New PFA rules against payments to trusts

Mohlala, who replaced Vuyani Ngalwana, the man who got South Africans to sit up and take notice at financially punishing, and often illegal, practices going on behind-the-scenes of the pension funds’ industry, made her first ruling in connection with questionable payments to trusts. In MM Moralo vs Holcim SA and the Alexander Forbes Trust, Mohlala said she could have sent the ruling back for the trustees to ‘exercise their discretion appropriately’, but instead, ordered the fund to pay all money owed to the complainant, in the interests of avoiding wasting further time or causing unjustifiable prejudice to a woman who had already suffered financial hardship as a result of the case. In this matter, the Holcim SA Provident Fund (formerly known as Alpha Group Employees Provident Fund) trustees had decided to hand over a lump sum to a trust rather than the widow. The report says the move underscores a widespread practice in the pension fund industry for fund trustees to move money payable to adults into trust, instead, for administration and investment management by big companies. Deputy Pension Funds’ Adjudicator Naleen Jeram is quoted as saying that funds are not, by law, supposed to move benefits for adults into a trust. It is only where there are exceptional and compelling circumstances that a trust, rather than the adult, takes control of the money. ‘The general principle is that it must be paid directly to beneficiaries.’ In the case, Holcim SA’s provident fund argued that it had placed the widow’s benefit in trust because she was unemployed and had another 25 years to retirement. Full Moneyweb report