A Fin24 reader writes:I have a problem with a pension fund that doesn't want to pay out my share of a surplus.
I was a Standard Bank employee for 40 years. In 2004, I accepted an early retirement package because my department was closing down.
Shortly thereafter I read that Standard Bank's pension fund had declared surpluses and I applied to get a part of the surplus.
I was then informed that the surplus would only be paid to members who left the fund between 1988 and January 2001 – although I was also member of the fund while the surplus was built up.
My objections to the fund and, later, the Alexander Forbes trustees, went ignored.
In 2010 I heard that all current members of the fund (people who are still working for the bank received a minimum adjustment of 10% (and more) on their pension savings plan.
No one can explain to me where this money is suddenly coming from and I can't see such an amount in the bank's financial statements.
What I do know is that only 40% of the surplus has been paid out. What about the rest? Was the money used to pad the pension money of current members?
I am very unhappy about this and have asked the pension ombudsman to investigate – to no avail.
Cleon du Preez, a financial consultant with Alexander Forbes, responds:Surplus legislation was introduced into the Pension Funds Act with effect from December 7 2001.
The aim of this legislation is to ensure that actuarial surpluses in funds are allocated on what government believes to be an equitable basis.
A distinction is made between "past surplus" ie surplus calculated at each fund's surplus apportionment date (being a fund specific valuation date after December 7 2001) and surplus which arose post the surplus apportionment date, ie "future surplus".
In the case of the reader, the issue relates to "past surplus".
Legislation states that "past surplus" should be utilised firstly to provide past members and pensioners with "minimum benefits".
"Minimum benefits" are defined in the act and there is a specific formula in the legislation which must be used to compare the benefits already paid to former members and pensioners against the minimum benefit set in the legislation.
In the case of the Standard Bank Group Retirement Fund, that exercise was carried out and all members who retired or resigned prior to the December 7 2001 who had not received their "minimum benefits" were paid an additional amount. Members who exited the fund after December 7 2001 received their "minimum benefits".
Should there be additional surplus left after "minimum benefits" are paid out, the residual surplus may be allocated among the stakeholders as decided by the trustees. The stakeholders include current members, former members, pensioners and the employer.
The trustees of the fund elected to increase certain active member fund credits. We assume the reader does not fall into the active member group who received a portion of the surplus.
He was therefore not entitled to a minimum benefit top-up, as he already received his minimum benefit when he left the fund and did not qualify for a share of the residual surplus based on the criteria set by the trustees for the distribution of the residual surplus.
The surplus apportionment scheme, that is the document setting out how the surplus was to be distributed, was submitted by the fund to the Financial Services Board (FSB). It was approved by the FSB before the fund started paying out the surplus.
- Fin24