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

• Citation: (2021) 7(1) JCCL&P 80
• Date: 16 May 2022
• Published date: 16 May 2022
• DOI: https://doi.org/10.47348/JCCL/V7/i1a4
• Pages: 80-103

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

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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.

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