Retirement fund sitting on your money?

I BELIEVE there should be increased efforts by regulators and the financial services industry to reduce delays by retirement funds and their administrators in disbursing benefits to members or transferring benefits to another fund.

- MARTIN HESSE

The longer a fund sits on money that should be disbursed or transferred, the longer it receives the administration fees on that money.

In terms of the Pension Funds Act and the rules of the fund, a retirement fund has to finalise a payout to a member or effect a transfer of benefits “within a reasonable time” of receiving instruction from the member.

If the member has died, the process is more involved, because the fund needs to consider dependants not necessarily named on the beneficiary form when distributing the benefit, which would typically be part retirement savings and part group life insurance payout. In death-benefit cases, the time limit is a year.

Individual payouts on resignation are typically done within about three months, but the files of the Pension Funds Adjudicator are full of cases where payouts have taken inordinately longer than that.

The introduction of the two-pot system last year and the subsequent deluge of savings-pot withdrawal applications forced many funds to streamline their processes for cash withdrawals.

Over time, it will only be savings-pot withdrawals that funds will have to contend with, as withdrawals of vested benefits on resignation will eventually fall away.