Crime fighters: Security guards earn about R3,500 a month at entry level and have more than R6bn in their pension fund. Questions are being asked about fees paid to the fund’s board members. Picture: RUSSELL ROBERTS
Crime fighters: Security guards earn about R3,500 a month at entry level and have more than R6bn in their pension fund. Questions are being asked about fees paid to the fund’s board members. Picture: RUSSELL ROBERTS

A court bid to place the pensions of almost half a million private security workers under curatorship — once again — has been met with a fierce backlash from the fund itself.

The Financial Sector Conduct Authority (FSCA) accused the Private Security Sector Provident Fund of paying its trustees "exorbitant" fees.

In its court application the FSCA, formerly the Financial Services Board (FSB), said trustees’ fees had topped R25m a year, while total administration expenses had rocketed to R353.8m for the R6.23bn fund, equivalent to a staggering 5.6% of its total asset value.

But the fund’s chairman Cobus Bodenstein argued that its fees were the direct consequence of the FSCA’s decision to take over management of the poorly run fund in 2009.

The security industry is a massive employer in SA and the fund represents close to half a million security staff, of whom 263,655 are active members.

Bodenstein has now accused the FSCA of going "behind our backs" in its court bid and ascribed the fees paid to trustees and its new administrators, SALT Employee Benefits, to a mammoth backlog that had been "haunting" the board "forever". Bodenstein said they had tried to meet with the FSCA "to find a solution".

"Curatorship is not going to help this fund in any way, shape or form," he said.

"If nothing else, we’re going to go back to where we were in 2010," he said.

Trustees were entitled to be paid R7,900 per board meeting and R5,768 per subcommittee meeting, but "neither of these rates conformed to the rates specified in the fund’s trustee remuneration and allowance policy", said the FSCA.

To put that into perspective, an entry-level security worker earns about R3,500 a month.

Remuneration

The FSCA also accused the trustees of being unable to justify their high rate of remuneration, "but tried to do so by indicating that the two section 26 trustees appointed by the registrar (out of a board of 12) were receiving over R500,000 a month".

However, Bodenstein said those fees, in particular relating to trustees installed after a board overhaul of 2009, "actually came from the FSB. The trustee expense has been an issue for years now and every time we ask for guidance from the FSB to ask what should we be paying, they then come back with the answer that they can’t tell the board what to pay themselves."

The FSCA accused the fund of paying "excessive" amounts to its administrator, SALT, which took over from Absa Consultants and Actuaries, and said there were "overlaps" of services and functions performed by the board at "considerable cost" to its members.

It also found that the fund’s principal officer was conflicted in certain of his functions after appointing his daughter to render certain secretarial services, while he himself was being paid a monthly retainer of more than R50,000 to transfer business in terms of the pension funds act.

SALT CEO Eddie Strydom was "adamant" that fees paid to it were above board.

Bodenstein admitted that "anybody on the outside who would read those papers would definitely think the worst", but said the board, under his leadership since 2016, had managed to clear a backlog of more than 160,000 claims and had paid out more than R500m in unallocated contributions.

"This fund has been plagued with problems for many years. It’s very big — we’re talking 6,000 participating employers. If you look at the turnover of security staff in the industry, it’s much higher than any other industry, so this fund is unique."

The FSCA also found that the fund had unallocated deposits of R250m as of November 29 2017, which it said was "significant" given that members who withdrew from the fund may not have received their full benefit.

Corlia Buitendag, the FSCA’s head of department in its conduct supervision division, said "further investigation is necessary to confirm how many members are affected".

Bodenstein said the fund had met its goal of paying 10,000 claims a month "so from January onwards the expenses of the fund have dropped significantly. Although the FSCA papers said that nothing has changed, that’s as far away from the truth as could be."

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