“Know your ombud” episode 8

For many South Africans, their pension fund represents their largest financial asset, yet countless members remain in the dark about their rights when things go wrong. In the latest episode of our Know Your Ombud series, I am joined by Pension Funds Adjudicator Muvhango Lukhaimane, who reveals the most common complaints that her office handles  – and the critical knowledge gaps leaving consumers vulnerable.

Your right to free help

The most important right every pension fund member has is free access to the Pension Funds Adjudicator when complaints arise against their fund or employer. Unlike many financial disputes, you don’t need a lawyer or any upfront payment.

“Even if you haven’t tried resolving the issue with your fund first, we’ll help activate that process,” explains Lukhaimane.

This is particularly crucial for employees whose employers aren’t paying contributions – a situation she describes as “absolutely criminal” – where complaining directly might risk job security.

The information crisis

One of the biggest failures Lukhaimane sees is that funds do not share basic information with members.

“There are so many members who have never held a benefit statement in their hand,” she notes. This violates your fundamental right to understand your benefits.

But it is equally important for members to actively seek out information about their fund. Don’t wait for annual statements. Contact your fund regularly to understand your benefit structure, growth, and what triggers various benefits.

Two-pot tax reality check

The two-pot system brought harsh lessons about member responsibilities. One member expecting R15 000 from his savings pot received only R2 000 because SARS deducted outstanding taxes.

“Funds have no choice but to deduct what SARS requires,” Lukhaimane explains. Ensure your tax affairs are in order before accessing benefits, as all withdrawals require SARS tax directives.

Death benefits: understanding trustee discretion

A common misconception is that death benefits automatically follow your wishes or legal inheritance rules. In reality, trustees have discretion to allocate benefits based on financial dependency, not just legal relationships.

In one case, trustees allocated 65% of benefits to minor children over adult children and the spouse, recognising the minors’ greater dependency.

The key lesson: complete beneficiary nomination forms, but understand that trustees will consider actual financial dependency when making decisions.

“You can’t rule from the grave,” Lukhaimane emphasises. Even estranged spouses with no ongoing financial relationship may receive nothing if others were genuinely dependent on the deceased.

The beneficiary fund debate

When minor children inherit pension benefits, funds often place money in beneficiary funds rather than giving it to the surviving parent. However, the default legal position favours competent parents managing their children’s inheritance.

In a landmark case, Lukhaimane ruled in favour of a mother whose children’s benefits were placed in a beneficiary fund without proper assessment of her competence.

If you’re a capable parent, you should manage your minor children’s benefits unless the fund can prove otherwise.

When members get it wrong

Not all complaints succeed. One member received an incorrect benefit statement showing she had R1 million more than her actual entitlement. When she resigned based on this figure, she demanded the inflated amount.

Lukhaimane ruled against her: “You cannot get what you’re not entitled to under the fund rules.” Member’s need to be reasonable about benefit projections and question statements that seem unrealistic.

Taking action

Before approaching the adjudicator:

• Try resolving issues with your fund, employer, or administrator
• Gather all relevant documentation
• Understand your fund’s rules and benefit structure

Note that the Pension Funds Adjudicator doesn’t cover government employee pension funds, Transnet, or certain university funds – though the pending COFI Act should change this.

Key red flags requiring immediate action

• Missing benefit statements
• Employers deducting but not paying contributions
• Inability to access basic fund information
• Unfair death benefit allocations

The bottom line

Your pension fund is likely your biggest asset, but protection requires active engagement. Know your rights, fulfill your responsibilities, and don’t hesitate to use the free dispute-resolution services available.

And remember: approaching any ombud is free, and you don’t need legal representation. Don’t waste money on lawyers or vent on social media – get proper help through official channels.

Contact details

If you feel let down by a financial service provider, you can contact the appropriate ombud scheme via the links below:

• Ombud for Financial Services Providers (FAIS Ombud): Disputes related to financial advice
• Office of the Pension Funds Adjudicator (OPFA): Disputes related to pension funds
• JSE Ombud: Disputes related to the JSE
• National Financial Ombud Scheme (NFO): Disputes related to banking, credit, and insurance

This podcast series was created in partnership with The Ombud Council.