You could lose out dramatically on the benefits due to you when you retire if your retirement fund fails to keep proper and accurate records of each individual fund member.
Even if you leave the fund before retirement, or if you are already drawing a pension, any mistake could hit you hard, Richard Morris, a senior audit manager at PricewaterhouseCoopers, says.
If a single contribution of R1 000 from you, your employer or both, is left out 30 years before you retire and this goes undetected until you retire, you will lose almost R66 200. This is based on a 15 percent return on the fund's investments.
Even if you are already drawing a pension from the fund, you are not immune from this kind of administrative risk.
There is a danger that future pension increases will be lower because of mistakes in the accounting records.
If you belong to a defined benefit fund, the administration risk can be largely eliminated at the time you retire, Morris says in the latest issue of Pensions World South Africa.
This is because you can check your retirement benefit easily enough. It depends on your years of service and your salary at or about retirement age.
You should ask for a copy of the fund's rules, find the relevant clauses, read them carefully, and work out what will be due to you.
Members of defined contribution funds have no escape from administration risk.
In these funds the rate of member and employer contributions is usually fixed and your retirement benefit is ultimately determined by the contributions credited to you and your share of the return generated from the fund's investments.
These funds are more accounting intensive and it is vital that defined contribution funds keep full records of all contributions and returns allocated to individual fund members.
Morris says in many cases the accounting and administration systems previously used for defined benefit funds were "tweaked and patched" in order to handle defined contribution funds.
"The result is that even now, many of these systems are something of an accounting nightmare," he says.
Some practical steps you can take to ensure you are getting what is due to you:
To start, you should receive an annual statement of benefits that sets out the contributions (both yours and your employer's if applicable) and the investment returns due to you over the year.
Check your contributions:
If the fund's year-end is at the end of February, you can check on your IRP5 tax certificate that contributions paid into the fund tally with your retirement fund benefit statement to ensure that this amount has actually been allocated to you within the fund.
If you belong to a non-contributory retirement fund such as a provident fund, check the details of your salary package to calculate the rate your employer should be contributing to the fund and again compare this with your fund's benefit statement.
Check your returns:
Keep the annual benefit statement you receive from your retirement fund, which reflects the market value of your share of the fund. By deducting one year's figure from another, you will be able to calculate the average percentage return your investment earned.
Morris says you should compare this with the rate of return to members reflected in the full financial statements of the fund.
Insist that your fund is properly audited:
Many funds which are administered by insurance companies are not individually audited.
Unless your fund is properly audited mistakes are less likely to be detected, says Morris.
But you should also bear in mind that an audit is based on spot checks, so it is not a guarantee that your specific benefits have been calculated accurately.
Housing loans:
If you have taken out a housing loan from your retirement fund, you should make sure you are being charged the appropriate interest rate on the loan and that any adjustments to this rate are accurately reflected in your fund's benefit statements.
The rules of your fund should tell you how housing loans are dealt with and you should make sure these rules are applied properly.