Retirement funds rivalry, voluntary withdrawal of membership, and transfer of assets during the period of employment

• Jurisdiction: South Africa
• Pages: 205-233
• Author: Marumoagae, C.
• Published date: 06 April 2021
• Date: 06 April 2021
• DOI: https://doi.org/10.47348/SAMLJ/v32/i2a2

(2020) 32 SA Merc LJ 205

© Juta and Company (Pty) Ltd

for members between retirement funds associated with the same

employer. To attract more members, these retirement funds usually

promise superior services regarding the products they offer, low fees,

and high investment returns that increase members’ retirement

benef‌its.

2

To prevent loss of membership, some of these retirement

funds often create rules that prevent their members from voluntarily

withdrawing their membership during the period of their employment.

3

Despite these rules, those members who are unhappy with the manage-

ment and performance of their current retirement funds have attempted

to ‘leave’ those funds to join rival funds associated with their employers.

In certain instances, some employers, as a result of pressure from their

employees, have discontinued contributions to members’ current funds

and started contributing to rival funds while members are still

employed.

4

This raises an important practical question of whether South

African law allows members who are actively employed voluntarily to

withdraw their retirement fund memberships and initiate a process that

would lead to their fund credits being transferred to rival funds.

In this article, I engage this question by looking at how employers and

retirement funds in practice have dealt with members who wish to

withdraw their membership. I shall critically discuss how various

retirement funds have crafted their rules in response to the voluntary

withdrawal of membership and transfer of fund credits.

5

With reference

to decided cases, I shall demonstrate that there is no direct legislative

provision that deals with this issue, and that retirement funds are

empowered to provide for both the withdrawal of membership and the

transfer of assets in their rules. Section 14(8) of the Pension Funds Act

6

is

2

NJMPF, ‘Innovation and f‌inancial literacy’, available at http://kzntopbusiness.co.za/site/

kzn-top-businesses/Natal-Joint-Municipal-Pension-Fund/page/10091, accessed on

10 February 2020.

3

SAMWU National Provident Fund v Ntabankulu Local Municipality & others (457/2015)

[2018] ZAECMHC 43 (14 August 2018) para 39 (Ntabankulu HC).

4

See, generally, South African Municipal Workers’ Union National Provident Fund v

Umzimkhulu Local Municipality & others (297/2018) [2019] ZASCA 41 (29 March 2019)

para 34; (Umzimkhulu SCA); Municipal Employees Pension Fund & another v SAMWU

National Provident Fund & another (1412/2018) [2019] ZASCA 42 (29 March 2019).

5

In this article, a reference to a member’s fund credit is a reference to the amount standing

to the credit of an account in the fund in the name of the member. The amounts credited to

the account may include the member’s contributions to the fund; the balance of the

contributions made to the fund for the benef‌it of the member by his or her employer after the

deduction of amounts required to provide for the member’s share of the fund’s costs,

including administration, governance, and risk benef‌it costs, and amounts transferred to the

fund from another fund for the benef‌it of the member. This amount of the member’s fund

credit from time to time is usually invested with the view to ensuring that its real value

increases over time.

6

Act 24 of 1956 (‘PFA’).

https://doi.org/10.47348/SAMLJ/v32/i2a2

(2020) 32 SA MERC LJ

206

© Juta and Company (Pty) Ltd