Retirement fund ordered to pay up for unlawful study loan

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A retirement fund has been ordered to pay back the amount deducted from a withdrawal benefit in respect of a study loan.

Pension Funds adjudicator Muvhango Lukhaimane said the Financial Sector Conduct Authority should investigate the fund for unlawful conduct.

The complainant was employed by Akani Retirement Fund Administrators and was a member of the Bokamoso Retirement Fund.

The complainant was paid a withdrawal benefit of R14 868.69 on 30 July, after the deduction of R60 879.70 for a study loan. The complainant submitted that he signed an acknowledgement of debt in respect of a study loan of R52 252.13. But the fund deducted an amount of R60 879.70 from his withdrawal benefit.

Therefore, the fund owed him R8 627.13.

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Upon further investigation, it was established the deduction of the study loan from the complainant’s withdrawal benefit may not have been in accordance with the provisions of Section 37D of the Act.

Therefore, the office of the pension funds adjudicator was asked to issue a determination.

In her determination, Lukhaimane said Section 37D of the Act only provided for the deduction from a member’s benefit in respect of compensation for any damage caused to the employer by reason of any theft, dishonesty, fraud or misconduct by the member.

The deduction of the study loan fell outside the scope and was unlawful.

“As a result of the first respondent’s unlawful conduct, the complainant suffered prejudice in that he has been denied access to his full withdrawal benefit which would have become available upon the termination of employment,” said Lukhaimane.

“The deduction from the complainant’s benefit was not authorised by Section 37D of the Act. The fund should pay the complainant the amount deducted from his withdrawal benefit in respect of the study loan plus interest.
“The conduct of both the fund, and the administrator is inconsistent with keeping with their fiduciary responsibilities.

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“Such conduct must be scrutinised by the regulator as it is the regulator that permits these administrators to operate in the retirement funds sector.

“Accordingly, this determination will be made available to the Financial Sector Conduct Authority, together with any other information that the regulator may require in order to consider such behaviour,” Lukhaimane said.

The fund was ordered to pay to the complainant the amount deducted from his withdrawal benefit in respect of study loan, together with interest.

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Source: citizen