The need to address the challenges regarding the transfer of assets between occupational retirement funds operating in the municipal sector

AuthorRasetlola, T.T.
DOIhttps://doi.org/10.47348/JCCL/V7/i1a4
Published date16 May 2022
Date16 May 2022
Citation(2021) 7(1) JCCL&P 80
Pages80-103
https://doi.org/10.47348/JCCL/V7/i1a4
80
THE NEED TO ADDRESS THE
CHALLENGES REGARDING THE
TRANSFER OF ASSETS BETWEEN
OCCUPATIONAL RETIREMENT
FUNDS OPERATING IN THE
MUNICIPAL SECTOR1
TSHEPISO TSHIAMO RASETLOLA*
Associate at Fasken (incorporated in South Africa as Bell Dewar Inc)
ABSTRACT
There are several industries where employers participate in more
than one retirement fund, such as the municipal sector. Retirement
funds that operate in such industries continually try to increase their
membership leading to fierce competition for members. They often
use their rules to attract new members while ensuring that they do
not lose members who are currently paying contributions to them.
These rules usually link membership of funds with the tenure of
employment with participating employers. This article examines
the legal framework that regulates the rivalry between retirement
funds that operate within the same sector or are linked to the same
employer. It assesses whether employees’ rights to freely associate
with the retirement fund of their own is limited by retirement funds’
rules that ‘lock’ them into retirement funds that they joined upon
their employment. This article highlights that the current legislation
does not adequately deal with the voluntary transfer of assets between
rival funds at the instance of the member. This article argues for the
establishment of a legal framework that will adequately regulate the
rivalry relating to retirement funds’ membership in sectors where the
employer can participate in more than one retirement fund.
Keywords: retirement funds, rivalry, freedom of association,
members, employers.
* LLB (NWU) LLM Candidate (Wits).
1 This is the shortened version of the research report prepared in partial fulfilment
of the requirements of the degree of LLM under the supervision of Prof Clement
Marumoagae at the University of Witwatersrand, Johannesburg, in 2022.
(2021) 7(1) JCCL&P 80
© Juta and Company (Pty) Ltd
81
THE NEED TO ADDRESS THE CHALLENGES REGARDING THE TRANSFER OF
ASSETS BETWEEN OCCUPATIONAL RETIREMENT FUNDS OPERATING IN
THE MUNICIPAL SECTOR
https://doi.org/10.47348/JCCL/V7/i1a4
I INTRODUCTION
This article discusses the legal framework regulating the transfer
of retirement assets between retirement funds that operate within
the municipal sector. In recent years, South African courts have
been required to determine which provisions of the Pension Funds
Act 24 of 19562 (PFA) should be applied when retirement funds’
members seek to transfer their fund credits from one fund to another.
Particularly, where such transfer may be contrary to the rules of
the member’s current retirement fund. This will be done by first
providing a contextual background of the rivalry that can occur in
various industries that may influence members to want to move their
fund credits from one retirement fund to the other. Herein, practical
disputes that arise regarding transfers where members want to migrate
from their funds while still actively employed are discussed. The way
retirement fund rules usually deal with transfers by explicitly stating
that members cannot voluntarily withdraw from their current funds
to join rival funds is also be discussed.
Secondly, this article evaluates s 14 of the PFA to determine
whether members can request their retirement funds to transfer their
fund credits to rival retirement funds. Thirdly, this article assesses
whether retirement fund members’ right to freedom of association
is infringed when they are denied permission to join their desired
retirement funds while still actively employed. This article examines
whether the provisions of the PFA dealing with the transfer of assets
provide an adequate legal framework that can assist courts to deal
with members who wish to transfer their fund credits from one fund
to another while still actively employed. Throughout this article,
relevant legal literature such as journal articles, books, legislation,
websites, and case law are critically analysed.
II RETIREMENT FUND RIVALRY
To attract and retain competent employees, some employers
provide retirement benefits as part of the employment package. The
adjudicator in Younghusband v Decca Contractors (SA) Pension Fund
& its Trustees acknowledged that retirement benefits are part and
parcel of the costs of employing labour and the remuneration that
employees receive for rendering their services.3 In Resa Pension Fund
v Pension Funds Adjudicator & Others, it was noted that pension rights
amount to deferred pay rather than gratuities bestowed within the
2 Pension Funds Act 24 of 1956.
3 (1999) 20 ILJ 1640 (PFA) para 1658.
© Juta and Company (Pty) Ltd

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