The deceased worked for a Municipality for 40 years and through his employment he was a member of the first respondent, the Pietermaritzburg Corporation Provident Fund (“Fund”). The deceased left the employment of the Municipality and a withdrawal benefit therefore became due and payable and shortly thereafter he passed away. His withdrawal benefit should have been paid to his estate as this became due as a result of him resigning, but was incorrectly paid as a death benefit to his widow. However, his widow only received half of the deceased’s fund credit. She was dissatisfied with the amount received as she was also promised interest on the amount.
The underlying investments of the Fund
The broker of the Fund submitted that they only paid 50% of the funds due as the Fund had invested in a company now under curatorship as well as Sharemax which is under liquidation. Furthermore, the financials of the Fund had not been prepared since 2006 and proper records had not been maintained by the Fund.
FSB recommendations
For the above reasons the FSB recommended that the claims going forward only be paid at 50% until the financial affairs and records are brought to order. The aim was to avoid overpayments and the fund being impacted negatively which consequently would affect remaining member’s rights. The FSB highlighted however that they were under the impression that members were informed about this arrangement.
The Tribunal’s ruling
- The Board of the Fund had failed to take reasonable steps to ensure that the interests of its members were protected at all times.
- The resolution to pay 50% of the benefits to exiting members is not in the best interests of the members of the Fund.
- Based on the submissions by the FSB, the respondent failed to keep proper records. They also failed to ensure that adequate and appropriate information was communicated to members and beneficiaries of the Fund informing them of their rights, benefits and duties.
- The Board failed to act with due care and diligence in dealing with the property of the Fund.
- In 2008 there was a resolution signed by the employer to increase contributions but this was not implemented. The non-implementation of a resolution signed by an employer cannot be an excuse to not pay the deceased’s full fund credit.
- The Fund was ordered to establish its data accuracy of the deceased and provide the widow with the full fund credit plus fund growth.
Due diligence and treating customers fairly must be at the core of your business
This case illustrates the importance of conducting proper due diligence before contracting with another party. In this matter, the funds were invested into companies who are now under curatorship and liquidation.
It is also evident that the TCF principles were the underlying factors taken into consideration by the Tribunal. Treating customers fairly includes providing customers with clear information and keeping them appropriately informed before, during and after the time of contracting as well as making sure that there are no barriers at claim stage.
This serves as a reminder to all financial services providers to display and conduct their business in a manner which shows integrity by exercising the necessary skill, care and diligence. The core of your business should be to pay regard to the interest of your customers and treat them fairly in all matters pertaining to the rendering of a financial service.