Deputy Pension Funds Adjudicator Naheem Essop has ruled that the Municipal Employees Pension Fund must grant a complainant access to her savings withdrawal benefit, clarifying the application of fund rules and the two-pot retirement system.
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The Municipal Employees Pension Fund has been ordered to allow a member access to her savings withdrawal benefit under the two-pot retirement system after the office of the Pension Funds Adjudicator found that the fund incorrectly applied its rules.
In a reconsidered ruling, deputy pension funds adjudicator Naheem Essop said pension funds are bound by their registered rules and cannot act outside them.
“Fund rules are treated as the fund’s constitution, and the fund may act only within the powers conferred by the rules. It is not permissible to venture beyond them,” he stated.
The complaint was brought by a member who worked for Ba-Phalaborwa Municipality from September 2015 until January 2018, during which contributions were made to the fund. She applied for a withdrawal benefit when leaving that job and started working the next day for Polokwane Local Municipality, which also participates in the fund.
The complainant argued that the fund unfairly refused her access to a savings withdrawal benefit under the two-pot system because it considered her a non-contributing member due to outstanding contributions linked to her later employment.
The fund argued that she remained a member when changing employers and therefore did not qualify for a resignation benefit. It said she and her current employer were still liable for contributions from February 2018 onwards.
The fund further argued that her benefits were frozen under its rules because contributions were in arrears. It relied on rule 27(2)(b), saying it applied to all benefits, including those under the two-pot retirement system.
The matter returned to the Adjudicator after the Financial Services Tribunal set aside an earlier ruling and referred the matter back for reconsideration.
Essop found that rule 27(2)(b) does not apply to defined contribution members and therefore could not be used to block the complainant from accessing her savings withdrawal benefit.
“The Adjudicator: ‘Fund rules are treated as the fund’s constitution, and the fund may act only within the powers conferred by the rules. It is not permissible to venture beyond them.’ He added that if a board wishes to act outside its rules, it must first amend and register those rules.”
The ruling comes as disputes linked to South Africa’s two-pot retirement system continue to emerge.
The two-pot system, introduced in September 2024, allows retirement fund members to access part of their retirement savings before retirement. The system has led to a sharp rise in withdrawal applications and disputes relating to fund rules and administration.
The Adjudicator ordered the fund to provide the complainant with details of her savings account and the process for claiming the benefit. The fund was also ordered to pay the savings withdrawal benefit within two weeks of receiving her instruction.
PERSONAL FINANCE