Pension Law

• Citation: 2021/2022 YSAL 1084
• Published date: 14 April 2023
• Pages: 1084-1118
• Author: Marumoagae, M.C.
• Date: 14 April 2023

1084

1. INTRODUCTION

The regulation of the ret irement industry in S outh Africa continues to

present serious challe nges for the legislature. Unfortu nately, the South

African court s have not been particularly helpful in adequately shaping and

developing sound pension law jurisprudence in t his country. This chapter

shows how some judges have either misunderstood or misapplied pension

law rules. Some decisions ref lect a lack of judicial desire to seriously engage

with pension law principles and to adequately determi ne how pension law

is influenced by other a reas of law, such as matrimonial law. The Office

of the Pension Funds Adjudicator (the ‘Adjudicator’) and the Financial

Services Tribunal (the Tribunal) also cont inue to play a fundamental role

in the resolution of retirement f und-related disputes. Pension-related

disputes involving retirement f unds regulated by the Pension Funds Act1

(PFA), which established the Adjudicator, as amended by the Financial

Sector Regul ation Act, 2 which introduced the Tribuna l, can be determined

by these dispute resolution bodies. However, this is a luxury t hat those

with disputes arisi ng from retirement fu nds regulated by, among others,

the Government Employees Pension Law Proclamation3 (GEP Law) and

the Transnet Pension Fund Act4 do not enjoy.5 These latter statutes did not

establish quasi-judicial foru ms that specifica lly address pension-related

disputes arising fr om the management and administration of t he retirement

funds that they establi shed. This has created a platform for the Government

Employees Pension Fund to establish its own pension dispute struct ure,

* LLB LLM (Wits) LLM (NWU) PhD (UCT); Associate Professor, School of Law, University

of the Witwatersrand. ORCID: https://orcid.org/0000-0002-3926-4420.

1 24 of 1956.

2 9 of 2017.

3 21 of 1996.

4 62 of 1990.

5 See M Mhango ‘Does the South African Pension Funds Adjudicator perform an

administrative or a judicial function?’ (2016) 20 Law, Democracy and Development 20.

Pension LawPension Law

Motseotsile Clement Marumoagae*

2021/2022 YSAL 1084

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peNsIoN LAW 1085

which is fina ncially dependent on and accountable to it. Given some of

these challenge s and the social and econom ic impact of the retirement

industry, it is disappointing that the legi slature has not initiated a proc ess

to review South African pe nsion law through the South African Law Reform

Commission to exami ne whether the law regulati ng retirement funds i n

South Africa is fit for purp ose.

This chapter seek s to highlight some of the legi slative initiatives and

selected judicial approaches th at raised serious concerns about the reg ulation

and development of pension law in South Africa during t he period under

review.6 From a legislative point of view, the major issue that arose is t he

diversification of the classes of i nvestment by retirement fu nds through the

amendment of reg 28 of the Pension Funds Act Regulation s. This chapter

will evaluate these amendme nts with a view to ascertaining t heir impact on

the administ ration of retirement funds and members’ benefits. T his chapter

will show that the legislat ure proposed amendments th at would introduce

the clean-break princ iple regarding the shari ng of pension benefits on

divorce for all retirement fu nd members. Currently, this principle is not

applicable across the board and some retir ement fund members do not

benefit therefrom. Th is chapter will ref lect on the proposed amendments

to the GEP Law that seek to introduce thi s principle to members of the

Temporary Employees Pension Fund (TEPF) and the Associated Institution s

Pension Fund (AIPF).

This chapter wil l also reflect on some of t he court decisions that were

delivered during the period under rev iew. It will be illustrated that

the Constitutional Cour t (CC) attempted to provide guidance on the

Adjudicator’s jurisdiction when complaints are lodged by persons who are

not members of pension funds. The c hapter will discu ss the approach of

the Supreme Court of Appeal (SCA) regarding employers who claim to be

unable to honour their statutory duty to pay their employees’ contributions

to the retirement fu nds with which they are ass ociated. This chapter wi ll

also reflect on t he questionable approach adopted by the SCA regarding

the retrospect ive application of rule amendments. The chapter wil l further

discuss the way in whic h the SCA dealt with the issue of the ret rospective

application and enforcement of rule amendments even before t he rules

sought to be amended have been registered and approved by the Fina ncial

Sector Conduct Authority (FSCA). Selected decisions delivered by various

divisions of the High Court rel ating to pension law will a lso be discussed.

6 July 2021 and June 2022.

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YeArbooK oF south AFrICAN LAW

1086

2. LEGISLATION

2.1 AMENDMENTS TO REGULATION 28

The much-awaited amendments to reg 28 of the Pension Funds Act

Regulations were published on 1 July 2022 in the Gover nment Gazette and are

due to come into effect on 3 January 2023.7 Generally, reg 28 is intended to

assist board members of reti rement funds to execute thei r fiduciary duties

towards their funds. It also e nables boards to act in the best i nterests of

members of these fund s by adopting responsible investment approaches

that will lead to these f unds earni ng risk-adjusted returns for thei r

specific m ember profile s.8 This goal is ach ieved by limiting the extent to

which retirement fu nds may invest in certain as set classes and preventi ng

excessive concentration of risk.9 The main purpo se of these amendments is

to create a legal framework which will en able retirement funds to undertake

longer-term investment initiatives into in frastructu re with a view to

assisting economic development in South Af rica.These amendments define

infrastruc ture to mean ‘any asset that has or operates with a pr imary

object of developing, constructi ng and/or maintaining physical assets and

technology struc tures and systems for the provi sion of utilities, services

or facilities for the economy, business, or the public’.10 This is a much

broader definition than t hose proposed in the fi rst two amendment drafts,

which were more public infrastr ucture-orientated. Th is definition is more

expansive and covers investment in private infra structure, creating room for

private capital to assist the country with developing its in frastructure. With

these amendments, government ack nowledges that it cannot successfully

deal with the developmental challenge s alone; government has created

an avenue for private sector participation in infra structure fu nding and

development in South Africa.

In terms of reg 28(3)(iA), ‘[t]he aggregate exposure by a fund to all is suers

in respect of dire ct infrastructure, across al l asset categories, excluding any

debt instrument is sued or guaranteed by the South Af rican government,

may not exceed 45% of the aggregate fair value of the total asset s of the fund.’

This means t hat retirement funds will only be p ermitted to invest up to 45%

of their capital in inf rastructure projects once these amend ments come into

effect. It has been argued ‘that due to the wide scope, the ma ximum allowable

exposure to inf rastructure should be even h igher than the fi nal gazetted

7 Notice 2230 of 1 July 2022.

8 Preamble to reg 28.

9 National Treasury ‘Treasury publishes final amendments to Regulation 28 of the Pension

Funds Act’, available online at https://www.gov.za/speeches/treasury-publishes-final-

amendments-regulation-28-pension-funds-act-5-jul-2022-0000.

10 Reg 28(2).

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