Ombud finds in favour of Metropolitan in miscalculated RA case

Last December Moneyweb reported on the case of a reader whose retirement annuity (RA) value was miscalculated by Metropolitan. A year after being issued with a quote and accepting the retirement value on his policy, the pensioner was told that the company had made a mistake and that he had been given nearly three times what he was actually owed.

Metropolitan offered to allow him to keep the overpayment on the cash payout he had received, but wanted to reduce the amount that had been annuitised to reflect the correct value of the remainder. It however only gave him two weeks to accept this offer.

In an attempt to establish his rights, the pensioner referred the matter to the Pension Funds Adjudicator (PFA) for a ruling. Metropolitan responded by immediately withdrawing its offer and filing a claim in the High Court to recover the full overpayment it had made.

It was however still required to reply to the complaint lodged with the PFA, and did so first and foremost by claiming that the ombud did not have jurisdiction to hear the matter. However, the PFA dismissed this argument on the grounds that the complaint related to the retirement benefit payable from a pension fund and was therefore within its ambit.

Metropolitan, and its parent MMI Holdings, further argued that the miscalculation was a “bona fide mistake” and therefore its client could not keep money that was not due to him. The company stated that he should also have been aware that the amount he was offered could not be correct when compared to previous statements.

Metropolitan made the argument that it had tried to resolve the matter amicably through the offer it had made, and that the complainant couldn’t claim to have suffered any prejudice as he was in fact enriched by the error. It added that if he felt that he had been prejudiced, he would in any case have the opportunity to oppose the High Court application and to file a counter claim.

The determination

The PFA produced a 13-page ruling in which it noted that it believed the complainant should have been alerted to the possibility of an error in the amount he was offered. This is because it was over 100% more than the illustrative value of the policy 20 months before.

The PFA also found that the pensioner had not shown that Metropolitan had acted negligently or unlawfully in making the miscalculation. Neither had he proven that he would suffer any financial loss due to the error.

On this basis it ruled that “the complainant is not entitled to the overpayment”.

The ombud’s determination did not, however, end with this finding. Despite dismissing the complaint, it still issued some severe criticism at both Metropolitan and MMI.

It noted its concern that MMI’s “administrative checks and balances are either weak or non-existent. One presumes that when benefit statements, withdrawal benefit quotations and requests for retirement are processed, numerous checks and balances that are not solely dependent on computer systems are in place to ensure that the correct information is provided to members”.

It then went further to say that Metropolitan “failed to comply with the principles of good governance … which provide, inter alia, that communication to members should be appropriate, accurate, complete, useful and comprehensive”.

It ruled that the company “must put in place more reliable systems to ensure errors such as these are prevented and thus ensuring that vital information provided to members is correct”.

Moneyweb approached Metropolitan for a response to this reprimand, but the company would only state that: “Metropolitan, as a division of MMI Holdings, remains committed to continually balancing the interests of our clients, our shareholders and our employees within the industry regulatory framework”.

The complainant in the case told Moneyweb that despite the PFA’s findings he is continuing to contest Metropolitan’s High Court application.