Pension industry must treat customers fairly

Pension Funds Adjudicator Muvhango Lukhaimane has said that many pension funds claim to conform to the Treating Customers Fairly (TCF) principle while not doing so. Lukhaimane stated: “I am astounded at the number of times funds quote compliance with TCF in response to an action that took place in a retirement annuity fund.

“At this rate, implementation of TCF might just as well cease as I am sure the public is confused because 100% of the time, the customer has not been treated fairly at all.”

What is TCF?

The Financial Services Board (FSB) explained that TCF is an outcomes based regulatory and supervisory principle targeted at the financial products provided by regulated financial firms. There are six outcomes that financial firms are expected to comply with in relation to their products. These outcomes must be delivered “throughout the product life cycle, from product design and promotion, through advice and servicing, to complaints and claims handling – and throughout the product value chain,” noted the FSB.

The Office of the Pension Funds Adjudicator (OPFA) elaborated: “TCF aims to raise standards in the way firms carry on their business by introducing changes that will benefit consumers and increase their confidence in the financial services industry.”

The six outcomes as explained by the FSB are as follows:

1.        Customers can be confident they are dealing with firms where TCF is central to the corporate culture.
2.        Products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly.
3.        Customers are provided with clear information and kept appropriately informed before, during and after point of sale.
4.        Where advice is given, it is suitable and takes account of customer circumstances.
5.        Products perform as firms have led customers to expect, and service is of an acceptable standard and as they have been led to expect.
6.        Customers do not face unreasonable post-sale barriers imposed by firms to change product, switch providers, submit a claim or make a complaint.

According to Lukhaimane, the delay between discussions on TCF and its implementation may result in fund members losing confidence in the outcome-based system. In the first nine months of the 2015/2016 financial year, the OPFA had already received 10% more complaints than during the 2014/2015 year.

The pension fund industry

Lukhaimane noted that the health of the industry could be measured by the number of complaints received. She believed that the industry viewed the regulator as being ineffective or sympathetic to the funds management company’s reasons for non-compliance.

Furthermore, Lukhaimane pointed out that fund members are still experiencing low levels of service. This includes the lack of provision of benefit statements or explanations of fund information, as well as delays in requests for transfer to other funds or excessive delays in the payment of retirement and death benefits.

The complaints

“Most members that complain about payment of benefits or non-payment of contributions by their employers often have no written communication from the fund or administrator regarding the status of their membership.

“The number of complaints that reach our office when a claim has prescribed also points to lack of knowledge by fund members of their rights to enforce claims.

“These are referred to the Financial Services Board for further investigation where the complainant is adamant that a benefit is owing, as this will assist with the tracing of members entitled to unclaimed benefits,” highlighted Lukhaimane.

Despite these claims having been prescribed, Lukhaimane noted that the funds have a duty, at the very least, to look up a member in case they are owed a benefit, as this is their rightful money.

Furthermore, Lukhaimane revealed that tracing agents that are paid by members to submit complaints on their behalf are not all doing so correctly. “These tracing companies are taking money from former members with a promise to trace their unclaimed benefits, yet all they do is submit their name, with no other information to our office for investigation.

“When these complainants are contacted, often they do not have supporting documents establishing membership nor the name of the fund they wish to claim from, which means we cannot investigate further,” added Lukhaimane.

Fund management companies are meant to inform members that OPFA is a free complaints’ resolution office that they can contact directly. However, Lukhaimane pointed out that companies are not doing this often enough. Many complaints that the regulator receives come from companies such as Clientele, Legalwise and Scorpion Legal Protection on a member’s behalf. This is not necessary, as the service is offered for free, and the complaints’ form is available from the OPFA’s website.

For more information on the OPFA and how to lodge a complaint, click here.