How to handle fund disputes

Every fund has a board of trustees and a constitution, more commonly known as the rules of the fund.

The rules of the fund constitute the legal persona of a fund and the agreement between the fund and its members, even though the individual member may not ever have seen the rules or have signed acceptance of the agreement. Employees are usually required to become a member of the employer’s pension fund in terms of the contract of employment entered into between the employer and the member. In becoming a member of the fund and making monthly contributions to the fund, the member has, at least tacitly, accepted the conditions of membership as contained in the fund’s rules.

It is also to be noted that the obligation to join the employer’s fund has its roots in the Income Tax Act, that requires membership of the employer’s fund to be a condition of employment for the employee. Where membership is a condition of employment, the Income Tax Act concedes an annual tax deductible member contribution of N$ 40,000. This concession is not available to any voluntary contribution.

The trustees of the fund are required to manage the fund in accordance with its rules. Rules usually contain provisions regarding the resolution of any dispute. Having subscribed to this agreement with the fund, the member has a contractual obligation to comply with the agreement, i.e. the rules, when he/she has a dispute with the fund.

The typical dispute resolution procedures are that the member submits his/her complaint to the trustees in writing. It would be wise to request the trustees to respond within a reasonable period, say 14 days, as most rules do not lay down such period. Should the member not be satisfied with the response provided by the trustees, the complaint is typically required to be referred to the fund’s actuary by the trustees. The actuary is an independent professional person, with extensive knowledge of pension funds business and rules would typically state that the decision of the actuary regarding the complaint is binding on the fund and the member.

If the member remains dissatisfied, Namfisa would gladly involve itself in assisting to resolve the complaint at no cost to the complainant, and this should then be the member’s next avenue.

Members are sometimes so aggrieved with the employer and/or the fund or one of the fund’s service providers, that he/she has no faith in the sincerity of the trustees. Usually this is a wrong perception, considering that the board of trustees normally comprises of an equal number of employee elected, and employer appointed trustees. Trustees have a fiduciary duty to protect the interests of members and typically do take this duty very seriously.

Any confrontational approach a member may choose to take, is likely to end up in a protracted and costly matter and should be considered only if the trustees evidently do not take the member’s complaint seriously.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.