SOUTH AFRICA - Trustees have a duty to recover profits made by pension fund administrators that have not been disclosed to pension schemes, the pension funds adjudicator (PFA) has ruled.
Irvin & Johnson retired member B Dollman had claimed NBC had accrued unlawful profits in excess of ZAR369,000 (US$38,000) by combining the scheme's bank accounts with its own - and earned preferential interest of each fund.
As a "reward" for putting this arrangement in place, the administrator retained a proportion of the additional interest for itself without disclosing this to the fund.
NBC admitted it had earned ZAR369,109 from the arrangement between April 2000 and March 2006.
However, it said this represented about 10% of the total interest earned from bulking, and claimed 90% of the interest earned was passed on to the fund.
The administrator claimed it had offered to repay the additional interest in October 2006 , but trustees declined the offer.
Dollman complained that in doing so, the trustees had exceeded their authority and were not acting in the interests of the fund.
According to the ruling, the trustees told the adjudicator that if NBC had refunded the profits, this would not have resulted in a material payment to members.
Mohlala said NBC should have bulked the accounts in order to earn the best interest rate for the fund, as this was within the scope of the mandate it was given by the fund.
She ruled the profits should have been passed on to the fund, and the administrator's retention of about 10% without the fund's consent was "wrongful".
She also warned trustees had a duty to ensure that all profits due to their fund were recovered where practical, for the benefit of the fund and its members.
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