What is Bulking?

Alexander Forbes has committed to offer a settlement amount in respect of the non-disclosure of fees received from bulking of fund current accounts to September 2004 when Alexander Forbes ceased to receive income from this practice.

Bulking is the term used to describe the practice of the notional aggregation by Alexander Forbes of the Fund’s current account balance together with the current account balances of other retirement funds administered by Alexander Forbes in order to secure a preferential rate of interest from the bank concerned. The fund therefore earned a better rate of interest than they would have done had the banks treated the funds’ account in isolation. Our retirement fund clients have benefited significantly over the years from this practice and continue to do so.
From 1996 to 2004 Alexander Forbes earned income from the banks for “bulking”, this ended in 2004. Due to disclosure requirements not being complied with in relation to the income that it earned Alexander Forbes decided to pay the income earned from bulking to the relevant funds. In this regard a factual findings report was prepared by independent auditors, Ernst and Young. 

When did Alexander Forbes receive an amount in respect of Bulking?

This took place between 1996 and September 2004. 

What is the process to distribute Bulking Allocations?

Alexander Forbes has presented and agreed a settlement offer to the board of Trustees of the fund. The trustees of the fund have decided upon a method of distribution of the settlement monies from the fund. The decision to distribute to active and/or former members of the fund is made by the Trustees and may differ from fund to fund.

Once this decision is made, and dependant on the trustees’ decision, persons who were active members of the fund between 1st June 1996 and 30th September 2004 may be eligible to receive a share of the bulking settlement. (Note that the Trustees decide how the settlement offer gets distributed and to which members/former members) 

How will funds be paid to individual members?

This will be entirely dependent on the decision by the Trustees and will differ from fund to fund, however if the Trustees decide to distribute the proceeds of the bulking settlement it will take place as follows: 

a)     If you are still an active member on the fund, and the trustees have decided to make an allocation to active members, it is likely that your current fund credit will be increased in line with the method of calculation decided by the trustees. (Benefit statement will reflect this as an enhancement.) Active members could only receive this when they leave the fund. 

b)    If you are a former member and the trustees have decided to make an allocation to former members, you will have to complete a Bulking Application Form which will have to be posted back to Alexander Forbes with original certified copies of your ID, proof of banking details and proof of membership to the fund. (To request an application form please complete the below online request form). 

As a former member, when will you receive payment?

a)     Fund has already started making payments: You should receive payment within 21 working days once all the required documentation has been received.

b)    Fund has not already started making payments: We cannot confirm a turnaround time for payments at this stage.

c)     Former members/ members: Trustees decided not to make individual payments to members/former members: The Trustees of the fund took a decision not to distribute the bulking settlement monies to individual members/former members thus they will not be receiving bulking payments from this fund 

Will I receive interest?

Yes, members will receive interest calculated at the prevailing rates which is calculated from the date the trustees decided to distribute the settlement monies to individual members. 

What amount will I receive?

At the moment the exact amount cannot be confirmed as the interest calculation will need to be added to the amount.  

Will the amount be taxed?

If your fund has amended its rules to provide for the bulking distribution it will not be taxed.

N.B. University of KZN: Yes the Allocation has been taxed as there was no rule in place to cater for these benefits to be tax free. A tax certificate can be generated for you. 

How was my allocation calculated?

These allocations were reviewed and accepted by the fund’s trustees. 

N.B. For a full listing of funds advertised in the Press, please click here.