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There’s been an increasing number of several big employee benefit fund administrators exiting the market, and employers are encouraged to build relationships with administrators that are committed to being long-term partners – particularly when it comes to corporate retirement funds.
That’s the advice of Siphamandla Buthelezi, head of platforms at financial advisory firm NMG Benefits: “Administrators play a critical role when it comes to processing claims and ensuring that members are paid out timeously and accurately.” Buthelezi also emphasises that winding up a pension fund takes time, and the overall perception of fund administrators taking too long or delaying the process needs to be addressed.
To start, while an administrator may receive notification of a member’s resignation or retirement within the member’s last working month, it can take up to 10 working days from the end of the month for an employer to finalise a member’s last contribution.
The administrator can only start working on this claim once the final payment is received. From there, further delays can arise if the member’s documents are incomplete, incorrect, or non-compliant with the requirements of section of the Pension Funds Act.
Buthelezi says that tax is the most common reason for claims being delayed. “The majority of claim forms that we receive either have an incorrect tax number, or none at all. On top of this, there are often items that must be sorted out directly with SARS, which an administrator is not legally able to do on a member’s behalf.”
The administrator must also verify account details with the member’s bank. “Verifying bank accounts sets a strong precedent for accountability and the protection of individuals’ financial interests. It is pivotal when it comes to protecting members’ financial interests and is a critical security measure within our claims process,” says Buthelezi. If a bank account cannot be verified, the claim process will be delayed.
After the tax and banking details are made compliant, the administrator may need to co-ordinate with the employer, in case of any Section 37D that a member might have, who may need to approve certain claims. Section 37D is part of the Pension Funds Act of South Africa.
It provides for the deduction of certain amounts from a member’s pension benefits. These deductions include, amounts required by law to be deducted in respect of income tax, amounts due on a housing loan or mortgage where the fund has provided a guarantee, amounts required by a court order for maintenance purposes and any compensation for damages suffered by an employer due to theft, dishonesty, fraud, or misconduct by the member, as determined by a court judgment.
Disinvestments also take time, depending on where the money is coming from. If the member is moving the funds to a different retirement fund, the administrator manages this transfer process.
It should also be taken in account that these processes can only start once the last contribution has been invested. Its also crucial that the administrator has the recent contact details for the member, in case of outstanding requirements or if the member is uncontactable, he or she can remain a paid-up member of the fund.
Buthelezi reiterates that transparency between employers and employees results in a greater understanding of the process and a more realistic expectation of when their funding will pay out. He also advises employers to do regular ‘temperature checks’ with their administrators and have employers ask their employees to update their personal information to be shared with the fund for a seamless payout process.
