50. Berlinah Gashula (Administrative Assistant)

She is currently studying a Personal Assistant Diploma at Intec College. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in February 2008.

51. Thuli Mogwale (Administrative Assistant)

She holds a Diploma in Media and Journalism from Rosebank College. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in August 2008.

52. Khensani Madinga (Administrative Assistant)

She holds a Certificate in Public Relations from University of South Africa (UNISA) and certificate in Computer Literacy from Soweto Digital College. She is currently studying for an LLB degree at the University of South Africa. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in April 2008.

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56. Mfundo Dimbaza (Administrative Assistant)

He is currently studying for an LLB degree part-time at the University of South Africa. He joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in November 2007.

58. Siphokazi Cetyana (Administrative Assistant)

She enrolled for Bachelor of Commerce in Human Resources at the University of the Western Cape and later switched to Diploma in Travel and Tourism. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in February 2008.

59. Pinky Makhanya (Administrative Assistant)

She holds a BA degree from the University of the Witwatersrand. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in August 2008.

60. Yolandi Puwani (Administrative Assistant)

She holds a Certificate in Operation Management from Edcon. She is currently studying second year of an LLB degree at the University of South Africa. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in May 2008.

54. Khomotso Matsi (Administrative Assistant)

He holds a Secretarial Diploma. He joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in April 2008.

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61. Lerato Mokoena (Administrative Assistant)

She is currently studying for BA Communication Science at the University of South Africa. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in April 2008.

62. Tumelo Letsoalo (Administrative Assistant)

She holds a National Diploma in Fashion Design from the University of Johannesburg. She holds a Certificate in Business Management and Computer Studies. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in July 2007.

65. Luan Dames (Administrative Assistant)

She holds a National Diploma in Public Management. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in August 2006. Retrenched in March 2009.

64. Lethabo Ramphele (Administrative Assistant)

She enrolled for Diploma in Office Management and Technology for a year at TUT and then switched to Marketing Management. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in December 2007.

67. Kelebohile Molefe (Administrative Assistant)

She holds a Diploma in Cost and Management Accounting from Vaal University of Technology. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in the New Conciliation Service Unit in October 2008.

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68. Ncebakazi Jwaqu (Administrative Assistant)

She holds a BA degree from the University of the Western Cape. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in April 2007. Resigned in December 2008.

69. Vumisa Ndlovu (Administrative Assistant)

He holds a Project Management Certificate from University of the Witwatersrand. He also holds an International Computer Driver Licence. He joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in the New Conciliation Service Unit in October 2008.

71. Colline Alexander (Administrative Assistant)

She is currently doing Paralegal Diploma at Intec College. Joined the Office of the Pension Funds Adjudicator in April 2002 as a temporary Receptionist and was later promoted to the position of Administrative Assistant.

70. Christie Tyatyam (Administrative Assistant)

Joined the Office of the Pension Funds Adjudicator as an Office Assistant in 2002. In 2005, she was promoted to the position of Receptionist until 2007. She is currently an Administrative Assistant.

72. Keratile Pekane (Administrative Assistant)

She is currently studying for Bachelor of Commerce (Economics) at the University of South Africa (UNISA). She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in February 2009.

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73. Kgomotso Ndaba (Administrative Assistant)

She holds a Certificate in Secretarial Studies from Birnam College. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in December 2007.

74. Lumkile Batyi (Administrative Assistant)

He holds a Certificate in Management Assistance from Cape Midlands College. He joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in May 2008.

75. Nonhlanhla Msimang (Administrative Assistant)

She holds a Certificate in Personal Assistance. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in October 2008.

76. Nthabiseng Maleka (Administrative Assistant)

Holds a computer literacy certificate. Currently employed as an Administrative Assistant.

77. Sylvia Arendse (Administrative Assistant)

Holds a Certificate in Computer Studies. Joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in July 2004.

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57. Thubalakhe Zwane (Office Assistant)

He holds Certificates in Computer Studies and a Call Centre Agent. He joined the Office of the Pension Funds Adjudicator as an Office Assistant in March 2008.

63. Dideka Regina Mkele (Office Assistant)

She holds a Certificate in Time Management and Refreshment Provider. She is currently busy with the Computer Studies at Creative Minds. She joined the Office of the Pension Funds Adjudicator as an Administrative Assistant in August 2004.

66. Dolphina Sibanda (Office Assistant)

She holds a Business Administration Certificate from PC Training College. She joined the Office of the Pension Funds Adjudicator as an Office Assistant in December 2007.

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JOHANNESBURG OPFA STAFF

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OPFA Divisions - Composition and OutputIn the year under review the OPFA introduced new departments in addition to the ones it previously had as reflected below, in an endeavour to bolster its efficiency and effectiveness:

1. New Complaints Unit 5. Pension Funds Adjudicator2. Merit Teams 6. Human Resources3. Special Projects 7. Finance4. Conciliation 8. Information Technology

NEW COMPLAINTS UNIT DIVISION (NCU)

This is the first port of call of the OPFA where the life of complaints begins leading to investigation, settlement and determination. During the financial year under review the NCU comprised of:

2 professional staff members, a senior assistant adjudicator and an assistant adjudicator, 15 administrative assistants, 4 office assistants and 2 receptionists, for both offices. This division not only receives complaints but deals with telephonic enquiries as well as walk-in enquiries as well.

Table 1: Depicts Telephone enquiries by monthMonth 2005/06 2006/07 2007/08 2008/09April 2500 3700 4181 8586May 2900 3700 4481 7483June 3300 3400 6785 7843July 3800 3500 7081 8031August 3100 3500 7358 6744September 3300 4100 7466 8483October 1100 4100 7755 7839November 3400 3800 5633 8273December 3100 2900 3668 5429January 2300 3800 3896 7290February 3100 4800 3564 6826March 3500 3800 2243 6850TOTAL 35400 45100 64111 89677

NCU Cape Town NCU Johannesburg

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Graph 1 below: Depicts the comparison of telephone enquiries per month in the financial year under review and previous financial years.

Although the OPFA does not have a call centre it receives a substantial number of telephone enquiries in a month. An average of 360 calls is received every working day by the two offices of the OPFA. There has been a steady increase in the number of walk-ins in the past four years as depicted by Table 1. The growth can be attributed to more and more people becoming aware of the services of the office.

Table 2 below: Depicts Walk-in enquiries by month.Month 2005/06 2006/07 2007/08 2008/09April 22 50 61 244May 18 90 94 242June 42 45 83 216July 35 48 99 281August 48 50 109 277September 60 90 122 335October 72 90 110 239November 60 98 133 263December 18 30 62 178January 38 58 105 496February 48 48 94 248March 35 45 127 262TOTAL 496 742 1199 3281

100 000

80 000

60 000

40 000

20 000

0Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Total

2005/06 2006/07 2007/08 2008/09

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Graph 2 below: Depicts Average number of new complainants visiting the OPFA (walk-ins) per day.

A substantial number of potential complainants come to the OPFA offices in person to lodge their complaints. In the financial year under review an average of 13 people a day approached the office for assistance which is a 120% increase from the previous financial year. This figure excludes those who are invited to have their disputes resolved through conciliation.

Table 3 below: Depicts Monthly breakdown of new complaints received.

Month 2005/06 2006/07 2007/08 2008/09April 407 405 449 430

May 439 522 506 514

June 443 429 559 402

July 477 520 4681 597

August 512 483 447 561

September 427 488 447 680

October 463 463 466 877

November 457 458 556 467

December 203 216 554 383

January 305 374 464 397

February 352 475 581 778

March 411 389 544 790

TOTAL 4896 5222 10254 6876

Graph 3 below: Depicts Number of new complaints received per year in the last 4 years

Bulk Complaints: Most of the figures in the 2007/08 and 2008/09 financial years will be distorted by what we describe as bulk complaints. These are complaints lodged by a fund against employers for failing to comply with their duties in terms of the Act and the rules of the fund. The difference between these types of complaints and the ordinary ones with multiple parties is that they cannot be resolved as one complaint as the allegations against each employer differs. Although the complaints may have been similar in issues, in the end each complaint has to be dealt with individually. A total of 4 147 bulk complaints were lodged during July 2007 and all 4147 matters were finalized during this financial year. A Further 1 392 Bulk complaints were lodged during November 2008 of which 20% were resolved at the end of the financial year and the rest carried over to the current year, whilst others were returned to the sender.

The picture as appears in graph 2 above is skewed by the existence of the bulk complaints, a more clear picture of steady organic growth emerges if these bulk complaints are removed and a comparison is done with the previous 3 years.

15

12

9

6

3

0

1200

1000

800

600

400

200

0

1.9842.968

4.796

13.124

2005/06 2006/07

2007/08 2008/09

2005/06 2006/07

2007/08 2008/09

4896 5222

10254

6876

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Pie chart 1 below: Indicates types of complaints received during 2008/09.

Withdrawal Death Diasbility

Divorce Others

A more subtle picture not apparent from the figures and graphs above which has changed during the year under review is the types of complaints received. Two third of complaints are on withdrawal benefits, followed by death benefits, with divorces being visible for the first time and disabilities coming in last. The other category includes retirement annuities, preservation funds and ongoing fund issues. The Global economic crash that occurred during the year under review affected members of pension funds drastically and an increase in certain types of complaints appeared. Firstly, the number of withdrawals increased and contained in this was an unusually high proportion of complaints relating to the poor performance of funds. Secondly, this trend is also reflected in number of desperate members ceasing contributions from retirement annuities and opting out of preservation funds and demanding immediate payment even before reaching retirement age.

Pie chart 2 below: Depicts Percentages of complaints lodged per province

A comparison of complaints by province indicates that the majority of complainants are based in Gauteng followed at a distant second by the Western Cape and Mpumalanga, Kwazulu Natal, Free State and Eastern Cape almost coming equally. These figures invariably are in line with the population dynamics and the economic activities of the provinces. A factor to be considered is that these figures also include those complaints which fall outside the jurisdiction of this office such as complaints relating to the Government Employees Pension Funds which forms the majority of complaints from some of the provinces.

66% 68%

9%1%

4%

4%

5%

5%

2%

2% 0%13%

4%

2%

15%

Western Cape

Northern Cape

Eastern Cape

Free State

KwaZulu Natal

Mpumalanga

North West

Gauteng

Limpopo

Foreign Countries

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Table 4 below: Depicts Complaints closed by the New Complaints Unit

Month

Reformulated complaints closed

Out of jurisdictioncomplaints closed

Settlementsclosed

Prescribed mattersclosed

2007/08 2008/09 2007/08 2008/09 2007/08 2008/09 2007/08 2008/09April 20 83 36 144 25 85 0 20

May 19 56 74 110 39 112 0 0

June 45 75 140 137 8 166 0 9

July 44 25 61 200 70 765 0 12

August 2 20 21 129 24 864 0 8

September 38 102 149 123 73 566 0 138

October 53 0 70 255 80 71 0 11

November 73 136 88 121 167 125 0 8

December 79 16 56 75 171 3 0 8

January 239 96 26 62 57 29 12 13

February 73 77 82 105 497 45 0 7

March 127 233 186 211 490 87 0 8

TOTAL 812 919 989 1672 1701 2918 12 242

A. Reformulated complaints, we refer to those matters received in writing but which fail to meet the minimum requirements of the definition of a complaint as contained in the Pension Funds Act. These are addressed by sending a set of guidelines to complainants to provide an opportunity to reformulate their enquiries into complaints. Failure to do so within 3 months results in the enquiries being closed.

B. Out of jurisdiction matters we refer to those matters which fall outside the jurisdiction (OJ’s) of the OPFA. These are closed and the complainant is directed to the correct forum.

C. Settlements are proper complaints falling within the jurisdiction of the office which are resolved by mutual agreement between the parties after the involvement of the OPFA.

D. Prescribed matters are those complaints which although properly formulated and falling within the jurisdiction of the OPFA the causal event complained of happened more than 3 years prior to the date in which the complaint was brought to the OPFA. Previously the Adjudicator had discretion to consider such matters. This provision was brought about by the Pension

Funds Amendment Act which came into effect on 13 September 2008 and as the figures indicates only a few cases were closed for this reason in the latter part of the previous year and only in this financial year were more cases closed.

E. A close analysis of these figures indicates a definite growth in the number of case closed year on year in particular the number of matters settled which almost doubled from the previous year. This is attributable to the following:

Settlement of bulk complaints which accounts for • almost half of the NCU settlements;Efficient work methods;• Additional human resources and momentum by • the different teams.

MERIT TEAMS DIVISION

The function of the merit teams is to draft determinations in respect of complaints received in terms of section 30M of the Act, which are then forwarded to the Adjudicator for her consideration, correction and signature. The determination-drafting phase is preceded by an investigation phase, the aim whereof is to solicit finer elements of the complaint from the parties concerned. During the 2008-2009

33

reporting period seven merit teams operated in the Office. Each merit team comprised a Senior Assistant Adjudicator, either one or two Assistant Adjudicators and an Administrative Assistant. The Office also initiated a legal internship programme and the four legal interns appointed spent a month with each merit team. Each merit team has a target number of draft determinations to be submitted to the Adjudicator each month.

While it was practice for merit teams to deal with all types of complaint issues rather than to specialise, during the reporting period it was decided that identified merit teams would investigate and determine specific types of complaints. Thus, one merit team was assigned the task of dealing with all complaints emanating from the Private Security Sector Provident Fund and three other merit teams were tasked with dealing with complaints concerning retirement annuity funds, divorce benefits and the Contract Cleaning National Provident Fund respectively. Reports from the specialised merit teams are contained elsewhere in this annual report. However, what is evident from the implementation of specialised teams is that more complaints were resolved and it was done expeditiously and consistently.

Merit teams are headed by the following Senior Assistant Adjudicators, whose contribution and output will be reflected below:-

1. Silas Mothupi 2. Makhubalo Ndaba3. Radesh Maharaj4. Mfundo Daki5. Tshepo Dooka6. Dr Elmarie de Larey7. Cikizwa Nkuhlu (resigned in January 2009)8. Karien McKenzie (resigned in January 2009)

a) SILAS MOTHUPI’S TEAM

Composition of the TeamSilas was appointed as a senior assistant adjudicator in September 2008 and as such his team’s work is only for a period of six months until the end of the financial year.

During the period from September 2008 until March 2009 this team consisted of three professionals and one Administrative Assistant. They are as follows:

Silas Mothupi (Senior Assistant Adjudicator)• Seabi Mokgara (Assistant Adjudicator)• Ayanda Mngqinya (Assistant Adjudicator)• Lumkile Batyi (Administrative Assistant)•

Total number of draftsDuring this period this team managed to deliver the output reflected below:

Merit Drafts - The number of merit draft • determinations submitted for the Adjudicator’s consideration in the year under review stood at - 187 Settlements/Out of Jurisdiction matters finalised • stood at - 21

Merit Team led by Silas Mothupi

34

The total number of merit drafts includes both formal and letter format drafts.

Therefore, the Total work output in the year under • review = 208

ProjectsThe team was assigned with a number of projects by the Adjudicator during the period in question. Most of these projects involved research that was necessitated by several amendments to the Pension Funds Act. The team had to draft a number of formal determinations in order to reflect new policy changes or legislative amendments to the Pension Funds Act.

As agreed at the strategic planning meeting the team was tasked with disposing off complaints involving Divorce benefits, Disability benefit, Complaints involving Section 30I of the Act and other complaints as required by the Adjudicator. Public AwarenessThe team was also involved in the public awareness campaign on different radio stations. We conducted interviews on Lesedi FM, Thobela FM, Umhlobo Wenene FM, Ikwekwezi FM, Voice of the Cape FM. Please see a complete list in the section dealing with public awareness in the annual report.

Monthly CommuniquéThe team is also responsible for drafting monthly communiqués involving issues of office operation, Human Resources issues, new appointments/ resignations and other important issues relating to the OPFA. We are glad to report that we have managed to draft a monthly communiqué every month; sometimes in two months were there were no major issues to be communicated to staff every month.

Placement of determinations on the websiteThe team is also responsible for the quality check of determinations prior to them being placed on the website for the benefit of the general public. I must point out that the website still need to be upgraded as

agreed at the strategic planning meeting. However, I must stress that all determinations that are important for public knowledge were placed on the website and this is being monitored as requested by the Adjudicator.

Drafting manualThe team in concurrence with another OPFA team compiled a Drafting Manual for the benefit of new professional employees as well as old employees. The purpose is to ensure quality and consistency in our determinations. The manual is close to being

signed off through the relevant organisational channels.

Workshops, Seminars and ConferencesDuring the period in question members of this team attended the following seminars and workshops:

S. Mothupi-Supervisory Skills (workshop)• S. Mothupi- Seminar relating to the amendment • of section 37D of the Act (Divorce matters) S. Mokgara and A. Mngqinya- Seminar on • powerful legal writing

Please see a full report on seminars and workshops captured elsewhere of the annual report.

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b) MAKHUBALO NDABA’S TEAM

Composition of the TeamDuring the period under review the team consisted of three professionals and one Administrative Assistant. They are as follows:

M.M. Ndaba (Senior Assistant Adjudicator)• L. Nevondwe (Assistant Adjudicator moved to • Conciliation in September 2008)R.B. Mahlalela (Assistant Adjudicator)• K. Matsi (Administrative Assistant)•


Merit Drafts - The number of merit draft • determinations submitted for the Adjudicator’s consideration in the year under review stood at – 496 Settlements/Out of Jurisdiction matters finalised • stood at - 21



ProjectsThe team was allocated a number of projects and responsibilities by the Adjudicator during the period under review which are outlined below as follows:-

Internship Four interns were recruited for the year under review .Mr. Mogashoa LP from the University of Limpopo, Ms Ndou FM from the University of Venda, Ms Mbhansa TC from the University of Zululand, and Mr. Zwane B from the University of Zululand. Two interns were able to successfully apply for jobs in the OPFA, one intern got a placement for articles and the third one absconded.

Conciliation The legislative mandate of the OPFA is to dispose of complaints in a procedurally fair, economical and expeditious manner. Further the provisions of section 30E of the Pension Fund Act provide the Adjudicator with the following powers that “in order to achieve his or her [the Adjudicator] main object, the Adjudicator may, if it is expedient and prior to investigating a complaint, require the complainant first to approach an organization established for the purpose of resolving disputes in the pension funds industry or part thereof”. The Conciliation Service was opened after a thorough process of consultation with the industry about the Conciliation Guidelines. The Conciliation Services of the OPFA started operating in September 2008. Five Conciliators and a Conciliation Coordinator were hired for this purpose. The Conciliation Coordinator works full time, whilst all; the conciliators are part time.

Bargaining Councils Historically the office held a view that as per the provisions of section 2(1) of the Pension Funds Act, 24 of 1956 (prior to the amendment) that the Act as it was did not apply in respect of Bargaining Council funds created in terms of the system of bargaining fostered by the Labour Relations Act, 66 of 1995 (“the LRA”). Therefore based on this view, the OPFA concluded that it does not have jurisdiction to investigate and determine complaints relating to funds created by these entities. The Pension Fund Amendment Act,

Merit Team led by Makhubalo Ndaba

36

11 of 2007 (“Amendment”) which was assented to by the State President and promulgated on the 13 September 2007 has since amended section 2(1) of the Pension Funds Act to read as follows;

“Subject to section 4A and any other law in terms of which a fund is established, the provisions of this Act apply to any pension fund including pension funds established or continued in terms of a collective agreement concluded in a council in terms of the Labour Relations Act, 1995 (Act No. 66 of 1995), and registered in terms of section 4.”

And Section (2) (a) reads:

“A pension fund established or continued in terms of a collective agreement contemplated in subsection (1) and not yet registered in terms of section 4, must register in terms of this Act before or on 1 January 2008.”

The Amendment Act has effectively conferred on this office the jurisdiction which it previously did not have. Therefore complaints which were previously dismissed by this office due to a lack of jurisdiction in that the fund was a Bargaining Council fund, may now be re-lodged with us. However, the jurisdiction in regard to these funds is still limited only to those funds which are registered in terms of section 4 of the Act.

Section 4 (1) stipulates that,

“every pension fund shall apply to the registrar for registration under this Act”.

Those funds which are not yet registered were given until 1 January 2008 to do so. Most Bargaining Councils have not as yet registered. The OPFA is interacting with the Registrar of Pension Funds to operationalize the implementation date issue of Section 2(a) of the Pension Funds Amendment Act of 2007.

Butterworth’s Pension Law ReportsFrom time to time, Butterworth’s publications, publishes our determinations. Before that is done, the determinations are edited by merit team. The team also liaises with Butterworth’s from time to time. Every quarter, Butterworth’s publishes our determinations on issues not previously traversed to inform the industry and the broader public about the recent innovations and development in pension law.

Balanced Scorecard The team assists in the coordination of the Balanced Scorecard Project and the rolling out of the project to the industry .Despite the establishment of the Office of the Pension Funds Adjudicator (“OPFA”) and the significant progress in disposing of pension fund complaints in a procedurally fair, economical and expeditious manner. The South African pension funds industry is faced with challenges that inhibit this progress. Consequently, a number of pension fund members are still affected by these challenges.The Pension Funds Adjudicator (“the Adjudicator”) believes that positive and proactive responses through the implementation of an industry-wide scorecard would address inefficiencies in the industry, unlock the industry’s potential and enhance its growth.

The industry continues to face challenges in the manner in which members interact with the trustees of their funds. Save for a limited number of funds, the industry continues, among other things, to face challenges of inefficiency in the way in which funds attempt or fail to resolve or respond to complaints from their members or the Adjudicator respectively. The scorecard provides a framework for the pension funds industry to address these challenges faced by their members and enhance the capacity of the industry to provide adequate services to their members. The scorecard aims, inter alia, to:

achieve a substantive change in the manner in • which pension funds and their administrators resolve complaints lodged with them by their members;

37

in a similar vein, achieve a substantive change • and improvement in the manner in which pension funds respond to requests for information from the Adjudicator in relation to complaints being investigated by the Adjudicator; provide the pension funds industry with the first • method for monitoring the progress of resolving complaints in a procedurally, fair, economical and expeditious manner; promote efficiency and transparency and • encourage accountability in the industry; promote access to justice and information by • ensuring that complaints are handled diligently and in a procedurally fair manner.

This project is on-going and has been carried over into the new financial year. Workshops, Seminars and ConferencesDuring the period in question members of this team attended the following seminars and workshops:

Pension Lawyers Association Conference - • Johannesburg Workshop on Conciliation and Scorecard - • Johannesburg Workshop on Conciliation and Scorecard - • Cape Town Principal Officers Association Workshop - • Cape Town Principal Officers Association Workshop - • Pretoria Principal Officers Association Workshop - • Durban Principal Officers Association Workshop - • Port ElizabethManagement Training Course- Johannesburg• Quality Assurance Launch- Johannesburg• IRF Conference - Johannesburg• Bargaining Councils Conference- Johannesburg•

Please see a full report on seminars and workshops in the relevant section of the annual report.

c) RADESH MAHARAJ’S TEAM

Composition of the TeamDuring the period under review this team consisted of four professionals and one Administrative Assistant. They are as follows:

R. Maharaj (Senior Assistant Adjudicator)• V.P. Mphephu (Assistant Adjudicator)• Adv. A.P. Lehana (Assistant Adjudicator)• L. Molete (Assistant Adjudicator moved to the • Cape Town office of the OPFA)T. Letsoalo (Administrative Assistant)•

Total number of draftsDuring this period the team managed to deliver the output reflected below:

Merit Drafts - The number of merit draft • determinations submitted for the Adjudicator’s consideration in the year under review stood at – 640

Settlements/Out of Jurisdiction matters finalised • stood at - 95


Merit Team led by Radesh Maharaj

38


Projects

Retirement Annuities The team commenced investigating and drafting determinations in retirement annuity fund complaints from 1 June 2008 following the adjudicator’s decision to proceed with these complaints, many of which had been pended since 2005 due to legislative changes and appeals against this tribunal’s determinations. The project ended on 31 March 2009. The retirement annuity fund team dealt with complaints that concerned the quantum of causal event charges imposed on complainants’ fund values as a result of cessation of contributions, or reduction of contributions, or transfers to another fund, or lapsed policies, or early retirement. Complaints concerning poor investment returns and illustrative maturity values were also dealt with by the team.

Due to the large number of complaints that had to be investigated and determined the team expanded to include another assistant adjudicator, Adv. A.P. Lehana, who commenced with the team on 1 June 2008. A third assistant adjudicator, Miss L. Molete, joined the team in September 2008 until 30 November 2008. In addition to the professional staff, four legal interns were also involved in the first two months of the project, whereafter the number decreased to two and by December 2008 the team was working with one legal intern. Due to the nature of the retirement annuity fund complaints an independent actuary, Mr. T. Nxumalo, was also contracted for the duration of the project to ascertain the reasonableness and actuarial soundness of the causal event charges imposed and investment returns achieved in each complaint.

A report on the retirement annuity fund project is contained elsewhere in this annual report, so the details will not be repeated here.


Pension Lawyers Association Conference - • Johannesburg Workshop on Conciliation and Scorecard - • Johannesburg Workshop on Conciliation and Scorecard - • Cape Town Principal Officers Association Workshop - • Cape Town Principal Officers Association Workshop - • Pretoria Principal Officers Association Workshop - • Durban Principal Officers Association Workshop - • Port ElizabethManagement Training Course - Johannesburg• Quality Assurance Launch - Johannesburg• IRF Conference- Johannesburg• Bargaining Councils Conference- Johannesburg•


39

d) MFUNDO DAKI’S TEAM

Composition of the TeamDuring the period under review this team consisted of three professionals and one Administrative Assistant. They are as follows:

M. Daki (Senior Assistant Adjudicator)• P. Myokwana (Assistant Adjudicator)• G. Mothubi (Assistant Adjudicator)• K. Manganyi (Administrative Assistant)•

Total number of draftsDuring the period under review the team managed to deliver the output reflected below:




ProjectsThe team was allocated a number of projects and

responsibilities by the Adjudicator during the period under review which are outlined below as follows:-

Annual Report This team co-ordinated the drafting of the annual report. It assisted in sourcing information and data to be utilised in the annual report, editing of the draft report until a final product was delivered to the relevant authorities.

Contract Cleaning National Provident FundThis team dealt with complaints relating to the Contract Cleaning National Provident Fund wherein the fund lodged complaints against employers who had failed to pay contributions and submit contribution schedules to the administrator on behalf of their employees. Please see the full details of the project elsewhere in the annual report.

Default DeterminationsThis team was tasked with devising a mechanism of dealing with complaints wherein funds, employers and administrators had flagrantly failed to respond to complaints sent to them by this office despite having been requested to do so on several instances. This led to the establishment of an initiative to issue default determinations against the said defaulters which was spearheaded by this team.

Public Awareness CampaignThis team spearheaded the public awareness campaigns which were carried out in different media including radio station interviews, television interviews as well as attending imbizos. This initiative has brought about awareness among the rural and peri-urban folk about this office and the essential services it provides.


Lesedi Municipality meeting with Community • Development Workers regarding the awareness programme of the OPFA Management Training Course- Johannesburg•


Merit Team led by Mfundo Daki

40

e) DR ELMARIE DE LAREY’S TEAM

Composition of the TeamDuring the period under review the team consisted of two professionals and one Administrative Assistant. They are as follows:

Dr E. De Larey (Senior Assistant Adjudicator)• L. Mbalo (Assistant Adjudicator)• B. Gashula (Assistant Adjudicator)•


Merit Drafts - The number of merit draft • determinations submitted for the Adjudicator’s consideration in the year under review stood at – 876 Settlements/Out of Jurisdiction matters finalised • stood at - 39



ProjectsThe team was only allocated one project by the Adjudicator during the period under review because of its enormity which is outlined below:-

Private Security Sector Provident Fund (PSSPF) This project relates to the bulk complaints referred elsewhere in this annual report. It was initiated as a result of a deluge of complaints which were received from PSSPF a Bargaining Council Fund against employers in the security sector who failed to pay contributions to it on behalf of their employees.

As indicated under the special projects in relation to this project, all these matters were resolved in this financial year.

Merit Team led by Elmarie de La Rey

41

f) TSHEPO DOOKA’S TEAM

Composition of the TeamTshepo was appointed as a senior assistant adjudicator in October 2008 and as such her team’s work is only for a period of five months.

During the period under review this team consisted of two professionals and one Administrative Assistant. They are as follows:

T. Dooka (Senior Assistant Adjudicator)• C. Seabela (Assistant Adjudicator)• N. Msimang (Administrative Assistant)•

Total number of drafts

During the period under review the team managed to deliver the output reflected below:




ProjectsThe team was allocated a number of projects and responsibilities by the Adjudicator during the period under review which are outlined below as follows:-

Drafting manualThe team in concurrence with another OPFA team compiled a Drafting Manual for the benefit of new professional employees as well as old employees. The purpose is to ensure quality and consistency in our determinations. The manual is close to being signed off through the relevant organisational channels.

BulletinThis team was responsible for drafting the bulletin which informs staff members of the developments in the industry which impact on the OPFA.

Balanced Scorecard The team assists in the coordination of the Balanced Scorecard Project and the rolling out of the project to the industry .Despite the establishment of the Office of the Pension Funds Adjudicator (“OPFA”) and the significant progress in disposing of pension fund complaints in a procedurally fair, economical and expeditious manner. The South African pension funds industry is faced with challenges that inhibit this progress. Consequently, a number of pension fund members are still affected by these challenges.The Pension Funds Adjudicator (“the Adjudicator”) believes that positive and proactive responses through the implementation of an industry-wide scorecard would address inefficiencies in the industry, unlock the industry’s potential and enhance its growth.

The industry continues to face challenges in the manner in which members interact with the trustees of their funds. Save for a limited number of funds, the industry continues, among other things, to face challenges of inefficiency in the way in which funds attempt or fail to resolve or respond to complaints

Merit Team led by Tshepo Dooka

42

from their members or the Adjudicator respectively. The scorecard provides a framework for the pension funds industry to address these challenges faced by their members and enhance the capacity of the industry to provide adequate services to their members. The scorecard aims, inter alia, to:

achieve a substantive change in the manner in • which pension funds and their administrators resolve complaints lodged with them by their members; in a similar vein, achieve a substantive change • and improvement in the manner in which pension funds respond to requests for information from the Adjudicator in relation to complaints being investigated by the Adjudicator; provide the pension funds industry with the first • method for monitoring the progress of resolving complaints in a procedurally, fair, economical and expeditious manner; promote efficiency and transparency and • encourage accountability in the industry; promote access to justice and information by • ensuring that complaints are handled diligently and in a procedurally fair manner.

This project is on-going and has been carried over into the new financial year.


Supervisory Skills Seminar • Principal Officers Association Workshops on • Scorecard

g) CIKIZWA NKUHLU’S TEAM


C. Nkuhlu (Senior Assistant Adjudicator)• S. Gcelu (Assistant Adjudicator) resigned.• P. Myokwana (Assistant Adjudicator) moved to • Mfundo’s team in July 2008.

L. Dames (Administrative Assistant)•





h) KAREN MACKENZIE’S TEAM


K. Mackenzie (Senior Assistant Adjudicator)• N. Sihlali (Assistant Adjudicator) resigned.• A. Mngqinya (Assistant Adjudicator) moved to • Silas’s team in September 2008.C. Alexander (Administrative Assistant)•





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SPECIAL PROJECTS

This part of the report deals with strategic initiatives undertaken by the OPFA in fighting the backlog surge which have proved to be a success in leaps and bounds as depicted below:

PRIVATE SECURITY SECTOR NATIONAL PROVIDENT FUND PROJECT

The Beginning of 2008/09 financial year saw the process of dealing with Bulk complaints 4147 that were submitted during July 2007 taking shape. The Complainant, Private Sector Security Provident Fund, is a fund created in terms of a Sectoral Determination in the department of labour. The Sectoral Determination regulates all employers in the private security industry and one of its requirements is that all employers must participate and register all their employees falling within certain specified grades with this fund. In terms of the Sectoral Determination it becomes compulsory for any employer participating in this industry to participate and register their employees in this fund. It was in terms of this Sectoral Determination that the complainant sought to enforce its rights. There were three categories of complaints, firstly, 1 056 complaints in terms of section 13A against those employers who were already participating in the fund but had failed to either pay the contribution to the fund or had failed to submit schedules as required. Secondly, there were 36 employers who had requested to be exempted from participating in the fund and the exemption had been declined and the fund set to compel them to register with the fund. Lastly, there were 3 055 employers who had never registered with the fund, the fund set to compel them to register and participate in terms of the Sectoral Determination.

As at 1 April 2008 1080 complaints had already been settled, a further 242 complaints could not be served on the respondents due to incorrect details and were abandoned. Due to the problems encountered in verifying the contact details of some of the respondents it became necessary to contact

the respondents to verify their contact details and through this process 3 397 calls were made. By 1 October 2008 all complaints were finalized, with 1164 determinations signed, 2362 were settlements and the rest abandoned as the respondents could not be traced.

Graph 4 below: Depicts Bulk Complaints from PSSPF

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Complaints recieved

Complaints settled

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Complaints abandoned

On 14 November 2008 a second set of 1 392 complaints were received from the Private Sector Security Provident Fund. As at 31 March 2009, 172 of these were settled 407 were returned to sender and 813 of these were carried over to the next financial year.

The processing of these complaints involved allocating more resources, the NCU had to be beefed-up with three temporary staff members and mini call centre was set to follow up on the information required to process the complaints. On the merit side a dedicated team was allocated to do all the drafts. However, the project should not be viewed in isolation and its successes and impact should also not be underestimated. One fifth of the ordinary complaints received by the OPFA are

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complaints by members of this fund in most cases complaining against the same employers for failing to fulfil their duties. Therefore, for this office it is most advantageous to deal with complaints at this level as the resolution of one of these matters eliminates 10 or more possible future complaints from the individual members.

CONTRACT CLEANING NATIONAL PROVIDENT FUND PROJECT

The office of the Pension Funds Adjudicator received 451 complaints in the past financial year from the Contract Cleaning National Provident Fund, a fund also created in terms of a Sectoral Determination in the Department of Labour, against the participating employers for non-compliance with section 13A of the Pension Funds Act (“Act”) and the rules of the fund. The relevant section 13A of the Act requires the participating employers to pay contributions regularly in respect of their employees, who are fund members, to the fund.

The investigation process included the mammoth task of confirming the correct details of employers against whom complaints were lodged. It was realised during this process that some of the employers concerned had stopped operating their businesses and could not be traced. It was resolved with the concurrence of the fund that cases against untraceable employees should be abandoned. However, it should be noted that there are those matters which were settled between the parties concerned. Therefore, the figure of matters settled, as indicated below is reflective of both abandoned and settled matters. The OPFA has successfully managed to dispose all the 451 complaints from CCNPF in the year under review in the following manner:

• 36 signed determinations by the Pension Funds Adjudicator

• 415 were settled prior the adjudication process and during the adjudication process.

Graph 5 below: Depicts CCNPF Complaints

Complaints recieved

Complaints settled

Complaints adjudicated

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0

451415

36

In conclusion, the finalisation of all these matter in the same year is a direct result of the proper implementation of the strategies by the OPFA to enable it to function efficiently and to meet its legislative mandate.

RETIREMENT ANNUITY FUND PROJECT

This tribunal has had a backlog of complaints concerning retirement annuity funds since 2006. This tribunal had to pend investigation of complaints against retirement annuity funds because of legislative amendments that affected retirement annuity fund (“RA”) members and appeals in terms of section 30P of the Act by retirement annuity funds or their underwriting insurers against rulings of this tribunal, which took over three years to be finalised by the high courts. In May 2008 it was decided to task one merit team (“the RA team”), comprising a senior assistant adjudicator, three assistant adjudicators, two interns and an administrative assistant to deal with the backlog retirement annuity fund matters, some of which were initially lodged in 2004. An actuary was also appointed on a contract basis in order to assess

45

the actuarial soundness of the calculations done by the underwriting insurers.

The project commenced on 1 June 2008 and the RA team had to deal with 773 backlog RA files since the inception of the project. They are tabulated as follows:

Cases requiring actuarial computations 482

Illustrative values complaints 73

Non-actuarial complaints 56

Settled and Out of jurisdiction complaints 95

Transfers to New Complaints Units (non-RA merit cases) 67

Total 773

The merit team’s first task, which commenced on 1 June 2008, was to contact all complainants to determine whether they wished to continue with their complaints in light of possible fund value enhancements pursuant to the Long-term Insurance Act regulations of 1 December 2006. This was a mammoth undertaking because some complainants had changed addresses or even emigrated since lodging their complaints. Secondly, some files that were classified as RA complaints actually concerned endowment policies, insurance matters or broker complaints and they had to be referred to the relevant ombudsman having jurisdiction. In total there were 95 matters closed in this manner. The last stage of the “clean-up” process was to identify complaints that were sent to the RA team, but were not in fact RA complaints. There were 67 files of this genre, so they had to be sent back to the new complaints unit for re-assignment to other merit teams.

The actuary required the RA team to classify actuarial complaints (see below for the categories). The merit team also had to establish inception, maturity and causal event dates for each complaint, as well as fund values before and fund value after the causal event dates complained of for each RA contract.

Complaints were classified as follows:

Further, since the majority of files were complaints emanating in 2005 and 2006, the administrators had to be contacted to establish whether complainants’ fund values were enhanced pursuant to the implementation of the long-term insurance regulations of 1 December 2006. Each file had to be updated with information on enhanced fund values, if any. At this juncture it is worth mentioning that all the major insurers offered their full co-operation in providing the required information, for which they are commended.

Once the updated fund values were obtained a decision then had to be taken whether a complaint required the actuary’s in-depth actuarial calculation or whether it merely required a perusal of the figures. The rationale for this was that if the total causal event charges levied were minimal (i.e. far below the 30 or 35% threshold stipulated in the long-term insurance regulations) then the actuary would not have to perform an in-depth analysis of the file. The RA team managed to obtain all the information required for the actuary’s purposes by 31 August 2008 and this was captured on the team’s control spreadsheet. The actuary firstly used this data to develop “expense models” for each of the insurers and used it in his actuarial computations when necessary.

From September 2008 the RA team commenced drafting determinations in the 611 files that required draft determinations. Since the actuary had to work on developing his costing and expense models, the RA team commenced with drafts in the non-actuarial complaints. There were 56 non-actuarial complaints and drafts were prepared in all of them before the RA

46

team moved to consider the complaints that required actuarial analysis.

From 1 October 2008 the RA team commenced drafting determinations in actuarial complaints after the actuary commenced forwarding his findings in each complaint. The breakdown of draft determinations that required actuarial analysis completed since October 2008 is as follows:

Month Completed DeterminationsOctober 2008 110

November 2008 90

December 2008 112

January 2009 118

February 2009 59

March 2009 66

Graph 6 below: Depicts the number of drafts completed per month.

Thus, the actuarial analysis and drafting of determinations in the backlog RA complaints came to an end on 31 March 2009.

Apart from the normal obstacles posed by complaints that take several years to finalise there were other legal challenges, in the form of high court rulings, that confronted the RA team. For example, the ruling of Sishi J in the consolidated section 30P appeals of Old Mutual v Pension Funds Adjudicator and

Mungal and Freeman (DCLD 7248/06 and 7343/06, unreported) where the learned judge mentioned in an obiter dictum that this tribunal does not have jurisdiction in RA matters concerning causal event charges imposed by underwriting insurers. However, on a closer reading of the judgment this tribunal is of the view that the appeals concerned market value adjusters, rather than causal event charges, so this tribunal is still in a position to consider complaints about causal event charges and the quantum thereof in light of the long-term insurance regulations.

In the interim, in mid-January 2009 the DCLD of the High Court granted the respondents leave to appeal in the Mungal and Freeman matters, so there should be clarity in this regard once the Supreme Court of Appeal makes its ruling.

In the interim, there has already been a measure of success in RA complaints. In Lockhat v PPS Retirement Annuity Fund and Sanlam this tribunal found that the fund and Sanlam were negligent in providing the complainant with an improbable maturity value, which led to him suffering financial loss. The tribunal said that the nub of the complaint was not only the improbable illustration provided, but also the singular lack of expertise exhibited by PPS and Sanlam and the neglect of the duty of care they owed the complainant. The respondents have not filed a section 30P(1) appeal and more than six weeks have elapsed since the determination was issued, so it is the case that they accept this tribunal’s determination in the complaint.

Also of interest to RA fund members is the complaint of Landman v Central Retirement Annuity Fund and Sanlam, where this tribunal ruled that the respondents were not entitled to divest the complainant’s maturity value 4 days before his actual retirement date because this was contrary to the first respondent’s rules. The respondents’ action resulted in the complainant sustaining a loss of approximately R7 500. The fund’s trustees were also urged to consider remedial action in respect of other retiring fund members who may have suffered the same fate as a result of similar maladministration by the second respondent.

120

100

80

60

40

20

0Oct08

Nov08

Dec08

Jan09

Feb09

Mar09

110

90

112118

5966

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CONCILIATION DIVISION

BackgroundSection 30E of the Pension Funds Act No. 24 0f 1956 provides the Adjudicator with the following powers that;

“in order to achieve his or her [the Adjudicator] main object, the Adjudicator may, if it is expedient and prior to investigating a complaint, require the complainant first to approach an organization established for the purpose of resolving disputes in the pension funds industry or part thereof”.

OPFA Conciliation Guidelines govern the whole processes of conciliation and are available in the OPFA website or in the Conciliation Service Unit upon request.

Section 30D of the Act obliges the OPFA to resolve disputes in a procedurally fair, economical and expeditious manner.

For quite some time, the office has had a serious backlog of cases. Several interventions have been made including establishing backlog teams, getting consultants to draft determinations and the establishment of the New Complaints Unit.

After some research and analytical work, invoking the provisions of section 30E of the Act read together with sections 30D and 30Q of the Act, the Adjudicator has decided to open up a conciliation service for the OPFA. Pursuant to section 30E of the Act read together with sections 30D & 30Q of the Act the OPFA has drafted conciliation guidelines towards the establishment of conciliation services under the auspices of the OPFA.

Unlike the CCMA/Bargaining Councils – parties do not choose to go for conciliation; the Adjudicator decides on the matters to be conciliated .Once a settlement has been agreed, it will become binding on the parties upon being signed by the Adjudicator in terms of Section 30M of the Act. The parties to the conciliation process are not represented by a legal representative unless agreed to otherwise by

the parties or the Adjudicator. If parties fail to reach an agreement, the matter will be investigated and adjudicated.

The Superannuation Complaints Tribunal in Australia as well as the UK Pensions Ombudsman does have a mediation /conciliation service as part of their dispute resolution mechanisms. In South Africa, the Commission for Conciliation, Mediation and Arbitration has registered a tremendous success of a 70% dispute settlement rate through conciliation. These services have proved to be very successful in dealing with disputes in a speedy and cost effective manner.

Inspired by these international and national trends, we have recruited the majority of our conciliators from the CCMA which, together with the then Independent Mediation Service of South Africa have run internationally accredited courses in mediation training and development.

OPFA Conciliation GuidelinesThe OPFA engaged in a process of consultation with various stakeholders in the pension funds industry in order for them to comment on the Draft Conciliation Guidelines.

The OPFA requested the Pension Fund industry stakeholders and organised labour to study the guidelines and give inputs about: the challenges that they believed were going to be brought about by the conciliation service and how they proposed that the OPFA should deal with the same. The OPFA also requested stakeholders to provide them with other relevant information they wished to add in order to add value to the conciliation process. Valuable comments were indeed received from various stakeholders and were considered in order to refine the final conciliation guidelines.

On 24 July 2008 letters were sent to funds requesting them to provide this office with contact persons for the conciliation service. This was done in order to establish a direct contact with a dedicated conciliation service liaison official in a fund.

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On 28 July 2008, the Conciliation Guidelines were posted in our website for public consumption. On 1 August 2008, the Conciliation Service officially became operational and various interviews were held with the print and electronic media across the country in the context of informing the general public about the conciliation service.

On 4 August 2008, letters were sent to parties indicating that their matters have been identified and selected for conciliation. From the 15 August 2008, set down notices were sent to the parties, giving them the 21 days notice to attend conciliation proceedings. The first conciliation hearing sat on 5 September 2008 and all matters which were heard during that were all settled.

The OPFA held briefings with funds about the conciliation service to answer all questions related to the conciliation service. For this purpose, funds were invited to a briefing session on 15 August 2008, 4 September 2008 in Johannesburg and 11 September 2008 in Cape Town. We further engaged with more briefings in November 2008 in Pretoria, Cape Town, Durban and Port Elizabeth.

Staff componentThe Conciliation Service Unit has a staff complement of four full time staff members, a Conciliation Coordinator, Assistant Adjudicator and two Administrative Assistants. It has 11 part-time conciliators and it is housed in the Johannesburg office. The Unit is headed by the Head of Conciliation. The strength of the conciliators is derived from the fact that it is constituted by individuals from several different professional orientations, namely, conciliation, arbitration and legal, corporate and financial sector, consumer affairs, organised labour, civic structures and the pension funds industry. The OPFA is also considering of recruiting various correspondent conciliators in the various provinces in the not too distant future in order for them to conciliate matters where it would be impossible to conciliate them in Gauteng.

StatisticsThese statistics reflect the matters which were handled by the Conciliation Service Unit as from September 2008 until 31 March 2009. Matters which are set down are conciliated by the conciliators. There are pre-conciliation matters which are handled by the Conciliation Unit.

Pre-conciliation is a process whereby the conciliator will check with the parties first, before the matter is enrolled for conciliation whether such a matter has got no propensity of settlement. As our statistics reveal, we have had a 100% increase in a number of matters that are settled before they are actually enrolled for conciliation. The Adjudicator has prioritized the resourcing of pre conciliation within the conciliation service as it is proving to be successful .There is an average of 60% settlement rate of conciliation matters.

This diagram indicates the statistics:

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SEPTEMBER 2008 – 172 Complaints referred to Conciliation and 101 settled

P/P % O/J % ADJUD % SETTLED TOTAL

SETTLEDIN-CON % PRE-CON %24 14 8 5 39 23 101 59 0 0 101 59%

OCTOBER 2008 – 225 Complaints referred to Conciliation and 151 settled



NOVEMBER 2008 – 317 Complaints referred to Conciliation and 160 settled



DECEMBER 2008 - 215 Complaints referred to Conciliation and 142 settled



JANUARY 2009 – TOTAL 277 Complaints referred to Conciliation and 181 settled



FEBRUARY 2009 – TOTAL 307 Complaints referred to Conciliation and 188 settled

P/P % O/J % ADJ % NCU % SETTLED TOTAL

SETTLEDIN-CON % PRE-CON %59 18 9 3 40 13 11 4 116 38 72 24 188 62%

MARCH 2009 – TOTAL 426 Complaints referred to Conciliation and 241 settled



Table 5: Complaints resolved by Conciliation UnitMonth 2008/09September 101

October 151

November 160

December 142

January 181

February 188

March 241

TOTAL 1164

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PENSION FUNDS ADJUDICATOR DIVISION

The division of the Pension Funds Adjudicator is responsible for both the technical, administrative and financial output of the organization. The PFA draws on the different competencies and skills in the office in order to experience the smooth and efficient running of the organization. The staffing of this division is the PFA who is assisted by two administrative assistants one in the Johannesburg office and administrative and financial in the Cape Town Office.

In her role as accounting officer, the PFA has undertaken various functions in the financial year lay among these are the following: -

The core functions of the PFA – DeterminationsThe output of the PFA is that of preparing determinations. The determinations that have been prepared in this financial year were ground breaking in various spheres. The spheres that relevant are with respect to the right of the non member spouse to access a benefit as at date of divorce even in an instance where a decree of divorce does not specify the name of the Fund. In the matter of Barnard v Municipal Gratuity Fund, i held that in line with legislative amendment of section 37D.the Pension Funds Act that when the fund is identifiable from the contents of the decree then the non member spouse should receive the benefit from the fund . the details

and specifics of this determination are laid out in the Summary of formal determinations section of this report. Another ground breaking determination that is worthy of specific mention is the Osbourne v MM Retirement Annuity Fund, Momentum Group Limited and another and Welensky v Old Mutual both of which dealt with the members entitlement to recoup legal and non patrimonial medical costs, respectively, where it can be shown that the fund has infringed the rights of such a member. The last but by no means the least ground breaking determination in the matter of E.A. Lockhart v Professional Provident Retirement Annuity Fund and Another, in terms of which it was held that the illustrative projections made by the Fund must be based on reasonable fund performances and not unrealistic projections. This determination was a first ever made determination in favour of a complainant where there is a challenge on illustrative values provided by the Funds. Therefore, through the medium of Lockhart, the OPFA ushered in a new era with respect to the manner in which projections therein must be made. The details of these two determinations are eloquently addressed in the summary of formal determinations section. The entire section on the summary of formal determinations section of this report lays out in detail all the ground breaking and precedent setting determinations that the PFA has addressed.

The other important issue to be noted is that in this financial year alone the PFA passed 1000 signed determinations mark, in fact she signed off a total of 1770 determinations were signed by the PFA for the 2009/2009 financial year. This deserves commendations as it represents a 248% increase from the 2007/2008 financial year with respect to the number of signed determinations. The impact is best depicted in the table and graph below.

Table 6 below: Depicts comparison of Adjudicators’ output on current and previous financial yearsYear 2005/2006 2006/2007 2007/2008 2008/2009TOTAL 473 460 508 1770

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Graph 7 below: Depicts signed determinations per financial year

Graph 7 and table 6 above show the number of determinations signed off by the adjudicator since the 2005-2006 reporting period. In the 2007-2008 reporting period 508 determinations were signed. In the current reporting period 1770 determinations were signed. This shows a 248% increase in the number of determinations signed compared to the previous reporting periods. This large increase is primarily attributable to the increase in the number of professional staff employed and the operation of specialised merit teams.

Graph 8 below: Depicts output of OPFA divisions

OVERRALL OUTPUT OF THE PFA

Graph 4: Comparison of complaints opened versus complaints closed

For the first time in the existence of the OPFA, more complaints were closed than those received at the same time. However, to give a proper interpretation of these figures it should be kept in mind that not all cases opened within a particular financial year are closed within that financial year. Relevant in this particular instance is that more complaints were opened in the previous financial year than the year under review. Therefore, it will take a sustained effort to reduce this apparent deficit and the above table indicates that the office is making substantial strides in achieving that.

Other functions:

1. Executive Committee The Adjudicator has chaired all the meetings of the executive committee in the past financial year, which have been held on a monthly basis. The purpose of such meetings is to ensure continuous and efficient financial management of the organization through provision of budget control and approval of annual financial statements, all executive appointments and approval of organizational policies are discussed and approval at Exco level.

2000

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02005/06 2006/07 2007/08 2008/09

473 460 508

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ationMeritteams

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openedComplaints

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The Exco has also been responsible for all major procurements decisions and approving procedures associated therewith. Exco has also ensured that all automated and efficient fixed asset registered mechanism has been implemented. Last but not least the Exco has for the first time in PFA’s history introduced procured and implemented information technology strategy aimed at ensuring that information and communications technologies are utilized as a tool to ensure a more efficient organizational output.

2. NCU and Merit teams meetingThe PFA in order to ensure continuous monitoring of work output has put in place monthly merit team and NCU meetings. The purpose of such meetings was to ensure ongoing assessment of work out of merit teams and NCU. The immediately realizable benefit of approach is that it has motivated that staff to aspire to achieve more. From a management point of view it allows management to detect and remedy all challenges at an early stage so as to ensure continued work output efficiency.

3. Specialized Committee MeetingThe PFA personally chaired and supervised weekly meetings with the specialized committees set up ensure bulk, specialized and expedient disposed of large numbers of complainants premised on the same or similar legal issues. In order to realize the anticipated complaint disposal rates, the teams weekly out puts were closely monitored and controlled. Further any unexpected challenges more dismissed and worked out of the. The exercise of setting up these specialized teams had the benefit of ensuring ongoing skills transference especially from the actuarial personnel secured to advice on the retirement annuity complaints. The negative effect however was that at times the work did become strenuous and demanding on those doing it under demanding timelines.

However one needs to acknowledge that these processes have been extremely successful.

4. Financial Service Board meetingsThe PFA is obliged to terms of the Pension Funds Act to submit is annual budget for approval to the FSB. In line with this obligation the PFA meets with the FSB subcommittee quarterly. These meeting are aimed principally at addressing the budgetary control issues of the organization. At meetings the budget and management accounts of the organization are discussed. Preparation and submission of agenda items and documents for the board pack is done by the office of the PFA.

HUMAN RESOURCES DIVISION

At the beginning of the 2008/2009 financial year, the Office of the Pension Funds Adjudicator (OPFA) had a total staff complement of 53 employees. During the course of the financial year the total staff compliment was 68 employees. However, by the end of the financial year there were 16 resignations and 22 new appointments, which then brought the figure of total staff complement to 60 employees as at 31 March 2009.

The OPFA strives at all times to be the employer of choice and always be compliant with employment equity requirement. The OPFA demographics are illustrated in Graphs 1, 2 and 3 below.

Graph 1: Racial composition within the OPFA

Within the staff complement of the OPFA we have 58 Africans, 5 Coloureds, 4 Whites and 1 Indian

60

45

30

15

0Africans Coloureds Whites Indian

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Graph 2: Gender composition within the OPFA

Out of the total staff complement of 68, there are 45 females and 23 males.

Graph 3: Structural composition of the OPFA

There are 13 employees on management level, 19 employees on professional level, 32 employees on administration level and 4 employees on internship level as at 31 March 2009. The OPFA is doing its best to recruit more women in management and professional positions.

Graph 4: Professionals and Non Professionals

From the total staff compliment, 32 employees are professionals and 36 employees are non-professionals.

Graph 5: Age gap composition in the OPFA

The OPFA endeavours to empower the youth with employment opportunities. Out of the total staff compliment, 40 employees are youth and 28 employees are non-youth.

RecruitmentDuring the 2008/2009 financial year there were 16 terminations. By the end of the financial year up to 22 positions were filled, including the position of an HR Manager to ensure that OPFA is HR compliant.

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40

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0Females Males

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0Manage-

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30Professionals Non-professionals

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0Youth Non-youth

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The OPFA has also employed more women in senior positions. For example the following positions are occupied by women: HR Manager; IT Technician; Senior Assistant Adjudicators; Office Administrator; Librarian. Moving forward in terms of recruitment, the OPFA undertakes to continue to empower women.

Cape Town Office ClosureThe OPFA office in Cape Town will be closing by 31 December 2009. The OPFA appointed an independent third party to assist with the process of the closure of the office. A media campaign also took place where members of the public were notified of the Cape Town office closure.

During the period of financial year 2008/2009 consultations with employees took place. Both group and individual consultations took place as per the Labour Relations Act 95 of 1995. Employees were even given an option of counselling should they require one. Some employees opted for retrenchment and some for relocation to the Johannesburg office. As at 31 March 2009 Cape Town office was left with 8 employees and the consultation process was completed. One professional from the Johannesburg office transferred temporarily to the Cape Town office to supervise and oversee daily operations until the closure by 31 December 2009.

FINANCE AND SUPPORT FUNCTIONS DIVISION

This is a division that has been the nucleus of the functioning of the OPFA divisions as it facilitated the provision of tools and resources for other divisions of the OPFA to function efficiently. Below are some of the functions and responsibilities that this department was saddled with under the financial under review.

Appointment of staffThe OPFA intends to appoint an internal auditor. An office administrator, information technology technician and the creditors clerk have been appointed to facilitate the smooth running of the office.

PoliciesThe Office of The Pension Funds Adjudicator (OPFA) has documented its internal policies and procedures and enhanced its internal controls by implementing recommended controls from Internal Auditors. This policy and procedures manual covers all business units like Human resources, Library, New Complains Unit, Merit teams, Finance and administration department.

Cape Town Closure and JHB move to new officesThe Cape Town office will be officially closed on the 31st of December 2009 and all OPFA operations will be based from its head office in Johannesburg – Sandton. Due to growth in the work load and the need to accommodate current employees who are already overcrowded, the OPFA will be moving to bigger premises in Sandton, 26 Fredman Drive. The name of the building is called the Corporate Place.

PFMAThe Office of Pension Funds Adjudicator has been included as one of the entities to comply with PFMA under schedule 3A on 1 November 2008.

The Office of The Pension Funds Adjudicator has been communicating with the Accountant General at National treasury and the Auditor General’s (AG) office in terms of which it was stated that due to the fact that our entity was listed in terms of Public Finance and Management Act (PFMA) in November 2008, the OPFA would be audited in terms of the Act.

The OPFA wishes to point out that the proposed approach by the National treasury and Auditor General towards the audit of the OPFA might have practical difficulty for the following reasons:

1 Firstly the listing of the OPFA in the middle of the financial year was not anticipated and this has resulted in the Pension Funds Adjudicator (PFA), being unable to put in place the relevant systems in order to comply with the requirements of the PFMA;

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2 Secondly the fact that the OPFA had been listed had not come to the attention of the PFA until the commencement of the 2009/2010 financial year. Therefore due to the failure to be provided with formal notification on the listing of the OPFA, we have not been able to request the relevant budget to fund the process and structures necessary to ensure compliance with the PFMA;

3 Thirdly the Gazetted notice in terms of which the OPFA is listed in terms of the PFMA does not specify the effective date.

The OPFA has had several meetings and requested that it should be excluded from PFMA audit in the current year and failed to get exception from both National Treasury and Auditor General. The Office would like to express its concern about the negative implication it might be faced with in this year’s annual report. The OPFA strongly believes that even though the entity is listed under PFMA, the National Treasury can exempt the OPFA from being audited as a PFMA listed entity in the current financial period to avoid negative matters relating non-compliance with PFMA Act.

The formatting of the financials is also a challenge because we are being audited on a PFMA basis after September 2008 and on a GAAP/GRAAP basis before September 2008.

OPFA Library

OPFA Library achievementsThe Library has grown rapidly from small beginnings to serving a much larger OPFA staff complement from both offices and has successfully facilitated the installation of IN magic Software which will manage all library activities.

The Library growing collection of online and audio visual information has reached at about ten Law Information titles and the number of new library users requesting information has also improved

tremendously. Current Issues is still the leading activity in the library, where library outsources information from different sources & circulates it to all OPFA staff members.

The Library has formed information sharing network with more than twenty law libraries around Johannesburg.

OPFA Library has acquired the following library material

Books• Reports• Journals• Reference Books• Audio visual and digital material• Magazines & pamphlets• Online legal information• Annual Reports• Statutes•

Only PFA staff members can access the library resources, special arrangements can be made for outside patrons. Library opens at 8:30 and closes at 17:00, Monday – Friday.

Internal AuditSekela Inc has been appointed as a company to perform internal audit functions for the OPFA in order to assist in ensuring that the organization has good control environment and strong internal controls and to ensure that all weak systems within the organization are detected and prevented timeously and good controls are implemented.

The OPFA control environment and internal controls have improved as compared to the previous years and will be more effective since there is a plan to have our own Internal Auditor effective from 01 June 2009. This will also assist in ensuring that findings from the current financial year are reduced significantly if not totally eliminated.

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INFORMATION TECHNOLOGY DIVISION (IT)

GENERAL OVERVIEWThe level of IT governance within the OPFA is maturing to the extent that it is now embedded as part of the overall business process within the organisation. During the year under review a service provider was appointed to develop an IT Strategy for the OPFA which will permeate throughout the organisation over time. IT must enable the OPFA to capture, resolve and adjudicate pension fund complaints and queries as expediently as possible with the least effort from all parties involved. Every component of the IT system must add value to the OPFA’s operational process.

The mission of the Information Technology Department is to ensure stable,operational and responsive Information and Communication Systems in the OPFA.

FUNCTIONThe IT department provides a number of services to the organisation including:

Support for all desktop PCs, laptops and printers• Diverse application and database support• A robust scalable and stable network • environment Recommendations for new technology to meet • the needs for the future

2008/2009 ACCOMPLISHMENTS AND DEVELOPMENT

Subscription with JutaStats to access online Law • Journals Changed Trend Anti-virus to Kaspersky Anti-• virus Implementation of the time and attendance • system called CLOCKWATCH.

STRATEGIC DIRECTIONSProcurement of Case Management SystemA Service Provider will be appointed to develop a new Case Management System for the Adjudication and Conciliation division that will be replacing the current one.

Procurement of the Document Management SystemTo prevent documents from being lost and to reduce the OPFA’s dependence on paper files, every document will be scanned into the document management system and linked to a case in the case management system.

ICT Infrastructure Upgrade The most significant benefit gained by the implementation of a comprehensive IT system is naturally a dramatic increase in operational efficiently and productivity. Old problematic computer equipment will be replaced and a new server acquired to run the new case system. The OPFA network and server systems will be centralized from Cape Town to the Johannesburg office. This will prevent the need for various systems communicating over public communication lines that can be accessed thus compromising security concerns and increasing the likelihood of there being errors or system downtime.

Appointment of internal IT PersonnelDuring the year an internal IT Personnel was appointed to oversee all IT related activities which include the following:

The provision of IT infrastructure services • including desktop support, LAN AND WAN, IT security and telecommunications. The development and implementation of IT • policies and procedures The development of the OPFA’s disaster • recovery plan. The development and Implementation of new • systemsIT Hardware and Software procurement• Implement the Helpdesk System• Implement the Asset Tracking System•

Enhance the OPFA websiteMaintain a Service Level Agreement with the current Service Provider for upgrading and updating the current website.

Telephone SystemCurrently the OPFA uses Telkom analogue PABX and telephone handsets. A new digital PABX and telephone system will be installed in the OPFA new premises.

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Summary of Formal DeterminationsThese are matters relating to ground breaking precedent setting determinations in the retirement fund industry.

DIVORCE BENEFITS

PA BARNARD v MUNICIPAL GRATUITY FUND (Case No.PFA/GA/24186/2008/SM) is an important determination dealing with the practical application of section 37D of the Pension Funds Act after it was amended by the Financial Services Laws General Amendment Act No 22 of 2008 (“the Amendment Act of 2008”), which came into effect on 1 November 2008.

The determination laid out some important principles relating to the meaning of the word “identifiable” in the Amendment Act of 2008, what needs to be done in order to identify a fund, the entity that has a duty to identify a fund from a divorce decree and also addresses the requirement that there must be an order to the fund to pay the non-member spouse her portion of the pension interest.

FactsMr PA Barnard (“the complainant”) lodged the complaint on behalf of his former wife (Mrs ME Barnard). The complainant is a member of the Municipal Gratuity Fund (“the fund”). Mrs ME Barnard instituted a divorce action in the High Court and the court granted the divorce order on 20 October 2003. In terms of the divorce settlement, Mrs Barnard was entitled to 30% of the complainant’s pension interest.

The complainant requested the fund to pay Mrs ME Barnard her 30% share of his pension interest as set out in the divorce settlement following the enactment of the Pension Funds Amendment Act 11 of 2007 (“the Amendment Act of 2007”). The fund refused to accede to the complainant’s request.

ComplaintThe complainant submitted that his former wife (Mrs Barnard) is entitled to claim her 30% share of his pension interest immediately as legislation has been enacted in terms of which a non-member spouse can claim his/her share before the member spouse retires or receives his benefits.

Response

Technical pointsThe fund raised a number of technical points in its response. Firstly, it argued that the complainant’s complaint does not constitute a complaint as defined in the Pension Funds Act (“the Act”). Secondly, it submitted that the complainant failed to lodge a complaint with the fund first before approaching this tribunal.

The meritsThe fund averred that it cannot apply the amended section 37D of the Act as if it applies retrospectively following this tribunal’s ruling in the matter of Cockroft v Mine Employees Pension Fund PFA/WE/11234/2006/LS. It pointed out that it is not bound to follow a determination issued in respect of other funds as the determinations of the Adjudicator do not

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create a legal precedent or fall within the principle of stare decisis.

Further, it indicated that it is not bound by the divorce order as the fund’s name is not mentioned in the order and it does not order the fund to pay the non-member spouse her portion of the pension interest. Held

Technical pointsThe Adjudicator held that the complainant’s complaint falls within the ambit of a complaint as defined in the Act as it relate to the administration of the fund, to a decision taken by the fund and there is a dispute of fact or law in relation to the fund as set out in section 1 of the Pension Funds Act. Further, it was held that a member is not obliged to first lodge a complaint with a fund before approaching this tribunal as set in section 30A of the Act. The Adjudicator held that section 30A of the Act was enacted for the benefit of a complainant and as a result she may renounce the statutory right conferred on her in this regard. The technical points were, therefore, dismissed.

The meritsThe Adjudicator held that her ruling in the matter of Cockroft matter indicates clearly that the mere fact that the Amendment Act of 2007 applies to divorce orders that were existing prior to its enactment does not render its application retrospective. She held that this determination was confirmed by legislative amendment in 2008. The Adjudicator held that the Amendment Act of 2008 clarified the issue retrospectivity in section 37D(4)(d) by stating that the section applies to divorce orders that were granted prior to 13 September 2007, which is the commencement date of the Amendment Act of 2007.

As regards the naming of the fund in the order, it was held section 37D (4)(a)(aa) of the Amendment Act of 2008 only requires that the fund must either be named or identifiable from the divorce decree. Further, it was held that the question whether a fund is identifiable from the divorce decree depends on the

facts of each case. The word “identifiable” indicates that some form of investigation needs to be carried out in order to identify the fund that is involved. It was held that the duty to identify the fund concerned should rest on the board of trustees as it has the resources to conduct an investigation in this regard. This is due to the fact that other role-players like the non-member spouse or a participating employer do not have the resources to identify a fund. The duty to identity a fund cannot rest on member spouses as in most cases they are not co-operative when coming to giving information about their funds. Thus, it was held that although the fund was not named in the divorce order it was easily identified from the facts or circumstances of this matter by means of an inquiry. This is due to the fact that the complainant is this matter is a member spouse and the fund can simply check its records to find out if he is indeed its member.

With regards to the submission that the divorce order does not order the fund to pay the relevant portion of the pension interest to the non-member spouse, it was held that it is sufficient if the order states the portion of the pension interest has been assigned to the non-member spouse. The amended section 37D of the Act does not require a divorce order to order the fund to pay the non-member spouse.

Moreover, it is clear from the provisions of section 37D(4)(b)(i) of the Amendment Act of 2008 that payment directly to the non-member spouse is not the only option available as the non-member has a choice of receiving a cash payment or transfer the benefit to another fund. Therefore, it was held that the fund should give the non-member spouse an opportunity to make an election as set out in section 37D(4)(b)(i) of the Amendment Act of 2008.

As regards to the fund’s submission that it is not bound by determinations issued in relation to other funds and that determinations by this tribunal do not create legal precedent, it was held that section 30O of the Act states clearly that determinations issued by this tribunal have the same status as civil judgments issued by any court. The Adjudicator held

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that determinations issued by this tribunal binds all registered funds, participating employers, members of funds, administrators of funds in dealing with similar issues. Therefore, the Adjudicator held that the fund is bound to follow determinations issued in relation to other funds if it involves similar issues.

The fund was ordered to conduct an investigation to verify if it is the fund identifiable from the decree of divorce within 15 days of the date of the determination. If it establishes that it is the find identifiable, the fund was ordered to give the non-member spouse to make an election regarding direct payment or transfer of her portion of the pension interest. The fund was further ordered to pay the non-member spouse her share within 60 days of being informed of her election.

The ImplicationsThe significance of this ruling is that it effectively removed most of the difficulties experienced by non-member spouse in relation to their share of pension interest on divorce.

This ruling confirms the decision made in the • matter of Cockroft and set out practical guidelines regarding the application of section 37D as amended. Pension Funds and their administrators can no • longer rely on technical grounds like the failure to name a fund clearly in the divorce order if it identifiable, or on the fact that there was no order to pay the non-member spouse in the divorce order. The issue of retrospectively that was raised • by pension funds prior and after Cockroft was clarified.

DEDUCTIONS FROM BENEFIT

CONSOL LTD t/a CONSOL GLASS v MOMENTUM FUNDSATWORK UMBRELLA PROVIDENT FUND AND ANOTHER (Case No. PFA/WE/24355/2008/SM) The issue was whether refusal by a fund to deduct a certain amount from the deceased’s death benefit and pay it to an employer in respect of

fraud he allegedly committed prior to his death was reasonable.

This determination sets out the circumstances under which an employer can request a fund to withhold a member’s benefit in terms of section 37D(1)(b) of the Pension Funds Act.

FactsMr Gravett (“the deceased”) was employed by Consol Ltd (“the complainant”) and was a member of the first respondent (“the Fund”) until he was suspended for allegedly committing fraud against the employer in the amount of R3 615 104.83. The deceased subsequently passed away prior to his disciplinary hearing.

Upon the deceased’s death, a death benefit became available for distribution to his beneficiaries. The complainant claimed that the fund should pay it the amount of the death benefit as the deceased committed fraud against it prior to his death. The refusal of the fund to pay the complainant the amount of the deceased’s death formed the subject matter of this complaint.

ComplaintThe complainant submitted that it is entitled to receive payment of the deceased’s death benefit as he misconducted himself by unlawfully misappropriating monies from the company through a fictitious business. It indicated that it was discovered that the fraud amounted to R3 615 104.83. It averred that the deceased undertook to provide it with a written acknowledgement of liability in respect of the fraud. Moreover, it argued that the deceased confessed the fraud to his wife prior to his death.

ResponseThe fund submitted that it can only deduct an amount from a member’s benefit in terms of section 37D(b)(ii) of the Pension Funds Act if a member has in writing admitted liability to the employer or a court judgment has been obtained against the member. It argued that the complainant did not seek a court judgment against the deceased prior to his death. Further, it

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pointed out that the admission of liability does not comply with section 37D(b)(ii)(aa) of the Act.

HeldThe Adjudicator held that it is common cause that the complainant did not obtained a judgment in a court in respect of any compensation for fraud against the deceased. The complainant only relied on an extract wherein the deceased admitted liability. Held that this is problematic insofar as the deceased never actually furnished it with a written acknowledgement or admission of liability prior to his death as contemplated in section 37D(b)(ii)(aa) of the Pension Funds Act. It was held that there is no evidence which indicate that the extract was done by the deceased as it was not signed or dated. Further, it was held that it is not clear from the extract whether the deceased admitted liability to the complainant in respect of any damage by theft, dishonesty, fraud or misconduct. The admission of liability does not mention the complainant or the amount of the fraud. Further, section 37D(b)(ii) of the Pension Funds Act applies to members and employers only. In this matter there was no employer and employee relationship as the deceased passed away and the matter involve beneficiaries of the death benefit.

Thus, it was held that the complainant failed to discharge its evidentiary burden by producing proof that the deceased admitted liability in writing to it prior to his death. Thus, it was held that a deduction of the deceased’s death benefit in these circumstances will be contrary to the provisions of section 37D(b)(ii)(aa) and section 37A of the Pension Funds Act. The complaint was dismissed.

The Implications A deduction from a benefit in favour of an • employer can only be made in terms of section 37D(b)(ii)(aa) of the Pension Funds Act if there is a clear written acknowledgement of liability or a court order. The written acknowledgement of liability must • amount to an unequivocal admission of liability and must be signed by the person concerned.

MALADMINISTRATION OF FUND AND LEGAL COSTS

GF OSBOURNE v MM RETIREMENT ANNUITY FUND, MOMENTUM GROUP LIMITED AND GILLMICH BUSINESS FORMS (PTY) LTD (Case No. PFA/GA/18285/2007), is another important ruling relating to the unlawful termination of the complainant’s membership of a fund by a pension fund administrator on the grounds that he ceased contributions prior to his selected retirement date. This matter involves maladministration of a fund by an administrator which resulted in the complainant suffering prejudice on his retirement benefit. Further, for the first time ever the Adjudicator issued a legal costs order against a pension fund administrator for all reasonable legal expenses incurred by a member in lodging a complaint.

FactsMr GF Osbourne (“the complainant”) was employed by Gillmich Business Forms (Pty) Ltd (“the employer”) as a financial manager from May 2002 until he was dismissed in March 2004. The complainant was a member of MM Retirement Annuity Fund (“the fund”) while he was employed by the employer until his membership was terminated in January 2005, ten months after the termination of his employment.

Because at the time of the commencement of his employment, the complainant did not meet the eligibility requirements for membership of the fund in which the employer participated, the complainant

Mr GF Osbourne

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had entered into an arrangement with the employer in terms of which a certain amount would be deducted from his salary by the employer as contributions to the fund and remitted by way of a debit order from the employer’s bank account and paid to the fund. This arrangement continued after the complainant’s dismissal in March 2004 until it was discovered in January 2005 whereafter Momentum Group Limited (“the administrator”) reimbursed the employer all the contributions made to the fund in respect of the complainant and terminated the complainant’s membership of the fund. The termination of the complainant’s membership in turn led to the underlying policy of insurance being lapsed.

ComplaintThe complainant is aggrieved by the termination of his membership of the fund. He contended that the administrator should not summarily have terminated his membership and paid his contributions to the employer as it was his monies in the first place that paid contributions to the fund. The complainant submitted that the amount deducted from his salary in respect of contributions amounts to R48 400.00. He argued that a further amount of R46 200.00 was erroneously paid by the employer from its bank account as contributions to the fund subsequent to his dismissal from employment.

Further, the complainant submitted that the employer is guilty of fraud by falsely claiming that the payments from its bank account were never authorised and that it committed theft by receiving and retaining monies that belong to the complainant. Moreover, the complainant stated that the administrator’s unilateral action constitutes a direct infringement of his rights in that: he was denied access to his investment, he was forced to incur unnecessary legal expenses and that he was caused unnecessary mental anguish and suffering over a protracted period. Therefore, the complainant seeks an order directing the administrator to immediately reinstate his membership of the fund, to give him immediate access to the proceeds of his investment, to pay his legal expenses and mental anguish and suffering.

ResponseThe respondents submitted, inter alia, that the insurance policy underlying the complainant’s membership of the fund lapsed at inception when all the contributions paid by the employer on the complainant’s behalf through a debit order on the employer’s bank account signed by the complainant were refunded on the basis of the complainant’s employment having been terminated. The administrator vehemently disputes the authority of the complainant to sign the debit order in respect of his fund contributions on behalf of the employer. The respondents indicated that, the administrator received instructions from the employer to have the debit order cancelled as the complainant had no authority to sign them in respect of his contributions. Therefore, the administrator submitted that it had no option but to cancel the underlying policy of insurance and refund the contributions paid since the complainant did not have the necessary authority to sign the debit order.

HeldThe Adjudicator held that Rules 5.2 and 5.3 of the fund’s rules entitle the administrator to terminate the complainant’s membership of the fund in the event that he terminates contributions to the fund before the underlying policy of insurance acquires a “paid-up” value. It was held that the administrator has provided no proof besides the apparent ipse dexit of the employer that the contributions made on behalf of the complainant were not deducted from his salary and further that the contributions were unlawfully made. It was held that what appears to have happened is that when the employer discovered some 10 months after the complainant’s dismissal that his contributions had erroneously continued to be paid to the fund, the employer demanded from the administrator a refund of all the contributions made in respect of the complainant, including those that were deducted from his salary during the tenure of his employment. The administrator merely accepted what the employer said without further investigations. The complainant, on the other hand, has provided documentary proof in the form of pay slips that monthly deductions of R2 200.00 were

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effected from his salary by the employer in respect of retirement annuity fund contributions.

It was held that the complainant’s contributions for the period June 2002 to March 2004 were lawfully deducted from his salary and formed his contributions to the fund and should never have been repaid to the employer. Further, it was held that the policy of insurance underlying the complainant’s membership of the fund should not have been lapsed at the time that he ceased his contributions as the policy had at that time acquired a “paid-up” value. Thus, in lapsing the policy, the administrator had acted wrongfully and unlawfully resulting in the complainant incurring pecuniary loss. It was held that the administrator is liable to compensate the complainant for that loss.

With regards to the complainant’s claim for immediate access to the proceeds of the policy, it was held that this tribunal is not competent to grant such relief in terms of the Income Tax Act of 1962. It was held that this Act preclude a retirement annuity fund from allowing a member access to monies invested in the fund until the member attains retirement age as stipulated in the fund’s rules.

As regards legal costs, it was held that this tribunal has the power to issue costs orders in terms of the section 30O of the Act read together with the Uniform Rules of the High Courts. The Adjudicator held that a complainant is entitled to recover all reasonable costs incurred in appointing a legal representative to properly lodge his complaint. It was held that a cost orders should be issued against the administrator as it conducted its investigations prior to terminating the complainant’s membership of the fund in a very lax manner as a result of which the complainant incurred legal expenses in lodging his complaint. Moreover, it was held that no case has been made regarding both the patrimonial and non-patrimonial damages that the complainant seeks. The complainant also failed to advance any case of fraudulent misrepresentation against the administrator.

The orderIt was declared that the fund and the administrator had no right to lapse the policy of insurance underlying the complainant’s membership of the fund when he ceased making contributions to the fund in March 2004 prior to his selected retirement date.

The fund and the administrator were jointly and severally directed to reinstate the complainant’s membership of the fund relating to his contributions from June 2002 to March 2004 to the value it would have currently been had his policy not been terminated.

The fund and the administrator were ordered further (jointly and severally) to pay interest to the reinstated value of the policy at the mora rate of 15.5% per annum reckoned from the date of this ruling until the date of reinstatement.

The administrator was ordered to pay the complainant’s costs of suit on a scale as between party and party calculated in accordance with the Magistrate’s Court tariff within 30 days of this determination.

The implications The implication is that a fund and its administrator • have no right to automatically terminate a member’s membership of a fund without any authority and without a proper investigation. That a fund and its administrator may incur legal • costs if a member secure the assistance of a legal representative in order to properly present his complaint before this tribunal.

DUTY OF FUNDS TO PROVIDE MEMBERS WITH BENEFITS STATEMENTS AND THE CONTENTS THEREOF.

M WENTWORTH v GG UMBRELLA PROVIDENT FUND, GARRUN GROUP EMPLOYEE BENEFITS (PTY) LTD, NEW DAWN HOLDINGS (PTY) LTD AND DYNAM-IQUE FUND ADMINISTRATORS (PTY) LTD (Case No. PFA/GA/14178/2007/SM), this ruling relates to the duty of a fund to issue benefit

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statements to a member on a regular basis and the failure of a participating employer to pay contributions timeously.

The determination is important in the sense that it sets out the contents of benefit statements in light of legislation from USA and UK. All funds needs to ensure that benefits statements include all the minimum information required by a member in order to exercise and protect his/her rights and benefits. The determination also sets out the frequency of issuing benefit statements to members. The determination requires that the language used in benefit statements should be simple in order to provide all members with reasonable access to relevant information regarding their benefits.

FactsMr M Wentworth (“the complainant”) was employed by New Dawn Holdings (Pty) Ltd (“the employer”) from 1 April 2004 until he resigned on 31 May 2006. Upon his resignation, the complainant joined Relational Database Consulting (Pty) Ltd in June 2006. The complainant is a member of GG Umbrella Provident Fund (“the fund”).

During January 2006 the complainant requested information relating to his benefit from Dynam-Ique Fund Administrators (“the administrator”). ComplaintThe complainant submitted that the administrator failed to provide him with information relating to his benefits in the fund. He argued that the last benefit statement was issued to him in November 2004. Further, the complainant stated that he later realized that the employer failed to pay contributions to the fund from October 2005 until May 2006.

Moreover, the complainant submitted that although the employer is taking steps to pay the outstanding contributions, this is taking too long and that his benefits in the fund cannot be paid or transferred to another fund due to the delay in the payment of the outstanding contributions.

Responses

Response on behalf of the fundThe fund indicated that it became aware of the non-payment of contributions by the employer on 11 May 2006. It argued that a meeting was held at the Financial Services Board (FSB) regarding this issue on 27 July 2006. It submitted that the employer agreed to work with the administrator to rectify the issue of the outstanding contributions. It averred that after the auditors have verified the outstanding amounts and interest, the outstanding contributions amounted to R4,656,359.57 as at 31 October 2007.Further, it pointed out that the employer and the fund signed an agreement which constitutes section 18 scheme. Furthermore, he indicated that the employer has already paid the following amounts to the fund: R400,000.00, R320,000,00, R320,000.00, R300,000.00 and R300,000.00.

The employer’s responseThe employer confirmed that an agreement was signed with the fund regarding the payment of the outstanding contributions. Further, it averred that members will not be prejudiced as the outstanding amount was verified by auditors and calculated on the basis of a prescribed formula.

Held

Provision of benefit statementsThe Adjudicator held that members of funds should be provided with benefit statements in order to exercise and protect their rights and benefits. The members’ entitlement in this regard in based on the provisions of section 7D(c) read together with Circular PF No.130. It was held that the provision of regular benefit statements is important for the purposes of accountability.

Frequency of providing benefit statementsIt was held that the frequency of providing such benefit statements is normally set out in the fund’s rules. Circular PF No.86 (issued by the FSB) requires that benefit statements should be issued to members not later than six months after the financial year end

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of that fund. An examination of legislations in USA and UK indicates that benefit statements should be issued to members at least annually depending on the type of fund. However, it was held that it is reasonable to expect each fund to issue benefit statements to members every twelve months.

The contents of benefit statementsThe Adjudicator held that Circular PF No.86 sets out the minimum information that should be included in a benefit statement. This include, inter alia, details of the fund, namely, its name and registered address, details of a member’s benefits like pensionable salary, date of calculation, benefits that become payable at retirement, anticipated formula based on current salary, rate of contributions and information relating to transfer of benefit from other funds.

However, after examining the provisions of The Pension Protection Act of 2006 (USA) and The Occupational and Personal Pension Scheme (UK), the Adjudicator held that also a benefit statement should contain the following essential information:

Details of the fund e,g, fund name and its • registered address Personal details of the member e,g, member’s • name, date of birth, date of admission Details of benefits, pensionable salary, date of • calculation, benefit that becomes payable on retirement, death, resignation, disability and the formula based on current salary Details of member or beneficiary’s total accrued • benefit, his/her vested accrued benefit or the earliest date on which the accrued benefit will become vested An explanation of any permitted disparity that • may be applied in determining accrued benefits Statement which explain how the benefit is • calculated and investment risk involved Details of contributions by both the member and • the employerAny deductions made from the benefits• Information relating to transfer from other funds • and section 14 transfers.

The language used in benefit statementsIt was held that a benefit statement should be formulated or drafted in a way that can be understood by every member of the fund. Funds should avoid using too much technical words in benefit statements having regard to the high level of illiteracy in our country. It was held that the structure and format should be simple and easily understandable.

Was there a breach of the duty to provide benefit statements in this matter?It was held that there fund failed to provide any cogent reasons for its failure to provide the complainant with benefit statements. t is clear that the failure to provide the complainant with benefit statements had an adverse effect on his benefit as he subsequently realized that contributions were not been paid properly by the employer. Therefore, it was held that the fund and the administrator failed to comply with their fiduciary duties to act in good faith and in the best interest of the complainant. The Adjudicator indicated that a punitive sanction would have been ordered against the fund and the administrator had the complainant requested it.

Payment of contributions by the employerIt was held that it is clear that steps have been taken to ensure that the employer pays the outstanding contributions. However, it is clear that the complainant is been prejudiced in respect of the payment of his benefit and the investment thereof as a result of the delay by the employer to pay all outstanding contributions to the fund. This is due to the fact that the complainant cannot excess his benefit or transferred it to another fund until such time that the employer pays out all outstanding contributions. Therefore, the appropriate relief was that the fund should calculate the amount that would have been paid to the complainant had the employer regularly and timeously paid all contributions due. The employer must then be ordered to pay the complainant his withdrawal benefit together with interest as calculated by the fund.

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The Implications The fund and the administrator have a duty to • account to members on a regular basis by way of providing them with benefit statements. The failure to provide a member with benefit • statements on a regular basis may prejudice a member and result in a damage award against the fund or its administrator. The contents of benefit statements should be • sufficient to allow a member to exercise and protect his/her rights. A delay by an employer to pay contributions • should not be allowed to prejudice a member in terms of a transfer or payment of his benefit.

MALADMINISTRATION OF FUND AND RECOVERY OF NON-PATRIMONIAL LOS DB WELENSKY v OLD MUTUAL LIFE ASSURANCE COMPANY (SA) LIMITED (Case No.PFA/GA/6550/2005/SM) This ruling involves an alleged maladministration of the complainant’s benefit by the fund’s administrator in delaying the part-payment and part-transfer of his benefit to another investment vehicle. The importance of this determination is that for the first time ever the Adjudicator indicated that this tribunal, like any other court, has the power to issue costs orders e,g medical costs and legal costs.

FactsMr DB Welensky (“the complainant”) was a member of the Nedcor Defined Contribution Provident Fund (“the Fund”) during the tenure of his employment with Nedcor until his retirement from service and the fund

on 1 September 2004. At the time of his retirement, the complainant’s benefit from the fund amounted to R1 197 894.66.

The complainant instructed Old Mutual Life Assurance Company (SA) Ltd (“the administrator”) to pay him one third of his benefit in cash and to transfer the remaining amount to the Board of Executors (“BOE”) to purchase an annuity.

ComplaintThe complainant is aggrieved by the alleged delay caused by the administrator to effect part-payment and part-transfer of his retirement benefit. The complainant contends that despite having retired from the fund on 1 September 2004, his cash payment was only effected to him on 11 November 2004. He further asserts that the remainder of his benefit was only transferred to BOE on 18 January 2005, on account of an administrative error occasioned by the negligent conduct of the administrator. Further, he alleges that the transfer portion of his benefit was indeed transferred to BOE, but due to an error on the part of the administrator, the money was allocated and paid to one JF Bennet, and such error was only rectified on 18 January 2005.

The complainant averred that as a result of the conduct of the administrator, he suffered loss in the form of interest, firstly, on the amount of R1 197 894.66 for the period 1 September 2004 to 11 November 2004 and loss of interest on the amount of R850 894.66 FROM 12 November 2004 to 18 January 2005.

He further submitted that the events explained above caused him to suffer severe stress as a result of which he underwent medical treatment, which cost him R2 599.00. Moreover, the complainant averred that as a result of the conduct of the administrator he had to obtain legal advice as to the legal remedies available to him, which cost him R3 285.63.

ResponseThe respondent argued that the delay was caused by the failure of the participating employer to submit all the documentation required by the administrator.

Mr DB Welensky

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It states that on 26 August 2004, it received from the complainant a document advising of his termination of service but because the document was not properly completed by the employer. The administrator further states that as a result of the late triggering of his exit, his funds could not be disinvested and that disinvestment of his funds only occurred on 13 October 2004, 14 days after he was exited by the employer. It asserts that it was only advised of the complainant’s exit on 27 September 2004.

On 28 September 2004, the administrator indicated that it requested from the employer a properly completed termination form which it received on 4 October 2004. On 11 November 2004, a tax directive was received from SARS and on the same date payment was effected to him and a transfer made to BOE.

The administrator denies that the complainant’s transfer benefit was erroneously paid to another person. It contends that while drafting a “confirmation of payment” letter to him, it erroneously addressed the letter to one JF Bennet and that there was no error in the “Recognition of Transfer” form, which was sent to BOE to notify it of his details and the amount transferred on his behalf. The administrator further submitted that the complainant was paid interest on the capital amount at Nedbank call rates of 6% because of the delay in the payment of his benefit.

Held

Claim for interestThe Adjudicator held that a member’s claim for interest may only arise from either the rules of the fund or a contractual agreement or the principle of unjustified enrichment. It was held that the fund’s rules do not specify the rate at which interest for the late payment should be made but leaves the issue to the discretion of the trustees and the administrator. In the absence of any evidence specifically disputing the legality of the rate at which interest for the late payment was made by the administrator, this tribunal is unable to find that the Nedbank call rate of 6% was not the rate reached by agreement between the fund trustees and the administrator.

In any event, this tribunal is of the view that the delay in paying out the benefit was neither wrongful as far as the fund and/or the administrator is concerned nor attributable to any fault on their part. It was held that it was impossible for the administrator to process the complainant’s retirement claim prior to 27 September 2004 as it was not yet properly advised by the employer of his exit from the fund.

Claim for medical expensesThe Adjudicator held that a plaintiff may claim compensation for all pain, suffering and discomfort flowing from a negligent act or omission as well as the consequent medical treatment. However, it was held that medical evidence and other relevant evidence is very important in understanding the nature, seriousness, extent, intensity and the loss incurred by the complainant. The onus is therefore on the complainant to submit medical evidence which indicates the extent of his injury to personality and the loss he incurred in medical treatment. Although the complainant submitted medical evidence relating to his medical condition, the claim for medical expenses falls away as the administrator cannot be held liable for the delay in the payment and transfer of his benefit.

Claim for legal costsAs regards legal costs, it was held that this tribunal has the power to issue costs orders in terms of the section 30O of the Act. A complainant is entitled to recover all reasonable costs incurred in appointing a legal representative to properly lodge his complaint. The Adjudicator held that the object is that a party to whom costs are awarded is afforded full indemnity for every expenditure reasonably incurred by him in relation to his claim. However, it was held that a legal cost order cannot be issued against the administrator as there is no fault on its part regarding the delay in the transfer and payment of the complainant’s benefit. The complaint was dismissed.

The Implications An administrator of a fund cannot be held liable • for any loss suffered by a member if there is no fault that can be attributed to it.

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This tribunal has power to issue costs order • including orders involving non-patrimonial loss.

THE RIGHTS OF A NON-MEMBER SPOUSE TO REQUEST INFORMATION FROM A FUND

GM MAHLANGU Vs SOWETO CITY COUNCIL PENSION FUND AND OLD MUTUAL LIFE ASSURANCE COMPANY (SA) LTD (Case No. PFA/GA/9384/2006/SM), this matter relates to the right of a non-member spouse to request relevant information from the fund relating to his portion of the pension interest. This determination lays out some important principles relating to the rights of a non-member spouse in a divorce matters, namely, whether the non-member spouse qualifies as a complainant as defined in the Pension Funds Act (“the Act”), whether the non-member spouse (like a member or beneficiary of a fund) is entitled to request information from the fund relating to his share of the pension interest.

FactsMr GM Mahlangu (“the complainant”) is the former husband of Mrs GN Mahlangu (“Mrs Mahlangu”) who was a member of the Soweto City Council Pension Fund (“the fund”) which is administered by Old Mutual (“the administrator”). The complainant instituted divorce proceedings against Mrs Mahlangu and on 17 May 2000 the South Gauteng High Court issued an order directing the fund to withhold payment of half (50%) of Mrs Mahlangu’s pension benefit

pending the finalization of the divorce proceedings. However, as at the date when this complaint was lodged with this tribunal the divorce proceedings had not been finalized.

ComplaintThe complainant submitted that the fund and its administrator failed to provide him with information regarding the balance of the remaining half of Mrs Mahlangu’s benefit in the fund and information as to whether any monthly payment is being made to Mrs Mahlangu from the remaining benefit in the fund.

Response

Technical pointThe fund and its administrators (“the respondents”) indicated at the outset that this complaint does not amount to a “complaint” as defined in section 1 of the Act and should therefore be dismissed.

The meritsThe respondents pointed out that half of Mrs Mahlangu’s pension benefit was withheld in the fund as required in terms of the court order pending the finalization of the divorce proceedings. They contended that the amount that is being held in the fund in respect of the complainant’s share of his former spouse’s pension interest amounts to R146 634.94.

Further, the respondents asserted that no monthly pension is being paid to Mrs Mahlangu in respect of the remaining half of the benefit that was assigned to the complainant in terms of the court order.

As regards the payment of the remaining half, the respondents stated that Mrs Mahlangu is no longer a member of the fund and as a result payment of the remaining half will be contrary to section 7(7) of the Divorce Act and section 37A of the Act. Moreover, the respondents averred that the divorce order and the divorce settlement should be drafted properly so that the fund is identifiable from the order or the settlement.

Mr GM Mahlangu

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Held

Technical pointAfter examining the definition of a “complaint” in the Act, the Adjudicator held that a complaint lodged by the non-member spouse amount to a complaint as defined as it relates to the administration of his share of the pension interest and it is clear that the non-member may sustain prejudice in consequences of the maladministration of his portion of the divorce benefit by the fund through an act or omission.

The Adjudicator held that although the non-member spouse does not fall under one of the categories of a complainants as defined in the Act and he is not a member or beneficiary as set out in section 37D(4)(c)(i) of the Act, he qualifies as a complainant by virtue of the existence of court order which entitles him to receive a portion of the pension benefit from the fund.

Held that the complainant’s (non-member spouse’s) qualification as a complainant and his entitlement to lodge a complaint is based on the provisions of section 7(7) of the Divorce Act of 1979 and section 37D(4)(a) of the Act. Thus, the complainant as the non-member spouse is entitled to lodge a complaint in relation to his share of the pension interest as set out in the court order. The technical point was therefore dismissed.

The merits

Is the non-member spouse entitled to request information from the fund?The Adjudicator held that the issue is whether the complainant as the non-member spouse is entitled to request information from fund relating to his portion of the pension interest. It is common cause that the divorce proceedings have not been finalized. However, it was held that it is clear that there is a court order which required the fund to withhold payment of half of Mrs Mahlangu’s pension benefit pending the finalization of the divorce proceedings. It was held that it is evident that the remaining half of the benefit that was withheld by the fund is the

portion of the pension interest that was assigned to the complainant in terms of a court order.

The provisions of the Act (Section 7D(c) and Circular PF No.130) issued by the FSB indicates that a fund has fiduciary duties towards its members and beneficiaries. It is clear from the provisions of section 37D(4)(c)(i) of the Act that the non-member spouse is not a member or beneficiary in relation to the fund. Further, section 1 of the Act define beneficiary as a nominee of a member or a dependant who is entitled to a benefit in terms of the fund’s rules.

However, it was held that a proper assessment of the position of the non-member spouse in relation to a fund indicates that he is not totally different from the position of a beneficiary or a nominee. This is due to the fact that all of them do not have any contractual relationship with the fund. They also derive their rights against the fund by virtue of a benefit that has been assigned to them in the fund. The non-member spouse is even in a much stronger position in the sense that there is a court order which entitles him to receive a portion of the pension interest.

The Adjudicator held that the non-member spouse’s rights against the fund arises from the terms of the divorce order. It follows that the court order establishes a minimum of fiduciary relationship between the fund and the non-member spouse as the fund assumes to the duty to pay or transfer the portion of the pension interest that has been assigned to the non-member spouse. Thus, the non-member is also entitled to request relevant information from the fund relating his share in terms of section 9 of the Promotion of Access to Information Act of 2000 and section 32 of the Constitution.

Was there a failure to provide relevant information?It was held that the complainant failed to discharge his evidentiary burden to proof that the respondents failed to provide him with the information he requested. This is due to the fact that the respondents have provided him with information regarding the balance of the benefit remaining in the fund and have also informed him that no monthly payments are being

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made to his former spouse from the remaining amount in the fund.

The application of the concept of pension interest after the member spouse has exited the fundThe Adjudicator held that “pension interest” is a technical term referring to the notional benefit to which the member spouse would have become entitled had he resigned from employment. The fact that the member spouse had exited the fund does not affect the portion of the pension interest that has been assigned to the non-member spouse in terms of a court order. In this matter the complainant’s interest in the fund was secured by a court order in the fund and the respondents are fully aware of this fact. Thus, the complainant’s share of Mrs Mahlangu’s pension interest was not affected by her exit from the fund.

The Implications A non-member spouse should not be treated • differently from a member spouse, a beneficiary or a nominee when coming to a request for relevant information relating to his/her share in the fund. A non-member has right to request relevant • information in order to exercise and protect his share in the fund. Pension interest is a technical term referring to • a member’s interest in the fund and it should not affect the non-member right to his share in the fund when the member spouse exit the fund before payment thereof.

CESSION OF AN ANNUITY POLICY IN TERMS OF A DIVORCE ORDER

CE TCA WATSON Vs MM RETIREMENT ANNUITY FUND AND MOMENTUM GROUP LIMITED (Case No. PFA/GA/8037/2006), this matter concerns a refusal by the fund to pay the complainant (non-member spouse) the proceeds of her former spouse’s retirement annuity policy as set out in a divorce order. This determination sets out the following principles:

A cession (out and out cession) of the proceeds • of the retirement annuity policy in favour of the complainant (non-member spouse) in terms of

the divorce order gives him/her full rights over the proceeds of the policy. It is not necessary for the court in a divorce order • to state that the fund must endorse its records in favour of the non-member spouse or pay the portion of the pension interest to the non-member spouse if the fund concerned is named or identifiable and it is clear what percentage or amount has been assigned to the non-member spouse.

FactsMrs TCA Watson (“the complainant”) is the former spouse of Mr DA Watson (“Mr Watson”) who was the beneficiary of policy number SX 8347516 with Southern Life Association Limited (“Southern Life”). During 1999 Momentum Group Limited (“the administrator”) acquired the business of Southern Life.

On 18 February 1993 Mr Watson and the complainant’s marriage was dissolved in terms of a divorce order handed down by the South Gauteng High Court. The divorce order incorporated a settlement agreement between the parties which was made an order of the Court. In terms of settlement agreement Mr Watson agreed to cede to the complainant his policy within three months of the date of the dissolution of the marriage.

ComplaintThe complainant submitted that the respondents refused to pay her the proceeds of her former spouse’s retirement policy despite the fact that she is a cessionary to the proceeds of the policy. She indicated that her former spouse executed a document which purported to be an out and out cession of his policy in her favour following their divorce. ResponseThe administrator submitted that section 37A of the Act prohibits a cession, pledge or reduction of a member’s policy save for the exceptional circumstances provided for in the Pension Funds Act (“the Act”). It further contended that the cession

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in this matter is illegal in terms of a retirement annuity fund as defined in section 1 of the Income Tax Act, 58 of 1962. Thus, it argued that it is not bound by the cession.

Further, it pointed out that the divorce order is not valid as it does not state the percentage of the pension interest concerned, it does not order the fund to endorse its and does not compel the fund to pay the portion of the pension interest to the complainant directly.

HeldIt was held that section 37A of the Act which protect pension benefit against cession, reduction or pledge is subject to section 7(7) and (8) of the Divorce Act which provides for exception in this regard. This is due to the fact that a divorce court is allowed to transfer a portion of a member spouse’s notional pension benefit to the non-member spouse as at the date of divorce order. A proper reading of section 37A of the Act relating to the prohibition against cession is subject to exceptions as set out in the Act and the Divorce Act.

It was held that it is evident from the facts that Mr Watson ceded his retirement policy to the complainant. A valid cession was concluded between the complainant and her former spouse in terms of which he ceded his rights to his policy in favour of the complainant. It was held that the cession was an out and out cession as it amounted to transfer of the entire proceeds of the proceeds of the policy to the complainant as evidenced by the document that was signed between the parties.

As regards the respondents’ submissions relating to the validity of the divorce order, it was held that this tribunal has held in the previous matter of PA Barnard v Municipal Gratuity Fund PFA/GA/24186/08/SM that the defence relating to the requirement that the fund must be ordered to endorse its records and pay the non-member spouse is contrary to the Financial Services Laws General Amendment Act 22 of 2008 (“the Amendment Act of 2008”). It was held that as long as it is clear from the divorce order that there is

a specific amount or percentage that was assigned to the non-member spouse the complainant’s claim cannot be rejected merely on the grounds that the fund was not ordered to endorse its records and pay that amount to the non-member spouse.

It was not necessary for the divorce order to state the percentage of the pension interest that has been assigned to the complainant as it is clear that the whole policy was ceded to the complainant.

It was declared that there was a valid transfer of Mr Watson’s rights to his retirement policy by way of an out and out cession in favour of the complainant. The respondents were ordered to request the complainant to make an election within 7 days of the date of this determination and pay out her share of the pension interest.

DEATH BENEFITS

L E MPONDO v GLAXO WELLCOME SOUTH AFRICA PENSION FUND PFA/EC/9108/06/KM

FactsThe deceased, the complainant’s father, passed away when the complainant was still 9 years of age. As a result, a pension became payable to the complainant on monthly intervals as his share of the death benefit. However, in March 2002 when the complainant was 23 years of age, the pension was ceased by the respondent.

ComplaintThe complainant sought an explanation for the cessation of his benefit and wants to know what amount is owing to him as a lump sum.

ResponseIn response, the respondent argued that upon the deceased’s death, the complainant elected to have the pension outsourced to a registered insurer and this was done, thereby terminating its duties to the complainant. It was contended by the respondent that in terms of the policy document issued by the insurer in this regard, the pension would subsist until

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the complainant attains the age of 21, save for where the complainant shows at such age that he was still studying full time, in which case the pension would be continued until the complainant attains the age of 26. The respondent concluded that its duties towards the complainant terminated when it outsourced the pension to a registered insurer and therefore the complainant is not entitled to any pension.

HeldAlthough this complaint was lodged after a period of three years had elapsed between the date on which the cause of action arose and the date of lodgment and therefore time-barred, this tribunal deemed it appropriate to condone the complainant’s non-compliance with the time limit for the following reasons:

The complainant was presumably unaware of the time barring restrictions. The complainant had good prospects of success

on the merits.

It was held that there was a discrepancy between the date on which the respondent alleged that the pension was outsourced and the date recorded in the policy document as the inception date. The policy document recorded the 22nd of October 2002 as the inception date, which date was 7 months after the cessation of the pension. For this reason, this tribunal concluded that she was not satisfied that the respondent’s liabilities towards the complainant had ceased.

Further, it was held that the complainant was entitled to have his right to receive the pension reviewed in light of the fact that he was still studying at the time of cessation of such pension. It was also held that the framing of the rules is such that it grants the respondent a discretion to extend the period for which the pension is payable provided the complainant is in full time study.

In the result, the tribunal directed the complainant to furnish the respondent with proof that he was in full time study when the pension was ceased, and

the respondent to exercise the discretion granted by the rules upon receipt of the proof required of the complainant.

ImplicationsThis decision serves as a guideline for the Funds’ discretion to cease a pension payable to a dependant. Where the rules so provide, Funds should not hesitate to refrain from ceasing pension benefits payable to dependants who are still studying on a full time basis.

L S THIPE v SAMWU NATIONAL PROVIDENT FUND PFA/FS/10313/06/KM

FactsThe complainant is a daughter of the deceased. After the deceased’s death, the respondent made payment of an amount not exceeding R25 000 as a death benefit.

ComplaintThe complainant in this matter was not satisfied with the amount paid as a death benefit. She sought to know what happened to the rest of the money deducted from the deceased’s salary. She states that the benefit was supposed to equal 5 x the deceased’s annual salary plus interest. She therefore sought relief directing the respondent to pay the remainder of the benefit.

ResponseThe respondent responded that the amount paid as the death benefit represents the full refund of the deceased’s fund credit and a lump sum death benefit which was equal to 2x the deceased’s annual salary in terms of its rules applicable during the material time.

ReplyIn her reply, the complainant disputed receiving any benefit. She stated that the benefit had been paid to her aunt. She requested that the respondent compensate her for the benefit which she believed was due to her because she was at the relevant time, a major.

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HeldWhile conceding that the complaint was lodged after a period of 6 years had elapsed between the date of occurrence of the act complained of and the date of lodgment of the complaint and thus time barred, this tribunal deemed it appropriate that it condone non-compliance with time limit because the respondent had not suffered prejudice by late lodgment of the complaint and furthermore, the complainant’s prospects of success were fairly strong.

It was held that in such light as that cast by the rules, the complainant was incorrect to suggest that the death benefit was supposed to be 5 x the deceased’s annual salary. This aspect of the complaint was therefore dismissed.

With reference to the provisions of Section 37C (2) and (4) of the Act, this tribunal found that the respondent paid the entire benefit to the deceased’s sister being guided by the fact that the complainant was being maintained by such sister during the relevant time thus thinking that they had discharged their duties to the complainant. This tribunal found this to be inconsistent with the provisions of Section 37C of the Act. The Adjudicator found that the fact that the deceased’s sister took care of the complainant was irrelevant in determining the mode of payment as the complainant was no longer a minor at the time of distribution. It was held that as the complainant was a major at the time of payment, there was no basis in law to make payment on her behalf to the deceased’s sister.

The Adjudicator pointed out that although Courts are reluctant to substitute their own decisions for that of another administrative authority, it would cause unnecessary delay if the matter is remitted to the respondent. In the result, she directed the respondent to pay the complainant the amount of the death benefit.

ImplicationsThe effect of this decision is that even if a death benefit accrues at a time when a beneficiary is still a minor, if the benefit is paid out when such beneficiary

is a major, her benefit must be treated as payment to a major irrespective of the fact that it accrued during his time as a minor.

TRANSFER OF BENEFITS

H E FOURIE v NATIONAL FUND FOR MUNICIPAL WORKERS PFA/WE/18955/07/NS

FactsThe complainant had approached the respondent and requested that his fund value be transferred to the Cape Joint Pension Fund. However, the respondent refused to accede to his request.

ComplaintThe complainant felt aggrieved by the respondent’s refusal to transfer his fund value to the Cape Joint Pension Fund and thus requested that this Tribunal direct the respondent to transfer his fund value to the fund of his choice.

ResponsesIn response, the respondent pointed out that its rules do not prohibit its members from transferring to another fund. They are however, so argued the respondent, precluded by the South African Local Authority Bargaining Council which imposes a moratorium on transfers contemplated between funds pending the negotiation of the structure of pension funds.

HeldThe Adjudicator, in determining the matter, referred to the provisions of Section 13 of the Act and Rule 11 of the rules and reasoned that the Rules are supreme. It was held that since the respondent’s rules do not prohibit transfers but provide for transfers subject to consultation with the Local Authority and the fund concerned, the collective agreement of the South African Local Authority Bargaining Council is inconsistent with the rules.

As regards the question as to whether the Collective Agreement supersedes the Rules, this Tribunal held that seeing that the powers of the Trustees are limited

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only to those set out in the Rules, the Rules would in any event override any agreement contravening its provisions. It was concluded that the respondent is not bound by the terms and conditions of the collective agreement but by the Rules, and such agreement is contrary to the law and thus unenforceable.

The respondent was directed to take such steps as are necessary to ensure the transfer of the complainant’s fund credit according to the dictates of his wishes.

ImplicationsSeeing as some funds always raise the issue of the collective agreement of the South African Local Authority Bargaining Council when members elect to have their benefits transferred to other funds, this decision provides guidance that where this agreement is contrary to the Rules of such fund concerning the transfer of membership, the provisions of the Rules shall prevail over the agreement. Thus, where the Rules do not specifically prohibit a member from transferring to another fund, such member shall not be denied the transfer by reason of the agreement.

TRANSFER OF BENEFITS INTO A PRESERVATION FUND

A EVERSON v SOUTH AFRICAN RETIREMENT ANNUITY FUND PFA/KZN/9057/06/KM.

FactsThe complainant resigned from service in 1995 and acting on his financial advisor’s advice, requested that his withdrawal benefit be transferred into the respondent, a Retirement Annuity Fund. After a while, he claimed that he had been poorly advised and ought to have placed his benefit in a preservation fund which would have allowed him an option of a once-off withdrawal which he could have used to access all his money. The complainant wished to transfer his benefit from the respondent into a preservation fund of his choice and the respondent refused to accede to his request.

ComplaintIt was the complainant’s grievance that the respondent refused to allow him to transfer his benefit into a preservation fund. The complainant approached this Tribunal seeking an order directing the respondent to allow him to transfer his benefit to a preservation fund of his choice.

ResponseThe respondent confirmed that it is unable to transfer the complainant’s benefit to a preservation fund as this is prohibited by South African Revenue Service Practice Note RF 1 of 98. It contends that it is for that reason, unable to accede to the complainant’s request.

HeldWith reference to the supremacy of the Rules as set out in Section 13 of the Act, this tribunal held that the Rules of the respondent do not provide for transfer of benefits into a preservation fund.

It was further held that in light of the definition of a “retirement annuity fund” in the Income Tax Act, any retirement annuity fund which allows transfer of benefits into a preservation fund would in all probability lose its tax approval status, which would be detrimental to the members still remaining in the fund.

In the result, the complaint was dismissed.

ImplicationsThe implication of this decision is that a member cannot be allowed to transfer his benefits from a retirement annuity into a preservation fund because in terms of the law, a retirement annuity is not supposed to do this. The rationale behind this prohibition being imposed on retirement annuity funds is to prevent any prejudice which may occur in respect of the remaining members of the respondent as a result of the fund concerned loosing its tax approval status. In other words, this is a balancing of an individual member’s interests against the interests of the other members.

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DEDUCTIONS FROM BENEFITS

DUMISA HUMPHREY MVINJELWA v ALLIED PUBLISHING LIMITED, ALLIED PUBLISHING PROVIDENT FUND, OLD MUTUAL LIFE ASSURANCE COMPANY (SA) LTD PFA/GA/18011/2007/FM

FactsUpon termination of his employment with the first respondent, the complainant became entitled to a withdrawal benefit. The total withdrawal benefit of R6 404,97 payable, was deducted and paid to the first respondent by the third respondent (administrator).

ComplaintThe complainant complained about this, citing that the first respondent deducted this amount as compensation for the first respondent’s loss of a motor bike which was stolen while in the complainant’s lawful possession and during the course and within the scope of his employment with the first respondent. He reasoned that in any event, the respondent was compensated by its insurers for the loss of the motor bike. The complainant thus denied any indebtedness to the first respondent and requested that this Tribunal direct the respondents to repay the amount deducted from his withdrawal benefit.

ResponseThe respondent stated that the complainant was found guilty of negligence for loss of the motor bike in a disciplinary enquiry. According to the first respondent, the complainant agreed to reimburse the amount of R11 000,00 being the book value of the motor bike. It further stated that the complainant acknowledged indebtedness and agreed to repay the loss in amounts of R100,00 per month. The first respondent averred that before the loss could be fully repaid, the complainant absconded and as the outstanding balance was R8 149,72, the whole withdrawal benefit was deducted in reduction of such balance. The first respondent also raised the issue of time barring.

HeldWhile conceding that the matter was time barred by reason of prescription, this tribunal pointed out that as the complaint was lodged prior to 13 September 2007, it had the discretion to condone non-compliance with time limits. Thus, this tribunal deemed it appropriate that to condone non compliance because such was the importance of the matter that it was in the interest of justice for the matter to be condoned. Furthermore, it was held that the delay was not inordinately long.

As regards the provisions of Section 37A, D, and 19(5)(a) of the Act, it was held that no court judgment or admission of liability by the complainant had been secured by the first respondent prior to deducting the complainant’s withdrawal benefit. It was further held that even in the instance where the first respondent were to secure a court judgment in its favour, it would be of little assistance since the Act requires that the deduction relate to damage caused by reason of fraud, theft, dishonesty or misconduct by the complainant. Therefore, in this matter, as there was no dishonesty or any of the above, the Adjudicator decided that the deduction made from the complainant’s withdrawal benefit was unlawful. The first respondent was directed to repay the amount deducted together with interest thereon at the prescribed rate.

ImplicationsThis decision puts emphasis on the reasons for which a benefit due to a member may be deducted. It demonstrates that a benefit cannot be deducted by reasons set out in the Act. It stresses the requirements set out in the Act for this deduction. These reasons are set out as theft, fraud, dishonesty or misconduct as the case may be, perpetrated by the member.

ACCESS TO INFORMATION

J D SHAHIM v SHAHIM PROVIDENT FUND PFA/FS/18770/07/NS

FactsThe complainant sought information from the respondent, amongst other things, he required

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the respondent to provide information pertaining to contributions and benefits paid in respect of other members of the respondent. The respondent refused to furnish this, citing that such information was confidential.

ComplaintThe complainant complained about this, and requested that this Tribunal direct the respondent to provide such information.

ResponseThe respondent confirmed that it refused to furnish the complainant with this information citing that it is confidential.

HeldWith reference to Section 35 of the Pension Funds Act, this Tribunal held that the information requested by the complainant does not fall within the ambit of the information in Section 35. It was held that the complainant has not shown that such information relates to any question which affects his rights, interests and expectations. It was, therefore, concluded that such request relates to the personal information of former and existing members of the respondent and as such, the respondent was justified in denying the complainant access to such information.

The Adjudicator found that the only information the complainant was entitled to in light of his request were the names of the Trustees who have been appointed as such in terms of Rule 14(c). In the result, the respondent was ordered only to provide the complainant with the names of the aforementioned trustees.

ImplicationsThe implication of this determination is that although members are entitled to be allowed access to some information, this may not include information relating to the personal affairs of the former or existing members of the fund. It further shows that a member must justify his demand for information by showing that it affects his interests, expectations and rights, where necessary.

DEATH BENEFITS (PERMANENT LIFE PARTNER)

N G HLATHI v UNIVERSITY OF FORT HARE RETIREMENT FUND, UNIVERSITY OF FORT HARE & Z HANISE PFA/EC/9015/2006

FactsConsequent to the deceased’s death, who had been cohabiting with the third respondent during his lifetime, a death benefit amounting to R400 000,00 became available for distribution. The first respondent resolved to allocate 33,33% of the death benefit to the complainant (Mother to the deceased) and 66,66% to the third respondent (Cohabitant).

ComplaintThe complainant complained of the first respondent’s decision to include the third respondent in the distribution of the death benefit citing that the third respondent was not dependent on the deceased and held a decently paying job, and that she was the sole beneficiary of the deceased seeing as the third respondent was not married to the deceased. She thus requested this Tribunal to set the first respondent’s decision aside and order that the death benefit be allocated to her in its completeness.

ResponseThe first respondent stated that according to an affidavit filed by the third respondent, she was unemployed and financially dependent of the deceased. She was also found to have been the common law spouse of the deceased due to her having shared expenses with him. The first respondent averred that it feared that the complainant would not benefit from the deceased estate and that it considered the fact that the complainant as the executrix of the estate, had access to the funds of the deceased estate.

The third respondent in response, stated that her relationship with the deceased endured for a total of 17 years, with 9 years of cohabitation. She stated that they had a mutually supportive, loving and happy relationship and they shared expenses. She pointed out that she contributed to the deceased’s

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tuition fees until his completion of studies and that they were planning to get married. She stated that the complainant’s allegation that she had a decently paying job was unsubstantiated.

HeldIn departing to examine the merits of the complaint, the Adjudicator pointed out that the complainant was a dependent as defined in Section 1 of the Act.

While refusing to subject herself to the argument that the third respondent was a spouse of the deceased, the Adjudicator nevertheless pointed out that the third respondent was a permanent life partner of the deceased and thus qualified as a factual dependent as defined in Section 1 of the Pension Funds Act as amended.

Furthermore, the Adjudicator held that it would be contrary to the intention of the legislature in Section 1 (b)(i) of the Act, for the first respondent to exclude the complainant from the distribution of the death benefit owing to the existence of interdependency between the deceased and the complainant as opposed to total or whole dependency of one on the other. She stated that it suffices for the complainant to establish interdependency as opposed to the existence of a dominant-servient relationship between the deceased and herself in order to be considered in the distribution of the death benefit. She found that since the complainant and the deceased shared expenses and mutually supported each other, factual dependency had therefore been established.

The Adjudicator held that in view of the fact that the third respondent ran a common household with the deceased for 9 years, there was interdependency and therefore the decision to award her 66,66% of the benefit was reasonable and proper. The complaint was ultimately dismissed.

ImplicationsThis decision shows that a cohabitant is entitled to be considered in the distribution of a death benefit irrespective of the fact that no valid marriage existed between the deceased and the claimant. It also

shows that dependency is not established by the existence of a dominant-servient relationship, but by interdependency between the deceased and the claimant of the death benefit.

BULKING

Bulking is a term used to describe the practice by the administrators of combining each fund’s current account balance with that of other funds in order to secure a preferential rate of interest from the bank account concerned. For bulking purposes, funds’ current account balances are added together.

B Dollman v The Irvin & Johnson Retirement Fund and Others (Case No: PFA/WE/13155/07/KM) is a case dealing with undisclosed profits earned by the second and third respondents (collectively referred to for the sake of convenience as “NBC”) during the course of their administration of the first respondent (“the fund”), a pension fund duly registered in terms of the provisions of the Act.

FactsThe complainant is a former member of the fund, having retired in August 2003. He claims that NBC made certain unlawful profits in the course of its mandate of administering the fund which ought to have accrued to the fund. The profits were generated through the aggregation or “bulking” of the bank accounts of the pension funds administered by NBC, thereby earning preferential interest rates for each fund. As a “reward” for putting this arrangement in place, NBC retained a portion of the additional interest for itself without disclosing this to the fund.

Complaint The complainant is aggrieved by the decision of the board of trustees of the fund to ratify the conduct of NBC with retrospective effect, thereby allowing it to retain the secret profits. The complainant is of the view that the decision is not in the interests of the fund or its members, past and present, and is in excess of the trustees’ authority.

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ResponseA response was received from the second respondent, seemingly on behalf of itself and the third respondent. It states that a full disclosure was made to the trustees of the fund in respect of the issues raised in the complaint. For that reason it was deemed appropriate that the fund should respond independently to the complaint.

Response from the FundThe fund states that the second respondent (NBC) was appointed as the administrator of the fund with effect from 1 April 2000. During 2006 when the press reported on the practice of “bulking” by members of the retirement fund administration industry, the fund was advised by NBC that it had not engaged in “bulking” practices, but that it had rendered a cash management service. NBC also informed the fund that it had retained a portion of the interest so earned as a fee for the rendering of the cash management services. The fund reports that it then requested a full disclosure from NBC of all interest earned in the fund’s bank account and of all amounts retained by NBC as a fee.

NBC then delivered to the fund statements produced by Standard Bank. It was apparent from this that a total amount of R3 437 750 had been paid by Standard Bank as interest on the cash balances in the fund’s bank account for the period 26 April 2000 to 31 March 2006. The statements confirmed that of this amount, an amount of R3 068 640 was credited to the fund and an amount of R369 109 was retained by NBC. Thus, NBC received 10.74% of the total interest amount earned on the fund’s bank account over this period.

During a meeting that was held on 12 September 2006, the board took cognisance of the following factors: The fund had benefited from participating in the cash management practice, the non-disclosure of the fees earned through bulking the cash accounts was prevalent throughout the industry. The only issue at stake was the fact that NBC had failed to inform the fund that it was earning a fee for the rendering of a service, although, in the board’s view, NBC was

not contractually entitled to earn a fee for services rendered to the fund without agreement from the fund on such fees.

The fund denies that the board’s decision to ratify NBC’s undisclosed fees in respect of the cash management service was beyond its authority. It also disputes that it was not in the best interests of the fund and its members.

HeldThe Adjudicator held that this grievance falls within the definition of a complaint, specifically relating to the administration of a fund, and containing the allegations set out in paragraphs (a) and (b). The question is whether the board of trustees of the fund had the authority to ratify with retrospective effect the undisclosed profits retained by NBC. Bearing in mind the provisions of section 7C and D the board may not dispose of any property of the pension fund (which would include secret profits to which the fund was entitled) in a manner calculated to gain any improper advantage to another person. The fund has cited its commercial relationship with NBC as a factor in deciding not to reclaim the profits.

The Adjudicator in this matter is not persuaded that the board’s decision to ratify the unlawful retention of secret profits by its administrator could possibly have been in the interests of the fund or its members. The only entity in whose favour such a decision could operate is the service provider itself, NBC. She further held that the complainant is incorrect in assuming that members or former members have any direct entitlement to undisclosed profits restored to the fund. On the contrary, those monies accrue to the fund, and must be utilised for the benefit of the fund as a whole as determined by the board of trustees. There is no guarantee that members or former members will be entitled to share in them. The board of trustees of the fund, in accordance with its statutory mandate of governing the fund, is obliged to decide how best to utilise those funds. The complainant does not have a direct entitlement to a share in the recovered profits, and the Adjudicator is therefore precluded from ordering relief in respect of

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the remaining aspects of his complaint, all of which are aimed at enforcing a direct claim on the funds.

The Adjudicator concluded that the decision of the board of trustees of the first respondent taken on 12 September 2006 (in terms of which it released the second and third respondents from their obligation to restore the undisclosed profits accruing in the course of their mandate to the first respondent) be set aside and the fund is directed to take the appropriate steps to recover the profits referred to above from the second and third respondents, together with interest thereon from date of accrual of the profits to date of final payment at the rate of 15,5%.

MALADMINISTRATION OF FUND

D Zotta v The South African Retirement Annuity Fund and Another (Case No: PFA/GA/7879/2006/CMS) concerned failure of the fund to properly carry out a fund member’s instruction as to how his value in the fund should be invested upon his reaching retirement age.

FactsThe complainant was a member of the fund from 1 December 1996 until 1 December 2005 when he attained retirement age. The member instructed the fund to utilise his pension fund benefit in a certain way which was within the parameters of the Income Tax Act 58, 1962. For some inexplicable reason, the fund omitted to carry out the member’s instruction but instead carried out an instruction which had already been revoked by the member.

ComplaintThe member was aggrieved by failure of the fund to properly carry out his instruction as to how his value in the fund should be invested upon his reaching retirement age and he lodged the complaint with the Office of the Pension Funds Adjudicator seeking an order directing the fund and its administrator to execute his investment instruction.

ResponseBoth the fund and its administrator conceded the administrative error on their part in failing to give effect to the member’s instruction, but argued, however, that the member had to repay part of the benefit already effected to him in order for the respondents to execute his lawful instruction.

HeldIn analysing the legal issues involved in the case, the adjudicator came to the conclusion that the complainant had to be put in the same position he would had been in had his lawful instruction been properly executed in the first place. The respondents were ordered jointly and severally to carry out the member’s lawful instruction.

E A Lockhat v Professional Provident Society Retirement Annuity Fund and Another (Case No: PFA/KZN/720/2004) concerns the alleged failure to realize the projected maturity values that were illustrated to the complainant when he extended his contract with the first respondent, the alleged failure to provide the complainant with confirmation of contribution increments and the alleged failure to inform the complainant about an altered fund portfolio.

FactsThe complainant was a member of the fund until 01 October 1997. He requested an extension of the contract for a further six months to 01 April 1998. The respondents agreed to that. The complainant also increased his monthly contributions to R 1 500 per month during the contract extension period. As a result of the extension, the maturity value of R 413 949.53 was reinvested in the Balanced Fund. On 01 April 1998 the maturity value decreased to R 390 427.65.

ComplaintThe complainant complains about the reduced retirement benefit he received when compared to what was illustrated to him six months earlier when he decided to extend his contract.

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ResponseThe second respondent submits further that the contract investment grows according to the actual growth rates and that no investment guarantees were given for the 6 months from 01 October 1997 to 01 April 1998. The second respondent further states that when the endorsement was done on 01 October 1997, the contract stated that the balance of the investment account would be available at maturity and growth on this type of investment is non-vesting.

HeldThe respondents raised the fact that the pension funds adjudicator has no jurisdiction to consider this complaint because the first respondent is an audit-exempt retirement annuity fund with its only assets being the insurance policies it holds, on the life of its members, issued by the second respondent in its capacity as the first respondent’s underwriting insurer. Thus, the complaint concerns “long-term insurance business” rather than “pension fund business”. The second is that this is not a complaint as defined in section 1 of the Act, so it should not even be considered by this office.

It is trite law that retirement annuity funds are “pension fund organisations” as defined in the Act and are registered as such by the Registrar of Pension Funds. Retirement annuity funds do, however, have to comply with all other sections of the Act, including chapter VA of the Act, which provides for the establishment of this office and the adjudication of pension funds-related complaints by it. When a retirement annuity fund member complains about the investment returns he received (or illustrative values), or about the quantum of the causal event charge levied by the underwriting insurer the member is complaining, in essence, about administrative actions pertaining to the computation of fund values taken by the underwriting insurer of the retirement annuity fund. Complaints of this nature fall within the ambit of a complaint as defined in section 1 of the Act.

The complainant alleges that he suffered financial loss as a result of the unrealised illustrated

maturity values, which negatively impacted on the complainant’s investment value and the quantum of the eventual benefit that he received from the first respondent retirement annuity fund. The import of this is that the complainant alleges that the decision taken by the second respondent (being the “any person” referred to in part (a) of the definition of a complaint) to pay a retirement benefit that was less than the illustrated value and the earlier maturity value was in excess of the second respondent’s powers in terms of the rules and policy document, or an improper exercise of its powers.

On the issue of time barring, the complainant’s policy matured on 31 August 1997 and he requested an extension for a further six month period to April 1998. Approximately six years passed before the complainant lodged his complaint on 25 May 2004. The Adjudicator condoned the non-compliance with time limit because the complainant has provided a reason why he lodged his complaint out of time. It is clear that he failed to submit a complaint on time because he only learnt about his cause of action during 2003/2004. Since the complainant only reasonably became aware of his cause of action in 2004, the complaint cannot be time-barred since 3 years has not elapsed until the lodgement of the complaint.

With regard to the complainant’s maturity values, the Adjudicator held that the illustration that was given to the complainant created an expectation of the approximate final fund value. The respondents were negligent in providing an improbable maturity value quotation to the complainant which led to him suffering financial loss.

ImplicationsThe effect of the above determinations (Zotta and Lockhat) is to put the complaint in a position he or she could have been in had maladministration not occurred. It gives the respondent a good lesson as far as neglecting their duties are concerned.

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DISABILITY BENEFITS

H v Bidcorp Provident Fund and Another (Case No: PFA/GA/18393/2007/MN) concerned the decision of the fund not to grant the complainant a disability benefit.

Facts The complainant in this matter was employed by Safcor Panalpina as a forwarding clerk. She was diagnosed with sarcoidosis, a lung disease and according to her and the supporting medical reports she is unable to go back to work and as such she has requested this tribunal to make a ruling on her disability claim. The respondents are adamant that she does not qualify for a disability benefit.

Complaint The complainant alleges that she had been feeling unwell and she was having chest pains. A biopsy was conducted and immediately thereafter a 7 x 8 blood pad was found between her heart and lungs and was removed. She returned to work after six weeks and was still not feeling well, having nausea and hot flashes. As a result she was sent for a Lung Ventilation and Perfusion scan, which established that her left lung was smaller than the right lung and was diagnosed with pneumonia. She was on temporary disability from work from the 27 November 2006 to 31 May 2007. She went back to work on the 01 June 2007 at the expiry of her temporary disability leave and was advised at work that her disability claim was still outstanding and they suggested to her that she should commence with an unpaid sick leave or else her disability claim will be invalid. She did not feel well again on the 2 July 2007 and went to see a doctor. She was told she had pneumonia in both lungs and that sarcoidosis had spread to both lungs .She alleged that Old Mutual the insurer did not accept the disability claim and the outcome was communicated to her on the 6 August 2007.

ResponseThe response was that the complainant suffers from sarcoidosis and had been treated for asthma. They confirmed being in receipt of several medical reports

compiled by the physicians of the complainant. According to the respondent, the complainant was assessed also by Ms Zonia Weideman, an independent Occupational Therapist and thereafter her records were referred to Dr Davis also a Physician so that she could assess the medical records.

The respondent submitted that, the insurer, Old Mutual, considered the assessment of the Complainants medical records by Dr Davis and repudiated the claim. The complainant disputed the factual accuracy of the respondents’ response.

Held The Adjudicator found that, what is crystal clear from the Rules is that, the Trustees, have a duty to determine whether or not a member is permanently incapable of efficiently discharging her duties. The word “determine”, the Adjudicator held, has to be interpreted in its literal sense that it imposes an obligation on the Trustees to do the investigation themselves by paying the costs of the medical examination and collate that medical information in order for them to make that decision.

The Adjudicator held that the attached addendum of the Occupational Therapist, Ms Sonia Weideman had factual inaccuracies and inconsistencies that it would be difficult to proceed to issue a determination without having dealt with such inaccuracies and inconsistencies in the first instance.

Further, the adjudicator ruled that, the assessment of the Complainant should be broadened so as to ensure that, the Trustees do not concentrate only on the medical report but on a whole range of issues, including but not limited to her general personal circumstances. The Adjudicator was at pains on emphasizing that there was no reason why the Trustees had not used their discretion to investigate and make a decision in terms of the rules of the Fund. This is because, in terms of the Fund rules, the duty to determine whether a member is permanently disabled is with the trustees, in consultation with the company. The adjudicator held that, the trustees had abdicated their responsibility by not exercising their

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discretion of investigating the possibility of an ill heath retirement in the circumstances that were thrown up by the complainant’s situation. The trustees have a fiduciary duty to exercise their discretion and make a decision. There was no evidence that they have discharged that obligation which is expressly stated in the Fund rules.

ImplicationsThis determination compels the trustees to comply with their fiduciary duties and the use of their discretion to investigate and make a decision in terms of the rules of the Fund. It compels the trustees to apply their minds to determine whether the complainant should be deprived of the right to disability benefits due to ill-health. In M v Astrapak Limited (case No. PFA/GA/4806/2005/LCM, the nub of the issue was (i) whether the respondent was correct in its contention that because its rules do not provide for the disability benefit, this tribunal lacks jurisdiction to adjudicate the complainant’s complaint.

FactsThe complainant was employed by Astrapak Limited (“the employer”) and was a member of the fund when his services were terminated with immediate effect on the grounds of incapacity by agreement between the complainant and the employer with effect from 24 February 2005.

In view of the aforesaid agreement between the complainant and the employer, the parties agreed that the employer will assist the complainant in claiming a disability/ incapacity benefit against the fund.

ComplaintThe complainant was dissatisfied with the repudiation of his disability claim by the fund.

ResponseThe fund contended that the alleged disability benefit the complainant is claiming about is not regulated and paid in terms of the fund’s rules. Thus, this tribunal lacks jurisdiction to adjudicate the matter.

HeldAfter examining the provisions of the rules of the fund, it became apparent that the fund did not provide for a disability benefit. The disability benefit is provided by a separate scheme, the Astrapak Umbrella Group Managed Income Replacement Benefit Scheme (“scheme”). Upon a perusal of the Scheme policy documents, it also became apparent to this office that the Scheme is not regulated in terms of the Act. It follows therefore, that this tribunal lacks jurisdiction to investigated and adjudicate this part of the complaint.

The matter did not however end there. The Adjudicator found that the rules of the fund, in particular, rule 32.1 read with rule 31.1 provides for an ill- health retirement benefit and early retirement. It held that in terms of the above rule, the complainant is entitled to either an ill- health or early retirement benefit from the fund.

The Adjudicator held further that failure by the fund to apply its mind to the provisions of the above rules when considering the complainant’s claim constituted failure to exercise its common law duty of good faith, diligence and duty to act with due care.

The Adjudicator ordered the fund to exercise its discretion in terms or rule 32.1 of the its rules read with rule 31 thereof and to furnish its decision regarding the discretion exercised together with reasons thereof to this office and to the complainant.

RETIREMENT ANNUITY FUND

Ms L Lottering

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L Lottering v Lifestyle Retirement Annuity Fund and Another (Case No: PFA/GA/5725/2005/LM) concerned the quantum of the complainant’s fund value subsequent to her retirement annuity fund contributions being made paid-up.

FactsThe complainant was a member of the fund, which is a registered retirement annuity fund in terms of the Act, on 1 May 2000. The complainant’s membership was to endure until her chosen retirement date of 1 May 2018. However, on 1 October 2000 the complainant decided to cease contributions to the first respondent. The respondent initially declared that the complainant’s policy had lapsed but later ratified in its response and stated that it became paid-up. However, the complainant decided to continue with her contributions and the deductions on the paid-up status were reversed.

ComplaintShe was aggrieved by the fact that her membership of the fund had lapsed and contended that she should not have lost her entire fund value, especially since she had contributed a lump sum of R4 242.00 in addition to her monthly contribution of R200.00.

ResponseThe fund submitted that matters relating to the operation of any policy of insurance it entered into with the second respondent in respect of members’ benefits, including the basis of determining policy values, fall within the scope of Long-term insurance business and referred this tribunal to the second respondent’s response in this regard. The second respondent raised a technical point of prescription and submitted that because the complaint dates back five years ago, it has prescribed in terms of section 30I of the Act. The second respondent explained that initially the second respondent had declared that the complainant’s policy had lapsed but later adjusted the values as it became apparent that the policy was in fact paid-up.

It explained that the complainant decided to resume making contributions to the first respondent and

all the earlier charges were reversed, therefore the complaint was no longer valid.

HeldThis Tribunal’s concluded that it has jurisdiction to adjudicate complaints by members of retirement annuity funds concerning causal event charges and that these complaints constitute valid “complaints” against the respondents as defined in section 1 of the Act.

The complainant’s technical point regarding time-barring was dismissed due to the fact that she reasonably became aware that she had a complaint against the respondents when she made enquiries with her insurance broker in September 2005. The respondents failed to prove or even allege, that they had advised the complainant that her membership had been made paid-up or lapsed in October 2000, thus the first respondent’s duty in terms of section 7C of the Act has not been fulfilled. In the circumstances the complaint was lodged within two months of the complainant having reasonably become aware of her cause of action.

The complainant had ceased contributions to the first respondent, resulting in her membership becoming paid-up. The complainant decided to continue paying contributions which caused all charges to be reversed and the policy to lose its paid-up status. The Adjudicator held that the fund has waived the causal event charges levied in October 2000. In effect there were no charges levied and the complainant’s fund value was fully re-invested. Therefore the complainant’s complaint could not succeed.

ImplicationsThis determination concerned the quantum of the complainant’s fund value subsequent to her retirement annuity fund contributions being made paid-up. The significance of this ruling is that once all charges are reversed and the policy loses its paid up status, the complainant does not lose her entire fund value.

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SECTORAL DETERMINATIONS

In PSSPF v D & L Patrols CC (case No. PFA/GA/16692/2007/EMD) the complaint concerned the failure and/or refusal of the employer to participate in the fund registered in terms of the sectoral determination.

FactsThe employer had refused to register with the fund in terms of the sectoral determination.

ComplaintThe fund sought an order directing the employer to register with it or an order prohibiting the respondent from applying for the liquidation of the business.

ResponseThe employer stated that its salaries are paid and regulated via the National Bargaining Council for the Road Freight Industry. It stated that, as a result of this, application had been made for the transfer of the present provident fund benefits to the National Bargaining Council for the Freight Road Industry.

HeldIn view of the fact that the respondent’s employees fall under the National Bargaining Council for the Road Freight Industry, the Adjudicator held that the respondent’s employees are not eligible employees as defined, as they fall under the jurisdiction of any other bargaining council agreement. It was held that the respondent employees are therefore precluded from joining the complainant.

The Adjudicator held further that, with regard to the prohibition of the respondent against applying for liquidation, the Adjudicator held that it is not willing to consider granting an order that could so easily be circumvented. The Adjudicator emphasized that if the order is granted it could readily be circumvented and rendered ineffective, as it would not restrain any other party including one or more members of the respondent itself, from applying to court for relief in their individual capacity.

In PSSPF v Mindmaps Twenty Two CC (case No. PFA/GA/16215/2007/LCM, the complaint concerned the failure and/or refusal of the employer to participate in the fund registered in terms of the sectoral determination.

FactsThe employer had refused to register with the fund in terms of the sectoral determination.

ComplaintThe fund sought an order directing the employer to register with it or an order prohibiting the respondent from applying for the liquidation of the business.

ResponseThe employer stated that due to it currently experiencing financial difficulties, it cannot afford to contribute to the complainant. Furthermore, the respondent requests that it be exempted from participating in the complainant.

HeldIn view of the fact that the respondent confirmed that it had 5 security personnel in its employ and intends to participate in the complainant, the Adjudicator held that the respondent had eligible employees, as defined. The Adjudicator ordered the respondent to register with the complainant.

The Adjudicator held further that, with regard to the prohibition of the respondent against applying for liquidation, the Adjudicator held that it is not willing to consider granting an order that could so easily be circumvented. The Adjudicator emphasized that if the order is granted it could readily be circumvented and rendered ineffective, as it would not restrain any other party including one or more members of the respondent itself, from applying to court for relief in their individual capacity.

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During the last financial year the OPFA conducted a number of public awareness campaign on different radio stations. This includes SABC and community radio stations. The public awareness was conducted in the form of interviews about the functions and operations of the OPFA and other relevant information that is vital to the public. The interviews were conducted in SePedi, SeSotho, Setswana, IsiZulu, IsiXhosa, IsiNdebele, TshiVenda, English and Afrikaans. All Assistant Adjudicators and a few Senior Assistant Adjudicators were involved in this campaign. Below is a list of the radio stations we had interviews with:

IKWEKWEZI FM Silas Mothupi, Mfundo Daki

KOVSIE FM Silas Mothupi

VOICE OF THE CAPE FM Philda Mphephu, Silas Mothupi Lufuno Nevondwe, Seabi Mokgara, and Lehana Lehana

PHALAPHALA FM Philda Mphephu, Lufuno Nevondwe

UMHLOBO WENENE FM Lungile Mbalo, Makhubalo Ndaba, Ayanda Mngqinya and Mfundo Daki

THOBELA FM Silas Mothupi, Mamodupi Mohlala and Lerato Molete

LESEDI FM Silas Mothupi, Chris Seabela, Tshepo Nawane, Lehana Lehana

UKHOZI FM Blessing Mahlalela

RADIO ALPHA Blessing Mahlalela

RADIO SONDER GRENSE Elmarie De la Rey

TALK RADIO 702 Mamodupi Mohlala

MOTSWEDING FM Tshepo Nawane

JOZI FM Mamodupi Mohlala

SA FM Mamodupi Mohlala

Other Activities of OPFA

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We also conducted interviews on different TV programs, newspapers and other medium of communication, namely:

SOWETO TV Mamodupi Mohlala

SABC 1-YILUNGELO LAKHO Mamodupi Mohlala

FINANCIAL MAIL Mamodupi Mohlala

SABC 2-Morning Live Mamodupi Mohlala

PERSONAL FINANCE Mamodupi Mohlala

SUNDAY TIMES Mamodupi Mohlala

THE BUSINESS WOMAN Mamodupi Mohlala

CONFERENCES, SEMINAR, WORKSHOPS AND MEETINGS

PRINCIPAL OFFICER’S ASSOCIATION Mamodupi Mohlala

DEPT OF LOCAL GOVERNMENT & CDWs-Meeting Mfundo Daki

LESEDI MUNICIPALITY-Meeting Mfundo Daki, Phumelele Myokwana and Khensani Madinga

SUPERVISORY SKILLS (Workshop) Silas, Tshepo D, Makhado and Elmarie

SEMINAR ON THE AMENDMENT OF S 37D (Divorce Benefits)

Silas Mothupi

STRATEGIC PLANNING MEETING All staff members

WORKSHOP (POA) –Scorecard :Durban, Port Elizabeth, Pretoria and Cape Town

Makhubalo Ndaba and Chris Seabela

Pension Lawyers Association Conference Mamodupi, Makhubalo , Lufuno and Saleem

Seminar on Powerful Legal Writing Lehana, Phumelele, Seabi, Ayanda, Blessing, Lufuno, Philda, Getrude, Chris and Tshepo N

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The OPFA participated in a number of programmes and events under the financial year under review which appear below:-

Youth DayAll employees were dressed in school uniforms on this day in commemoration of the youth day.

Heritage DayThis office took part in the festivity of this momentous day in celebrating the rich cultures which reflect the diversity of our rainbow nation.

6 Days of Activism against Women and Child AbuseThe OPFA also participated in the 16 Days of Activism against Women and Child Abuse where two representatives from People Opposing Women Abuse (POWA) we present to further educate and create awareness to employees on issues of women and child abuse. Material in the form of pamphlets and booklets were also available for employees and complainants to read and be informed about these issues.

Team BuildingThe OPFA had a team building exercise which took place at Sun City in North West.

Employees were split in teams and engaged in various team building activities for the entire day. There were prizes that were won by the winning team.

Year End FunctionThe OPFA had a year end function in December 2008 was celebrated in style with employees having dinner at the Victory Theatre and thereafter watching the fantastic stage play of UMOJA.

Employees dressed in school uniforms in commemoration of Youth day

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World Aids DayThe OPFA participated in the World AIDS day on 1 December 2008. A speaker was invited to make a presentation to employees and HIV/AIDS informative material was made available to employees and members of the public.

Cell C Take a Girl Child to WorkThe OPFA participated in the Cell C take a Girl child to work initiative by inviting girls from previously disadvantaged communities on that day. Girls were given an opportunity to work in different departments in order for them to have a feel of what work life is like, so that they will be able to make informed career decisions in the future.

Girl children experiencing the OPFA work environment

Letters of Gratitude

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Annual Financial Statementsfor the year ended 31 March 2009

TABLE OF CONTENTS PAGE Report of the Accounting Authority 92 - 97Report of the Auditor-General 98 - 102Statement of financial position 103Statement of comprehensive income 104Statement of changes in net assets 105Cash flow statement 106Summary of significant accounting policies 107 - 112Notes to the annual financial statements 113 - 123Annexure A - Unaudited statement of comprehensive income 124

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The Accounting Authority is responsible for the preparation and fair presentation of these financial statements in accordance with the South African Statements of Generally Accepted Accounting Practice (GAAP) and GRAPP.

The annual financial statements set out on pages 103 - 123, which have been prepared on the going concern basis, were approved by the Accounting Authority. GENERAL INFORMATION

The Office of The Pension Funds Adjudicator was established in terms of the Pension Funds Act No. 24 of 1956 (“the Act”), with effect from 1 January 1998 to investigate and decide complaints lodged in terms of the Act. It is funded in terms of section 30R of the Pension Funds Act by way of a levy imposed by national legislation and collected by the Financial Services Board. The Office of the Pension Funds Adjudicator is therefore a statutory office and not a company, partnership or a close corporation. It is incorporated in South Africa and has one office in Cape Town and its head office in Sandton, Johannesburg. Head Office - Sandton Branch - Cape Town 2nd floor 4th floor, Letterstedt House Sandown House Southwing, Cnr Camp Ground & Main street Sandton close 2 Cnr Norwich Close and 5th street Newlands on Main

Mamodupi Mohlala Pension Funds Adjudicator (ACCOUNTING AUTHORITY) Date: 31 July 2009

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Report of the Accounting Authorityfor the year ended 31 March 2009

Report of the Accounting Authority to the Executive Authority, and Parliament of the Republic of South Africa.

1. General review of the state of financial affairs The budget allocation for the OPFA amounted to R17,556,720 for the 2007/8 financial year . The

approved budget for 2008/09 amounted to R33,399,059. This represents an increase of 90% over the previous financial year.

The total expenditure for the 2007/08 financial year amounted to R19,651,769 and R 30,797,133 for 2008/09 financial year which represents a spending increase rate of 57%. The expenditure was made up as follows:

Expenditure 2008/09 2007/08 Increase /(Decrease)Compensation of employees 17,794,536 14,115,836 3,678,700

OPFA operational costs 13,002,597 5,535,933 7,466,664

TOTAL 30,797,133 19,651,769 11,145,364

The surplus on the Vote for the 2008/09 financial year amounted to R3,975,537. 2. Services rendered by the OPFA The Office of the Pension Funds Adjudicator was established in terms of section 30B of the Pension

Funds Act to provide recourse to members of pension funds which also includes provident funds and annuity funds that fall under the jurisdiction of this Act. The purpose of the Pension Funds Adjudicator is to resolve disputes in a procedurally fair, economical and expeditious manner. The Adjudicator’s office investigates and determines complaints by complainants relating to the administration of a fund, the investment of its funds or the interpretation and application of its rules.

3. Capacity -related constraints The OPFA has significantly improved its organisational structure by increasing the number of personnel

in order to meet its capacity-related needs. The strategy of increasing the OPFA’s capacity, both human and physical, will continue over the next financial years. Similarly, spending on capital immovable assets will also remain a prominent feature of the OPFA vote.

4. Public private partnerships (PPP) The OPFA does not have trading entities and public entities for the year under review.

5. Discontinued activities /activities to be discontinued None

6. New/proposed activities

Conciliation Services The provisions of section 30E of the Pension Fund Act provide the Adjudicator with the following powers

that “in order to achieve his or her [the Adjudicator] main object, the Adjudicator may, if it is expedient and prior to investigating a complaint, require the complainant first to approach an organization established for the purpose of resolving disputes in the pension funds industry or part thereof”.

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Therefore in line with this legislative imperative the Adjudicator decided that the most expedient, appropriate and tried and tested dispute resolution mechanism is that of conciliation. Thus where in the opinion of the Adjudicator a matter is capable of speedily resolution or alternatively is of such a nature as to be better capable of resolution through negotiation as opposed to adjudication these matters will be referred to conciliation.

This procedure is aimed at ensuring that disputes are resolved or disposed of as speedily as possible and the anticipated turnaround time for complaints is ninety days from date of referral to the PFA.In broad terms, conciliation is a process in which an independent, objective person, without prejudice, attempts to assist disputing parties to reach and agreement for the resolution of a complaint. The OPFA did engage with a process of consultation with various stakeholders in the pension funds industry in order for them to comment on the Draft Conciliation Guidelines. Valuable comments were indeed received from various stakeholders and were considered in order to refine the final conciliation guidelines. The conciliation guidelines provide for the following in summary:

investigation;

Adjudicator;

circumstances;

parties;

binding once it is signed by the Adjudicator, which will give it the status of Conciliation determination, with the same force and effect as any other determination by the Adjudicator.

The OPFA Conciliation Service was established effective from the 1 August 2008 and started its first hearing in September 2008.

Balanced Scorecard The establishment of the Office of the Pension Funds Adjudicator (“OPFA”) has had a positive

contribution to the significant progress made in disposing of pension fund complaints in a procedurally fair, economical and expeditious manner in terms of section 30D of the Pension Fund Act 24, 1956 (“the Act”). It is however faced with challenges that inhibit this progress Consequently, a number of pension fund members are still affected by these challenges. The Pension Funds Adjudicator believes that positive and proactive responses through the implementation of an industry wide balanced scorecard would address inefficiencies in the industry ,improve compliance , unlock its potential and enhance its growth .

Lack of good governance in some instances , and specifically with respect to the following issues ; failure to provide complete and accurate responses to complaints; failure to provide responses on time; failure to provide updated and relevant fund rules; failure by trustees to give effect to a members

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election in divorce matters; failure to interpret and apply the rules of the fund properly; failure to provide the appropriate and necessary information to members on request and delay in payment of benefit have negatively affected the Adjudicators mandate to dispose of complaints in a procedurally fair, economical and expeditious manner.

The scorecard is not aimed at assessing the retirement fund industry at large, but only those funds against whom members lodge complaints with the OPFA. By introducing the balanced scorecard project ; the OPFA is not embarking on a regulatory exercise, it is a tool that will enable the OPFA to execute its statutory mandate of resolving disputes in a procedurally fair, economical and expeditious manner.

The OPFA identified a need to ensure that there is legislative and regulatory compliance within the

industry in relation to the manner in which they conduct their operations and process complaints. That being the reason for the establishment of the scorecard .

The balanced scorecard do an invention of standards , it only seeks to measure issues of compliance against the already prevailing standards that are supposed to be implemented by all in the industry .These standards are set by the Pension Funds Act 24 of 1956 , Regulations of the Financial Services Board and the Rules of the Funds .The score card elements provide a guide as to the nature and standard that the industry will be expected to comply with in relation to the manner in which they deal with complaints submitted to the OPFA, the general administration of the fund and application of the Rules of the Fund to their members.

The need for the scorecard is necessary taking into account the need for funds to comply with section 7C of the Act which deals with the objects of the board, section 7D of the Act which deals with the duties of the board and Circular PF No 130 issued by the FSB which deals with good governance of retirement funds. Section 25 of the Bill of Rights which prohibits the deprivation of property in an arbitrary manner applies to pension funds as well.

The scoring of funds is based on the following criteria; type of complaint; complaint details; response quality; attempt to settle and outcome of the complaint.

The scoring of the funds in the scorecard started in September 2008 and the results will be issued in September 2009 .

7. Auditors In terms of section 188 of the Constitution of the Republic of South Africa,1996 (Act No. 108 of 1998)

read with section 4 and 20 of the Public Audit Act, 2004 (Act No. 25 of 2004) (PAA) and section 30T (3) of the pensions Fund Act, 1956 (Act No. 24 of 1956) as amended the Auditor-General has the responsibility to audit the books and statements of account and balance sheet of the OPFA. The Office of the Auditor-General will continue to perform the statutory audit of the South OPFA.

8. Asset management The OPFA embarked on an asset management strategy involving the enhancement of the asset register

by means of system developments and minimum information requirements to promote the capturing of assets of a movable nature. Several initiatives were implemented, with the emphasis on serialised assets.


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Assets acquired during the year has been included in capital expenditure and is stated at cost or fair value, if acquired at no cost, and represents actual additions

9. Events after the reporting date None

10. Scopa resolutions None

11. Utilisation of donor funds There has been no donor funds

12. Trading Entities and public entities The OPFA has got no trading entities.

13. Discontinued activities / activities to be discontinued None

14. Supply chain management As part of the phased approach of the OPFA to refine compliance with supply chain management

prescripts regarding the procurement of goods and services, a computer software system inclusive of a tender module, is being evaluated.

15. PFMA listing The Office of Pension Funds Adjudicator has been included as one of the entities to comply with PFMA

under schedule 3A on the first of November 2008.

The Office of The Pension Funds Adjudicator has been communicating with the Accountant General at National treasury and the Auditor General’s (AG) office in terms of which it was stated that due to the fact that our entity was listed in terms of Public Finance and Management Act (PFMA) in November 2008, The OPFA would be audited in terms of the Act

The OPFA wish to point out that the proposed approach by the National treasury and Auditor General towards the audit of the OPFA might have practical difficulty for the following reasons:

1 Firstly the listing of the OPFA in the middle of the financial year was not anticipated and because there was no consultation in process of the listing this has resulted in the Pension Funds Adjudicator (PFA), being unable to put in place the relevant systems in order to comply with the requirements of the PFMA;

2 Secondly the fact the OPFA had been listed had not come to the attention of the PFA until the AG’s office brought it to our attention on the 16th March 2009. Therefore due to the failure to be provided with formal notification on the listing of the OPFA has not been able to request the relevant budget to fund the process and structures necessary to ensure compliance with the PFMA;

3 Thirdly the Gazetted notice in terms of which the OPFA is listed in terms of the PFMA does not specify the effective date.


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The OPFA has had several meetings and requested that it should be excluded from a PFMA audit in the current financial year and failed to get exception from National Treasury. The Office would like to express its concern about the negative implication it might be faces with in this year’s annual report.

The OPFA strongly believes that even though the entity is listed for PFMA, the National Treasury can

exempt the OPFA from being audited as a PFMA listed entity in the current financial period to avoid negative matters relating to non-compliance with PFMA Act

The formatting of the financial is also a challenge because we are being audited on a PFMA basis after September 2008 and on a GAAP/GRAAP basis before September 2008.

16. Corporate governance arrangements The Office of the Pension Funds Adjudicator (PFA) was established on 01 January 1998 in terms of

the Pension Funds Act 24, of 1956. The PFA regards corporate governance as vital to its wellbeing and, as such, takes full responsibility for its application within the PFA. The PFA is committed to the highest level of corporate governance and is satisfied that it has complied with both the Public Finance Management Act, 1999 (PFMA) and the key provisions of the King II Report on Corporate Governance in South Africa for the period under review. In keeping with its commitment to corporate governance, compliance with relevant statutory and governance provisions of the PFA’s policies continued in the year under review as a priority to safeguard the interests of all stakeholders.

PFA STRUCTURE

Accounting Authority The Accounting Authority is an Adjudicator appointed by the Minister of Finance responsible for

overseeing the overall effectiveness of the PFA’s internal controls policies and processes, compliance with the applicable acts, laws, regulations and legislation,

Pension Funds Adjudicator Committee This committee assists the FSB Board in the management of the affairs of the Office of the Pension

Funds Adjudicator. The committee is constituted by the members listed below.

1. Ms Mogadime 2. Mr. AB Sithole 3. Ms. M Mohlala 4. Mr T Dube 5. Mr J Boyd 6. Mr M Du Toit 7. Mr Makume 8. Professor Sutherland 9. Ms K Biggs

Other committees Although the PFA has not had during the current year other committees, management has already

engaged in establishing the following committees that will be operational in the 2009/10 financial year:


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1. Tender committee 2. Risk management 3. Internal policy review

And the following section will also be established to ensure that the Accounting Authority’s goals and objectives are achieved in a more economical and effective manner:

1. Internal audit unit 2. IT department

Audit Committee The PFA operates in terms of a shared FSB Audit Committee in terms of treasury regulations 27.1.2

(TR27.1.2) and section 77(c) of the PFMA. The committee meets on a quarterly basis.

17. Management judgments Management has exercised its judgment with respect to estimates and assumptions used in the

preparation of the annual financial statements. The nature of estimates and assumptions is uncertain and the future eventuality of the actual amounts may differ from these estimates. Major provisions such as contingent liability and leave liability are based on management estimates and assumptions which are considered reasonable at the time of the preparation of the financial statements.

18. Approval The Annual Financial Statements set out in pages 103 to 123, have been approved by the Accounting

Authority.

Mamodupi MohlalaPension Funds Adjudicator (ACCOUNTING AUTHORITY) Date: 31 /07/ 2009


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Report of the Auditor-Generalfor the year ended 31 March 2009

REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE FINANCIAL STATEMENTS AND PERFORMANCE INFORMATION OF THE OFFICE OF THE PENSION FUNDS ADJUDICATOR FOR THE YEAR ENDED 31 MARCH 2009

REPORT ON THE FINANCIAL STATEMENTS

Introduction1. I have audited the accompanying financial statements of the Office of the Pension Funds Adjudicator

which comprise the statement of financial position as at 31 March 2009, and the statement of financial performance, the statement of changes in net assets and the cash flow statement for the year then ended, a summary of significant accounting policies and other explanatory notes, as set out on pages 107 to 123.

The accounting authority’s responsibility for the financial statements2. The accounting authority is responsible for the preparation and fair presentation of these financial

statements in accordance with the basis of accounting determined by the National Treasury, as set out in accounting policy note xx and in the manner required by the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA), and the Pension Funds Act, 1956 (Act No. 24 of 1956) and for such internal control as the accounting officer determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

The Auditor-General’s responsibility3. As required by section 188 of the Constitution of the Republic of South Africa, 1996 read with section

4 of the Public Audit Act, 2004 (Act No. 25 of 2004) (PAA) and section 30T (3) of the Pension Funds Act, 1956 (Act No. 24 of 1956), my responsibility is to express an opinion on these financial statements based on my audit.

4. I conducted my audit in accordance with the International Standards on Auditing read with General Notice 616 of 2008, issued in Government Gazette No. 31057 of 15 May 2008. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

5. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

6. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

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Opinion 7. In my opinion the financial statements present fairly, in all material respects, the financial position of

the Office of the Pension Funds Adjudicator as at 31 March 2009 and its financial performance and cash flows for the year then ended, in accordance with the basis of accounting determined by National Treasury, as set out in accounting policy note 1 and in the manner required by the PFMA.

Emphasis of matters8. Without qualifying my opinion, I draw attention to the following matters:

Basis of accounting9. Accounting policy note 1 to the financial statements describes the basis of accounting. The public

entity’s policy is to prepare financial statements on the basis of accounting determined by the National Treasury.

Significant uncertainty10. With reference to note 13 to the financial statements, the entity is the defendant in a lawsuit. The entity

is opposing the claim, as it believes the claim to be without substance. The ultimate outcome of the matter cannot presently be determined, and no provision for any liability that may result has been made in the financial statements.

Other matters Without qualifying my opinion, I draw attention to the following matters that relate to my responsibilities

in the audit of the financial statements:

Unaudited supplementary schedules11. The supplementary information set out on page 124 does not form part of the financial statements

and is presented as additional information. I have not audited this schedule and accordingly I do not express an opinion thereon.

Non-compliance with applicable legislation

PFMA and Treasury Regulations12. Due to the entity being listed as a schedule 3A entity in terms of the PFMA on 19 September 2008,

the entity has not complied with various PFMA and Treasury regulations. The OPFA commenced, with corrective actions after year end which will be followed up during the 09/10 financial year.

Governance framework13. The governance principles that impact the auditor’s opinion on the financial statements relates to the

responsibilities and practices exercised by the of the accounting authority and executive management and are reflected in the key governance responsibilities addressed below:

Key governance responsibilities14. The PFMA tasks the accounting authority with a number of responsibilities concerning financial and

risk management and internal control. Fundamental to achieving this is the implementation of key governance responsibilities, which I have assessed as follows:

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No. Matter Y NClear trail of supporting documentation that is easily available and provided in a timely manner1. No significant difficulties were experienced during the audit concerning delays or the availability

of requested information.✓

Quality of financial statements and related management information2. The financial statements were not subject to any material amendments resulting from the audit. ✓

3. The annual report was submitted for consideration prior to the tabling of the auditor’s report. ✓

Timeliness of financial statements and management information4. The annual financial statements were submitted for auditing as per the legislated deadlines

section 55 of the PFMA✓

Availability of key officials during audit 5. Key officials were available throughout the audit process. ✓

Development and compliance with risk management, effective internal control and governance practices6. Audit committee

✓

✓

77 of the PFMA and Treasury Regulation 27.1.8✓

7. Internal audit

✓

✓

Treasury Regulation 27.2✓

8. There are no significant deficiencies in the design and implementation of internal control in respect of financial and risk management.

✓

9. There are no significant deficiencies in the design and implementation of internal control in respect of compliance with applicable laws and regulations.

✓

10. The information systems were appropriate to facilitate the preparation of the financial statements.

✓

11. A risk assessment was conducted on a regular basis and a risk management strategy, which includes a fraud prevention plan, is documented and used as set out in Treasury Regulation 27.2.

✓

12. Delegations of responsibility are in place, as set out in section 56 of the PFMA ✓

Follow-up of audit findings13. The prior year audit findings have been substantially addressed. ✓

14. SCOPA resolutions have been substantially implemented N/A

Issues relating to the reporting of performance information15. The information systems were appropriate to facilitate the preparation of a performance report

that is accurate and complete.✓

16. Adequate control processes and procedures are designed and implemented to ensure the accuracy and completeness of reported performance information.

✓

17. A strategic plan was prepared and approved for the financial year under review for purposes of monitoring the performance in relation to the budget and delivery by the entity against its mandate, predetermined objectives, outputs, indicators and targets

✓

18. There is a functioning performance management system and performance bonuses are only paid after proper assessment and approval by those charged with governance.

✓

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15. The non-compliance and the resulting control deficiencies assessed above were mainly the result of the OPFA being listed as a schedule 3A entity in terms of the PFMA in September 2008 and thus not being able to design and implement the required structures, controls and procedures to mitigate the additional requirements set by the PFMA before 31 March 2009. The OPFA commenced with corrective actions after year end which, will be followed up during the 09/10 financial year

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

Report on performance information16. I was engaged to review the performance information.

The accounting authority’s responsibility for the performance information17. The accounting authority has additional responsibilities as required by section 55(2)(a) of the PFMA to

ensure that the annual report and audited financial statements fairly present the performance against predetermined objectives of the public entity.

The Auditor-General’s responsibility18. I conducted my engagement in accordance with section 13 of the PAA read with General Notice 616

of 2008, issued in Government Gazette No. 31057 of 15 May 2008.

19. In terms of the foregoing my engagement included performing procedures of an audit nature to obtain sufficient appropriate evidence about the performance information and related systems, processes and procedures. The procedures selected depend on the auditor’s judgement.

20. I believe that the evidence I have obtained is sufficient and appropriate to provide a basis for the findings reported below.

FINDINGS ON PERFORMANCE INFORMATION

Non-compliance with regulatory requirements No reporting of performance information21. The entity has not reported performance against predetermined objectives, as required by section

55(2)(a) of the PFMA.

Content of strategic performance plan22. Although the OPFA had a business plan for the year under review this plan did not constitute a strategic

plan and did not include objectives and outcomes as identified by the executive authority as well as key performance measures and indicators for assessing the entity’s performance in delivering the desired outcomes and objectives, as required by Treasury Regulation 30.1.3.

Lack of effective, efficient and transparent systems and internal controls regarding performance management

23. Notwithstanding the fact that the OPFA prepared progress reports, the accounting authority did not ensure that the entity has and maintains an effective, efficient and transparent system and internal controls regarding performance management, which describe and represent how the entity’s processes


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of performance planning, monitoring, measurement, review and reporting will be conducted, organised and managed, as required in terms of section 51(1)(a)(i) of the PFMA.

APPRECIATION

24. The assistance rendered by the staff of the Office of the Pension Funds Adjudicator during the audit is sincerely appreciated

Pretoria31 July 2009


103

Notes 2009 2008

R R

ASSETS

Non-Current Assets

Property and equipment 2 1,422,488 1,350,072

Intangible assets 3 10,523 26,330

Total non-current assets 1,433,011 1,376,402

Current Assets

Trade and other receivables 4 4,379,360 901,441

Cash and cash equivalents 5 1,516,985 683,441

Total current assets 5,896,345 1,584,882

TOTAL ASSETS 7,329,356 2,961,284

FUNDS AND LIABILITIES

Accumulated Funds 3,266,471 717,954

Total Accumulated Funds 3,266,471 717,954

Liabilities

Current Liabilities

Trade and other payables 7 2,824,670 1,106,045

Provisions 8 1,238,215 1,137,284

Total liabilities 4,062,885 2,961,284

TOTAL FUNDS AND LIABILITIES 7,329,356 2,961,284

Statement of Financial Positionas at 31 March 2009

104

Notes 2009 2008

R R

Revenue

Contributions from the FSB 15 33,399,059 19,646,554

Total revenue 33,399,059 19,646,554

Total expenses 9 (30,797,133) (19,651,769)

Personnel costs (17,794,536) (14,115,836)

Administrative cost (12,487,713) (5,182,004)

Depreciation (513,654) (350,874)

Miscellaneous (1,230) (3,055)

Surplus (Deficit) for the period 2,601,926 (5,215)

Finance income 17 17,595 7,551

Finance cost 18 (71,005) (2,336)

Net surplus for the period 2,548,517.00 -

Statement of Comprehensive Incomefor the year ended 31 March 2009

105

Net Assets

R

Balance at 1 April 2008 717,954

Net deficit for the period -

Balance at 31 March 2008 717,954

Balance at 1 April 2009 717,954

Net surplus for the period 2,548,517

Balance at 31 March 2009 3,266,471

Statement of Changes in Net Assetsfor the year ended 31 March 2009

106

Note 2009 2008

R R

Cash flow from operating activities

Cash generated from operations 10 1,457,215 1,035,722

Finance income 16 (71,005) (2,336)

Finance cost

Net cash flow from operating activities 1,386,210 1,033,386

Cash flow from investing activities

Finance income 17 17,596 7,551

Purchase of property and equipment (570,261) (900,521)

Purchase of intangible assets - (28,029)

Net cash flow from investing activities (552,665) (920,999)

Cash flows from financing activities - -

Total cash generated during the period 833,544 112,387

Cash and cash equivalents at the beginning of the year 683,441 571,054

Cash and cash equivalents at the end of the year 5 1,516,985 683,441

Cash Flow Statementfor the year ended 31 March 2009

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The principal accounting policies applied in the preparation of these annual financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

1. BASIS OF PREPARATION The financial statements have been prepared in accordance with the South African Statements of

Generally Accepted Accounting Practice (GAAP) including any interpretations of such Statements issued by the Accounting Practices Board, with the prescribed Standards of Generally Recognised Accounting Practices (GRAP) issued by the Accounting Standards Board effective from 31 March 2007, replacing the equivalent GAAP Statements as follows.

Standards of GRAP Replaced statements of GAAPGRAP 1: Presentation of financial statements AC 101: Presentation of annual financial statements

GRAP 2: Cash flow statement AC 118: Statements of cash flows

GRAP 3: Accounting policies, changes in accounting estimates and errors

AC 103: Accounting policies, changes in accounting estimates and errors

The recognition and measurement principles in the above GRAP and GAAP Statements do not differ

or result in material differences in items presented and disclosed in the financial statements. The implementation of GRAP 1, 2 and 3 has resulted in the following changes in the presentation of the financial statements:

In preparing these financial statements, the company has adopted AC 144 (IFRS 7) Financial Instruments: Disclosures as well as the amendment to AC 101 (IAS 1) Presentation of Financial Statements relating to capital disclosures. The adoption of AC 144 and the amendment to AC 101 impacted the type and amount of disclosures made in these financial statements, but had no impact on the reported profits or financial position of the company. In accordance with the transitional requirements of the standards, the company has provided full comparative information.

Terminology differences

Standard of GRAP Replaced Statement of GAAPStatement of financial performance Statement of comprehensive income

Statement of financial position Balance sheet

Statement of changes in net assets Statement of changes in equity

Net assets Equity

Surplus / deficit for the period Profit / loss for the period

Contributions from owners Share capital

Distributions to owners Dividends

Accumulated surplus / deficit Retained earnings

Reporting date Balance sheet date

Summary of Significant Accounting Policies

108

The statement of cash flows can only be prepared in accordance with the direct method Specific information has been presented separately on the statement of financial position such as:

Amount and nature of any restrictions on cash balances is required to be disclosed. Paragraph 11 – 15 of GRAP 1 has not been implemented due the fact that the local and international

budget reporting standard is not effective for this financial year. Although the inclusion of budget information would enhance the usefulness of the financial statements, non-disclosure will not affect the objective of the annual financial statements.

1.1 Significant accounting judgements and estimates The preparation of financial statements in conformity with SA GAAP requires the use of certain critical

accounting estimates. It also requires management to exercise its judgement in the process of applying the OPFA’s accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The OPFA makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The following accounting policies require significant judgement: Trade and other receivables, trade and other payables property plant and equipment, intangible assets and provisions.

New accounting standards and International Financial Reporting Interpretations Committee (IFRIC) interpretations

a) Standards, amendments and interpretations effective in 2009 IAS 23 (Amendment), ‘Borrowing costs’ (effective from 1 January 2009). The amendment to the standard

is still subject to endorsement by the European Union. It requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset.

IFRS 8, ‘Operating segments’ (effective from 1 January 2009). IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements of the US Standard SFAS 131, ‘Disclosures about segments of an enterprise and related information’. The new standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. The OPFA will apply IFRS 8 from 1 January 2009. The expected impact is still being assessed in detail by management, but it appears likely that the number of reportable segments, as well as the manner in which the segments are reported, will change in a manner that is consistent with the internal reporting provided to the chief operating decision-maker.


109

b) Standards, amendments and interpretations effective in 2009, but not relevant The following standards, amendments and interpretations to published standards are mandatory

for accounting periods beginning on or after 1 January 2007 but they are not relevant to the OPFA’s operations:

hyperinflationary economies’;

IFRIC 8, ‘Scope of IFRS 2’, requires consideration of transactions involving the issuance of equity

instruments, where the identifiable consideration received is less than the fair value of the equity instruments issued in order to establish whether or not they fall within the scope of IFRS 2. This standard does not have any impact on the OPFA’s financial statements. IFRIC 10, ‘Interim financial reporting and impairment’, prohibits the impairment losses recognised in an interim period on goodwill and investments in equity instruments and in financial assets carried at cost to be reversed at a subsequent balance sheet date. This standard does not have any impact on the OPFA’s financial statements.

c) List of new accounting standards and International Financing Reporting Interpretations Committee (IFRIC) Committee (IFRIC) Grap 4: The effect of changes in foreign exchange rates Grap 5: Borrowing cost Grap 6: Consolidation and separate financial statements Grap 7: Investment in associates Grap 8: Investment in joint venture Grap 9: Revenue from exchange transaction Grap 10: Financial reporting in hyperinflationary economies Grap 11: Construction contracts Grap 12: Inventory Grap 13: Leases Grap 14: Events after reporting date Grap 16: Investment property Grap 17: Property plant and equipment 2. PROPERTY AND EQUIPMENT Property and equipment are carried at cost less accumulated depreciation and any accumulated

impairment losses. Depreciation is calculated on a straight line basis over the useful life of the asset as follows:

Furniture and fixtures 10 years Office equipment 5 years Computer hardware 4 years Leasehold improvements Lease period Library books 8 years Paintings and sculptures 10 years


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Maintenance and repairs, which neither materially add to the value of the assets nor appreciably prolong their useful lives, are charged against income. There has been no change in the useful life of assets and no revaluation of assets performed during the year. The OPFA reviews the useful lives and residual values and depreciation is calculated on a straight line basis over the useful life of the asset, after deducting the residual value of the assets.

3. INTANGIBLE ASSETS Computer software licenses and costs associated with the development or maintenance of computer

software programs are recognised as an expense as incurred. Costs associated with the acquisition of computer software are recognised as assets and are amortised over 3 years. There has been no change in the useful life of intangibles during the year. The OPFA currently does not have indefinite intangible assets. All other intangible assets are classified as definite assets.

4. FINANCIAL INSTRUMENTS The OPFA financial instruments classification is dependent on the purpose for which the financial

instruments were required. Management determines the classification of each financial instrument at initial recognition and revaluates this designation at every reporting date.The OPFA financial instruments are made up of the following: Financial assets, trade and other receivables classified as loans and other receivables, cash and cash equivalents classified as investments through profit nad loss. Financial liabilities: trade and other payables classified as held for trade.

5. ACCOUNTS RECEIVABLE Accounts receivable are carried at cost less the provision made for impairment of these receivables. A

provision for impairment of trade receivables is established when there is objective evidence that the company will not be able to collect all amounts due according to original terms of the receivables.

6. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash in hand, deposits held at banks and other short-term highly

liquid investments with original maturities of three months or less. Cash and cash equivalents are recognised at cost which equates to their fair value.

7. LEASES Leases in which significant portion of the risks and rewards of ownership are retained by the lessor are

classified as operating leases. Payments made under operating leases are charged against income on a straight-line basis over the period of the lease.

8. REVENUE RECOGNITION Revenue comprises of contributions from the FSB in the form of cash advances, salaries and expenses.

It is recognised when the amount of revenue can be measured reliably and it is probable that future economic benefits will flow to the Office of the Pension Funds Adjudicator.


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9. PROVISIONS

Accounts Payable / Provisions are recognised when: Accounts payable / provisions are recognised when:

a) the OPFA has a present obligation as a result of a past event; b) it is probable that an outflow of resources embodying economic benefits will be required to settle

the obligation; and c) a reliable estimate can be made of the obligation

All transactions were done at arms length. Leave provision has been reclassified to ensure that it is comparable with previous years balance and to ensure that it has been fully provided.

10. MANAGEMENT OF CAPITAL GRANTS As the OPFA is not profit-driven and is not building an asset base, neither financial nor physical changes

in the OPFA’s assets is an indication of how to evaluate the entity’s objectives, policies and processes for managing its capital. The OPFA’s primary objective is to render a dispute resolution service to the Pension Fund Industry.

11. EMPLOYEE BENEFITS

The cost of providing employee benefits is accounted for in the period in which the benefits are earned by the employees.

OPFA contributes to a retirement annuity fund on behalf of its employees. There is no contract between the OPFA and the retirement annuity fund. Each employee has an individual contract with the retirement annuity fund. The extent of the OPFA’s relationship with the retirement annuity fund is purely administrative.

12. FINANCIAL RISK MANAGEMENT

Market risk

Foreign exchange risk The OPFA does not operate internationally but is exposed to foreign currency risk arising from foreign

travelling expenses. Foreign travel is only undertaken by the PFA and foreign travel expenses are paid at a spot rate.

Price risk The OPFA is not subject to price risk as we do not trade in goods nor hold investments

Cash flow and fair value interest rate risk The OPFA has cash and cash equivalents and its income and operating cash flow are dependent on

grants received from the FSB.


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Credit risk The OPFA has no significant concentrations of credit risk. The OPFA has policies to limit the amount of

credit exposure to any one financial institution. FSB collects levies on behalf of OPFA and all income is received from FSBConcerntration risk is surrounding FSB because OPFA receive its main income from them.

Liquidity risk Prudent liquidity risk management implies maintaining sufficient liquid resources and the ability to

settle debts as they become due. In this case, the OPFA liquid resources consist of mainly cash and cash equivalents. The OPFA maintains adequate resources by monitoring cash available in our current bank account a month in advance before payments are made. Cash is normally transferred into OPFA account within 24 hours after the request to FSB. The OPFA aims to maintain flexibility in funding by keeping committed credit lines available.

13. RELATED PARTIES

The company operates in an economic environment currently dominated by entities directly or indirectly owned by the South African Government. As a result of the constitutional independence of all three spheres of government in South Africa, only parties within the provincial sphere of Government will be considered to be related parties.

Key management is defined as being individuals with the authority and responsibility for planning, directing and controlling the activities of the entity. We regard all individuals reporting directly to the PFA as key mannagement per the definition of the standard.

Other related party transactions are also disclosed in terms of the requirements of the statndard. The objective of the standard and financial statements is to provide relevant and reliable information and therefore materiality is considered in the disclosure of these transactions.

14. FRUITLESS AND WASTEFUL EXPENDITURE

Fruitless and wasteful expenditure is expenditure which was made in vain and would have been avoided had reasonable care been exercised. Internal controls will be implemented to leave no room for fruitless and wasteful expenditure.


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2. PROPERTY AND EQUIPMENT

2009 2008 Cost Accumulated Carrying Accumulated Carrying

depreciation value Cost depreciation value R R R R R R

Furniture and fixtures 552,714 (285,908) 266,806 473,063 (260,556) 212,507

Office equipment 399,251 (316,492) 82,758 353,570 (255,438) 98,132

Computer hardware 980,429 (618,440) 361,989 804,185 (486,624) 317,561

Leasehold improvements 574,877 (355,886) 218,991 448,214 (183,158) 265,056

Library books 862,212 (399,234) 462,978 720,189 (295,959) 424,230

Paintings and sculptures 36,207 (7,241) 28,966 36,207 (3,621) 32,586

3,405,690 (1,983,202) 1,422,488 2,835,428 (1,485,356) 1,350,072

Reconciliation of property and equipment - 2009

Opening Carrying Balance Additions Disposals Depreciation value

R R R R R

Furniture and fixtures 212,507 79,651 - (25,352) 266,806

Office equipment 98,133 45,681 - (61,055) 82,759

Computer hardware 317,562 176,244 - (131,816) 361,990

Leasehold improvements 265,056 126,663 - (172,728) 218,991

Library books 424,228 142,023 - (103,275) 462,976

Paintings and sculptures 32,586 - - (3,621) 28,965

1,350,072 570,261 - (497,846) 1,422,487

Notes to the Annual Financial Statementsfor the year ended 31 March 2009

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Reconciliation of property and equipment - 2008

Opening Carrying Balance Additions Disposals Depreciation value

R R R R R

Furniture and fixtures 157,570 98,971 - (44,034) 212,507

Office equipment 137,362 19,149 - (58,378) 98,133

Computer hardware 58,958 332,455 - (73,851) 317,562

Leasehold improvements 3,157 345,245 - (83,346) 265,056

Library books 399,876 104,701 - (80,349) 424,228

Paintings and sculptures 36,207 - - (3,621) 32,586

793,130 900,521 - (343,579) 1,350,072

Depreciation is recognised against statement of financial performance after initial assesment of assets on historical basis


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2009 2008

R R

3. INTANGIBLE ASSETS

Computer softwareCost 188,165 188,165

Accumulated amortisation (177,642) (161,835)

Net carrying amount 10,523 26,330

Movement for the yearOpening balance 26,330 5,596

Additions - 28,029

Amortisation charge (15,808) (7,295)

Closing balance 10,523 26,330

Intangibles are amortised within 3 years and expenses recognised against statement of financial performance

4. TRADE AND OTHER RECEIVABLES

Property deposit 244,874 204,865

Debtors control 4,030,180 672,209

Other receivables 24,367 24,367

Staff loans 16,050 -

Suppliers with debit balances 63,889 -

Total trade and other receivables 4,379,360 901,441

Disclosure for items passed due but not yet impaired for 2009

Current +120 days TotalProperty deposit - 244,874 244,874

Debtors control 3,975,537 54,643 4,030,180

Staff loans - 15,050 16,050

Other receivables - 24,367 24,367

Suppliers with debit balances 63,689 - 63,889

Total 4,039,426 339,934 4,379,360


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Disclosure for items passed due but not yet impaired for 2008

Current +120 days TotalProperty deposit - 204,865 204,865

Debtors control 647,842 - 647,842

Other receivables - 24,367 24,367

Total 647,842 229,232 877,074

Breakdown of FSB debtors included in debtors control 2009 2008 R R

Balance as per debtors control 4,030,180 672,209Amount due from Vuyani Ngalwana 35,150 35,150

Amount due from Zareena Camrodeen 19,493 19,493

FSB Amount 3,975,537 617,566

Break down of movement in FSB debtor 3,975,537 617,566Opening balance 617,566 -

Payment recived from FSB (617,566) -

Movement for the period 3,975,537 617,566

Movement in statement of comprehensive income 1,427,021 617,566Amount received from FSB (29,423,522) (19,028,988)

Amount not funded by FSB (external income) (17,596) (7,551)

Total expenditure for the year 30,868,139 19,654,105

Trade debtors do not contain any items that need to be impaired at year end. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The entity does not hold any collateral as security. Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost. A provision for credit losses is established when there is evidence that not all amounts due will be collected according to original terms of the receivables.

The carrying amounts of the OPFA’s trade and other receivables are denominated in the South African Rands (ZAR).


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5. CASH AND CASH EQUIVALENTS 2009 2008 R R

Petty cash 437 976

Cash at bank on hand 1,413,074 588,786

Market link bank account 103,474 93,679

1,516,985 683,441

6. CURRENT TAX

The Office of The Pension Funds Adjudicator (OPFA) is not liable for income tax in terms of section 10(1)(t) of the Income Tax Act No. 58 of 1962.

7. TRADE AND OTHER PAYABLES 2,824,670 1,106,045 Creditors control 2,349,530 965,737

Operating lease straightlining 140,309 -

Accruals (insurance + tenants lease potion) 107,009 140,308

Credit card 10,085 -

Accrual for internal audit fees 217,736 -

The credit terms for trade creditors are negotiated on a 30 day settlement basis. Other accruals are settled on its merits.

Disclosure for items passed due but not impaired for 2009

Current 120 90 60 30 Total

Creditors control 693,394 1,226,890 219,871 (311,594) 465,056 2,293,617

Fair value adjustment 2,115 48,766 8,390 (9,789) 6,431 55,913

Total of creditors control 695,509 1,275,656 228,261 (321,383) 471,488 2,349,531

Operating lease straightlining - 140,309 - - - 140,309

Accruals 107,009 - - - - 107,009

Credit card 10,085 - - - - 10,085

Accrual for internal audit 217,736 - - - - 217,736

Total of trade and other 1,030,339 1,415,965 228,261 (321,383) 471,488 2,824,670creditors


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Disclosure for items passed due but not impaired for 2008

Current 120 90 60 30 Total

Creditors control 965,737 - - - - 965,737

Fair value adjustment - - - - - -

Total of creditors 965,737 - - - - 965,737

control

Operating lease 140,308 - - - - 140,308

straightlining

Total of trade and other 1,106,045 - - - - 1,106,045creditors

2009 2008 R R

8. PROVISIONS 1,238,215 1,137,284 Leave liability 1,110,583 619,210

Bonus liability 127,632 518,074

Provisions Opening Balance

Additions Reversal during the

period

Total

Reconciliation of Provisions - 2008Leave provision 454,810 619,210 (454,810) 619,210

Reconciliation of Provisions - 2009Leave provision 619,210 928,451 437,078 1,110,583

Bonuses Opening Balance

Additions Paid during the period

Total

Reconciliation of Provisions - 2008Bonus liability - 682,822 (164,748) 518,074

Reconciliation of Provisions - 2008Bonus liability 518,074 605,924 (996,366) 127,632


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2009 2008

9. OPERATING DEFICIT R R

Operating deficit is disclosed after taking the following into consideration:

Amortisation of intangible assets 15,808 7,295

Depreciation 513,654 343,579

Employees costs 17,794,536 13,796,863

Repairs and maintenance 59,789 20,122

External audit : audit and other professional services 823,875 170,892

: other expenditure 35,441 -

Internal audit fees 309,555 -

Legal / professional fees 5,050,454 772,110

Rent paid 1,278,085 1,031,356

Other administration costs 6,194,022 3,509,552

Total expenses 30,797,133 19,651,769


10. CASH GENERATED FROM OPERATIONS

Net surplus for the period 2,548,517 -

Adjust for:

Depreciation and amortisation 513,653 350,874

Finance income (17,596) (7,551)

Finance costs 71,005 2,336

Changes in working capital:

Decrease / (Increase) in accounts receivable (3,477,919) (760,785)

Decrease in accounts payables 1,819,555 1,450,848

Cash generated from operations 1,457,215 1,035,722

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11. EXECUTIVE MANAGEMENT REMUNERATION

Employee costs include costs for the following managerial staff:

Incentive Employer RA

Leave

Salary Bonus Contribution Computation Total R R R R R

Year ended 31 March 2009

M Mohlala, PFA 1,312,457 381,016 - - 1,693,473

L Manuel, Office Manager- left July 2008 258,128 - 19,711 85,942 363,780

F Mantsho, Finance Manager 550,000 - 35,767 - 585,767

2,120,585 381,016 55,478 85,942 2,643,020

Incentive Employer RA

Leave

Salary Bonus Contribution Computation Total R R R R R

Year ended 31 March 2008

M Mohlala, PFA - appointed 01/06/07 888,880 75,782 - - 964,662

L Manuel, Office Manager 611,100 - 40,691 - 651,791

F Mantsho, Finance Manager

- appointed 03/12/07 150,000 20,000 10,688 - 180,688

N Jeram - resigned 20/12/07 550,368 - 39,214 168,036 757,618

2,200,348 95,782 90,592 168,036 2,554,758


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12. RELATED PARTIES

All National Departments of Government and State-controlled entities are regarded as related parties in accordance with Circular 4 of 2005: Guidance on the term “state-controlled entities” in the context of IAS 24 (AC 126) - Related parties, issued by the South African Institute of Chartered Accountants. The following transactions and balances were recorded relating to transactions with related parties as defined.

2009 2008R R

Services provided by related partiesFunds provided from the FSB in terms of section 30R (1) (a) of the Pensions Act of 1956 as amended 33,399,059 19,646,554

Unemployment Insurance Fund 70,143 49,781

Sector Edudation and Training Authority 165,422 130,099

Telkom SA Limited 1,097,850 501,258

South African Post Office 13,890 33,108

1,347,304 714,245

Year-end balances arising from services provided to related partiesUnemployment Insurance Fund - -

Sector Edudation and Training Authority - -

Telkom SA Limited 361,512 55,248

South African Post Office - 20

361,512 55,268


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2009 2008

13. CONTINGENT LIABILITIES R R

Heritage BuildingThe Office of Pension Funds Adjudicator stopped with a plan of moving to the Heritage Buiding due to budgetary limitations. As a result, the offer to lease the Heritage Building was cancelled before we entered into a lease agreement with Growthpoint. That resulted into legal dispute that is currently ongoing and the amount of legal costs could not be determined at this stage.

Corporate Place BuildingDue to the inadequate space at our current office building for employees and documents the OPFA intends moving to a new office building in August 2009. This will result in penalties amounting to approximately R1,194,788 due to the cancellation of the current lease.

Accumulated FundsIn terms of the section 53(3) of PFMA, the OPFA has applied to National treasury for the approval to retain surplus of R3 266 471

14. OPERATING LEASE

The OPFA leases its office accommodation in terms of an operating lease. The operating lease rentals include a charge for rental, parking, operational costs, electricity, rates and taxes. Escalations of 10% have been included in the lease agreements. The total future minimum lease payments under these leases are as follows:

Due within one year 1,302,136 1,186,840

Due between one and two years 671,822 1,469,136

1,973,958 2,655,976

15. REVENUE

Revenue comprises the fair value of the consideration received or receivable and is recognised as follows:

Contribution from the Financial Services Board (FSB) 33,399,059 19,646,554

Contribution awarded to the Office of the Pension Funds Adjudicator by the FSB are recognised on the accrual basis.


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2009 2008 R R

16. FINANCE COST

Interest paid on outstanding invoice 15,092 2,264

Interest on overdraft - 72

Fairvalue adjustment on trade creditors 55,913 -

71,005 2,336

17. FINANCE INCOME

Finance income 17,596 7,551

18. FRUITLESS AND WASTEFUL EXPENDITURE

Interest paid on outstanding invoice 15,092 2,264

Although interest paid is wasteful expenditure, we anticipate recouping the total interest paid. The amount of interest is currently being disputed with Telkom.

Court case fees incurred 350,794 -

Although the fees were incurred is wasteful expenditure, we anticipate recouping the total fees incurred. The amount of fees is currently being recouped from the sub-contractor Bibi Rikhotso Attorneys.


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2009 2008 R R

Operating ExpensesAdvertising (258,097) (289,729)Archiving-off-site storage (33,408) (17,041)Auditors fees : External fees 2008 (678,997) - Auditors fees : External fees 2007 (144,878) (170,892) : External fees other (35,441) - Internal audit fees (309,555) - Bank charges (8,546) (7,385)Computer support, maintenance and internet (432,450) (878,296)Conference and training (113,787) (208,180)Consumables (46,947) (23,629)Courier and postage expenses (176,216) (82,971)Depreciation (513,654) (350,874)Entertainment - internal (52,378) (13,825)Entertainment - internal Tenth Anniversary (553,652) - Electricity, water and taxes (248,941) (227,634)Entertainment - external (19,115) (4,941)Flowers ,plants and gifts (73,004) (27,193)Insurance (27,960) (21,391)Repairs and maintenance (59,789) (22,389)Printing and stationery (238,434) (186,406)

Actuarial (843,600) - Anniversary (81,626) - Conciliation (1,288,250) - Determinations filing (63,960) (716,849)Financial (164,029) - Human resources (96,217) - Information technology (715,738) - Research (276,000) - Other (74,419) - Public relations Services (136,800) - Legal fees (1,309,816) (55,261)

Publications and newspapers (219,636) (4,117)Relocation expense (126,804) (41,333)Rent paid (1,278,085) (1,031,356)Salaries and wages (17,794,536) (13,953,662)Seta levy - (130,099)Staff relief expenses - (32,075)Telephone and fax (1,019,071) (468,968)Travel - local (air tickets, parking and mileage) and accommodation (1,026,753) (487,496)Transcription and translation (38,229) (5,000)Strategic planning and workshop (217,088) (189,722)Other expenses (1,230) (3,055)Total Operating Expenses (30,797,133) (19,651,769)

Annexure AUnaudited statement of comprehensive income

Documents

Annual Report 2008|2009 - pfa.org.za...Financial Manager: F Mantsho, Accountant: R Soldaat, HR Manager: P Mhlambi HEAD OFFICE Johannesburg 2nd Floor, Sandown House Sandton Close 2,