You have a right to expect an employer or retirement fund to exercise any
discretionary powers properly, says John Murphy, the Pension Funds
Adjudicator, who has just ordered one retirement fund to pay out nearly R22
000 to a member who didn`t get a fair hearing from his employer.
Louis Joffe resigned from Lenco Holdings in 1995, choosing to have his
retirement benefits placed in a preservation fund. He came to Murphy
because his employer did not pay an extra amount of 50 percent of his
benefits, which, in terms of the Lenco Holdings Limited Pension Fund`s
rules, could be offered, at the employer`s discretion, to members who chose
to receive a deferred pension, or to invest their benefits in an approved
pension fund or retirement annuity fund.
The fund told Joffe that the preservation fund he had chosen did not fall
within the category of approved funds, but Murphy found that it did.
The fund`s administrators, Glenrand MIB Benefit Services, also told Joffe
that it was "the exception rather than the rule" for the employer to
exercise his discretion about the extra payment in favour of the employee.
Glenrand said paying out the extra money was "not standard procedure and
was seldom granted".
Murphy found that the employer had not exercised his discretion properly.
"Any board of management, trustee or employer with discretionary powers is
required to exercise those powers reasonably and in accordance with the
spirit of the Constitution.
"The member`s right is not to have the discretion exercised in his or her
favour, but rather to have the discretion exercised properly and
reasonably, taking into account all considerations relevant to his or her
personal circumstances."
In this case, Murphy said, the employer had not granted the extra payment
simply because it was not policy to do so. This meant he had not exercised
his discretion properly, because he had followed a rigid policy and so had
"effectively abdicated" his power and responsibility.
Murphy, whose office has a four year claims backlog, decided not to send
the matter back to the employer to exercise his discretion properly.
Murphy found that, in the circumstances, it was justifiable to exercise the
discretion on the employer`s behalf and to order the fund to pay Joffe R21
898.