Edition: June / Aug 2017
Editorials

FUND ADMINISTRATION

Litany of irregularity

Big problems with big pension fund.
FSB must act.
Or disclose how it has.

With the Pension Funds Adjudicator having called on the Pension Funds Registrar to investigate the conduct and licensing conditions of Akani Retirement Fund Administrators, most recently over the Bokamaso retirement fund (TT March-May), it isn’t only she who continues to be unhappy with Akani. Clearly, participants in the giant Municipal Employees Pension Fund are unhappy too. Apparently the Financial Services Board is unhappy also.

This is evident from a report by the FSB that followed an on-site visit to the MEPF offices as far back as June 2014. The report is pretty damning. Yet at least one of the large unions representing employees has been urging the SA Local Government Bargaining Council to use its clout for the matter to be resolved.

For its part, the FSB says that it has no comment on the content of its now years-old report. What’s then been done about its findings? Nothing? If there have been any outcomes, the FSB doesn’t say.

The MEPF is administered by Akani. Within the MEPF, as its contributing employers, are 122 municipalities. About 17 000 members of the fund are members of either the SA Municipal Workers Union or the Independent Municipal & Allied Trade Union.

Members of the MEPF had complained to the FSB about irregularities in the fund’s administration. Their allegations have been recorded to include:

  • Akani’s active involvement in the fund’s affairs,making and implementing its own decisions for the fund;
  • Akani directors being on the fund’s board and management committee;
  • Akani being remunerated “in excess of industry norms” for administration services;
  • Akani having effective control of the fund forwhich it makes operational, strategic, investment and executive decisions.

Following its 2014 visit to the MEPF, the FSB reported:

  • On the processes and controls used by Akani, instances were discovered where information on the administration platform were not reflected in the annual financial statements e.g. the late payment of interest on benefits and transfers;
  • Irregularities were discovered with regard to the agreement concluded between the fund and Akani i.e. the costs of travel, accommodation and subsistence allowances of Akani’s personnel and trustees of the fund;
  • The fund’s board of trustees was not constituted in terms of fund rules. Appointments of the independent member and pensioner representative were irregular;
  • There was a “high risk on inconsistency” on the election of trustees;
  • On terms of office for the management-committee members, the pensioner board member and office bearers, irregularities were discovered;
  • No documentation could be found for the appointment of the (then) current independent chairperson, the deputy chairperson and the pensioner representative. There were irregularities in the election of the chairperson to the board of trustees;
  • In bank statements provided to the FSB, member contributions had not been paid according to fund rules;
  • The fund’s principal officer had a fully-furnished office in the premises of Akani, casting doubt on the principal officer’s independence;
  • Unclaimed benefits that had accrued were transferred to Akani. All proceeds from the distribution of death benefits, in respect of minors and gratuities, were transferred to Akani;
  • The fund and/or Akani made misrepresentations to the Registrar on the rule amendment related to the reduction of withdrawal benefits of fund members on resignation. No evidence could be found that members had been informed of the reduction before the resolution was taken by the board of trustees.

Having asked FSB executive officer Dube Tshidi what’s happened as a result of this report, a spokesperson for the FSB responded: “As pointed out in the complaint, the FSB conducted an on-site visit into the affairs of the fund on 27 June 2014. Our findings are contained in the report attached to the complaint. We have no further comment more than what is contained in this report.”

It is hardly a satisfactory state of affairs. In the 2013-14 annual report of her office, Adjudicator Muvhango Lukhaimane singled out the MEPF for ignoring its own rules when computing a withdrawal benefit. Yet the MEPF subsequently did it again, causing her to award punitive damages to a member against the fund. In effect, this left wholly-innocent fund members to bear the punitive costs while the MEPF trustees and administrator Akani escaped penalty (TT March-May 2015).

There must be something special about Akani in averting the Registrar’s wrath.