By Papali’i Panoa Tavita Moala – Ex-NPF Chief Executive Officer
1. Interest Crediting
As former CEO of the Fund and contributor for 35 years, I am writing this open letter to publicly express my disappointment and concern with regards to the way the Fund has denied payments of interest entitlements to its members on withdrawal grounds as stipulated in the 1972 Act. Whilst this open letter may highlight mis-treatment and deprivation on my part but assured that all members will be affected financially now or in future, especially on retirement or all other options for withdrawal as stipulated in the Act, by way of reduced interest during payout. My purpose in writing is to inform the contributors so that they can check out their payout on withdrawal to make sure that all interest due are payable. This is based on my experience of which the Fund has been demanded to repay my proportional interest omitted for the audited period (Fy 2007/2008)
Under withdrawal options, Section 35 as amended in 1998, “a member attaining 55 years may opt to fully withdraw their contributors credited to their accounts.” On application, approval was granted for full withdrawal. However, on receipt of my payout I have discovered that proportional interest for the unaudited Fy 2007/2008 was omitted and following my enquiry with the Processing Officer concerned, I have been advised that this practice had been stopped without a proper explanation. The interest income related to this period is no less than $7000 based on the 7% dividend declared by the Board and such income is quite substantial. Without hesitation, I immediately told the Processing Officer that the Fund’s decision was wrong and unlawful and the Fund’s decision would be challenged. What’s bothering me was the unnecessary cost incurred because of the Management’s incompetence and negligence.
Was the decision wrong and unlawful?
Without asking any expert on the issue, the simple solution was to look up what the NPF Act says. It doesn’t require any rocket scientist for this. Under Section 9 (rate of interest and Section 25 (Crediting of contributions to Accounts) and subsection (2) fully explain the whole process of crediting. This process has been practiced up until January 2008 unless the Board had blindly overruled these Sections of the Act which in my opinion is ultra virus.
On the other hand, contributors of the Fund must remember that crediting of the interest income to their accounts is always 12 months delay due to the delay of audited accounts for the current period. For instance, the recent interest declared by the Board for 7% was correspondent to the financial year 2006/2007 (audited) whereas interest related to financial year 2007/2008 (unaudited) will be decided in July 2009. The audited accounts for financial 2007/2008 will not be completed until October 2008. So, the interest accruing to members’ accounts is always 12 months behind unless the Board decides again for another interest crediting by year end once the audited accounts are completed. I personally don’t see this happening but it’s good for the members.
The point being argued here was that for those members who are retiring/withdrawing their contributions from the Fund, they should be fully rewarded and compensated for interest either for interest either for the whole year, or partial year (unaudited). Whether its one month, 2months etc, the proportional interest should be calculated and credited to members’ accounts on the date of withdrawal.
For the information of all contributors withdrawing their funds now or those who have already withdrawn their funds from January 2008 to date, I would suggest that you check back with the NPF office to ensure that all your interest dues/were paid.
2. NPF new members loan scheme (14%)
I’d like to share my views with you on this new loan scheme.
Under section 6 of the NPF Act 1972, it was amended in 1984 to allow members to borrow from their contributions on security of their contributions provided that these advances are no more than their standing credits, on the conditions approved and decided by the Board.
Currently, contribution loans are charged at 9.5% interest and the level of borrowing is limited at 50% for the member’s contribution at anyone time but this 50% ceiling can be reviewed and changed by the Board.
With the NPF new loan scheme, I understand that the loan amount varies at $5000 or more depending on the contributions level. The interest is set at 14% with security on member’s contribution in the event of default.
Looking at the old loan scheme vs. the new loan scheme, these schemes serve the same purpose, i.e. to help and assist the contributors. Nevertheless, I cannot see the need for a separate loan scheme with an exorbitant interest charged at 14% vs. 9.5% on the old loan scheme. As a matter fact, the underlying rationale in charging low interest rate (9.5%) in the old scheme is based on the following:
a) as benefit to members borrowing from their own funds,
b) The rate and cost of default or non-recovery zero. All interest and principal will be net off from member’s contribution in the event of non-payment. This is the same, I believe, with new loan scheme.
Clearly, from the above, there was no need at all for a separate loan scheme, robbing members at 14% unless the new scheme is unsecured. But, this is not the case; members are signing Agreements to secure these advances on their contributions. If the Board wants to further assist members through lending more, all it needs to do is to increase the present entitlement from 50% to say 60% or more for members’ loan entitlement on their contributions whilst maintaining a lower interest rate (9.5%)
Obviously, this new policy again robs members from their own funds, with similar effects on non-payment of proportional interest fro unaudited periods as explained in the first incident.
3. Effective date of 4% bonus for retiring and deceased contributors.
For the public’s information, this policy was presented and approved by the Board in January 2008. The Board resolution at the time called fro immediate implementation. That is, all contributors retiring after reaching 55 years of age and all contributors who may have passed away commencing end of January 2008 are entitled to this 4% bonus depending on the level of their contribution balances at the time of withdrawal.
I am not trying to inform the contributors of who made the initiative in the first place. All I am saying is that delaying the implementation of the policy from January 2008 to 1st July 2008 has penalized those members who might have retired or passed away within the period of January to 1st July 2008.
In all fairness, members withdrawing their contributions during this period should be entitled to receiving of their 4% bonus retrospectively.
Again, this example has clearly demonstrated similar effects as debated in No. 1 and 2 issues, i.e. members are robbed of their entitlements. In effect, the paramount objective of the Fund is to improve benefits and quality of services to its members whilst being active members of the Fund or during retirement from the Fund.
Finally, I urge contributors to check these out because the financial implications to you as members are phenomenal. I pray and hopeful for and immediate intervention by the Minister of Finance and the NPF Board in correcting these mistakes.
Yours faithfully,
Papalii Panoa Tavita Moala
FORMER CEO AND CONTRIBUTOR.
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