Your chances of getting a fair share of the money in your retirement fund if you leave your job before retirement are improving.
For the first time, the minimum benefits you get if you are retrenched or transferred from one kind of retirement fund to another are to be laid down in law, in an amendment to the Pension Funds Act due to go to Parliament this year.
And in an important decision this month, the Pension Funds Adjudicator ruled that the Clinic Holdings Pension Fund must top up withdrawal benefits paid out to one of its members, radiographer Gail Boiskin. Boiskin resigned from her job and was paid only her own contributions to the fund plus interest. The adjudicator ordered a payment which reflected the employer's contributions as well.
Sue Myrdal, the investigator in the adjudicator's office who handled the issue, emphasises that the Boiskin case should not be seen as setting a precedent.
"This was quite a specific case," she says. "The rules of the pension fund provided for the trustees to exercise discretion in paying out benefits on resignation. But the trustees did not exercise this discretion at all, even after I wrote to them asking them to do so.
"So we exercised that discretion, taking into account all the factors the trustees should have considered - such as her long service in a demanding job and her plan to preserve her funds for retirement and not just spend the cash - and we gave her the benefit the trustees would have been justified in giving her.
"However, unless the rules of the pension fund provide discretion to trustees to increase benefits, the trustees must pay whatever withdrawal benefits are defined in the rules."
The adjudicator cannot "improve" benefits by adjudication, Myrdal says - this can only be done by law or by collective bargaining within funds to change the rules.
"If there is a trustees' discretion to increase benefits in the rules, our lights go on. Where we can improve benefits we try to do so, because retirement benefits are people's deferred pay. But changes in benefits affect funding, so other members of the fund are affected in ways which we can't - and we aren't called upon to - take into account."
Andre Swanepoel, deputy executive officer of the Financial Services Board, says the issue of withdrawal benefits must be negotiated by employers and employees and the board cannot intervene.
"We do try to point out to employers that the trend in the market is towards greater fairness to employees. But in some older funds, the rule is members still only get their own contributions plus interest E We don't veto these rules, though we do try to encourage greater fairness."
The bill amending the Pensions Fund Act published last month sets down some minimum withdrawal benefits, mostly for people who are retrenched or who transfer from one fund to another within the same company.
These employees must not get less than the "minimum individual reserve", according to the bill. This is calculated differently for defined benefit and defined contribution funds but is considered to be an amount which, if invested until the member's retirement, should be equivalent to the benefit promised by the fund.
The bill is silent on minimum withdrawal benefits in the case of resignation, because, Swanepoel says, resignation benefits are normally defined in the rules of retirement funds.But, he says, resignation benefits could come under the spotlight in a major overhaul of the Pensions Act soon.
"Unfair withdrawal benefits have plagued retirement funds for some time," Giselle Gould, executive director of the Institute of Retirement Funds (IRF), says.
As far back as 1992 the Mouton Commission found that withdrawal benefits needed urgent reform.
"It's still very common that members of a retirement fund only get their own contribution with interest - not the employer's contribution - when they leave before retirement. Withdrawal benefits have improved, but too slowly. Especially in defined contribution funds, where members take all the risks themselves, members should get the employer's contribution too."
The latest Sanlam survey of retirement funds found that most funds still paid out more money on retrenchment than on resignation.
In defined benefit funds, while about three quarters of funds paid out more than employee's contributions plus interest on resignation, only half of those who resigned were treated in this manner.
Although the survey found that withdrawal benefits on resignation were improving, 15 percent of defined contribution funds still limited payments to the member's share plus interest and more than 40 percent paid out only part of employers' contributions.
WHAT YOU CAN DO
* Find out from your trustees what the rules of your retirement fund are;
* If your trustees have discretion over withdrawal benefits, make sure they exercise this discretion;
* If they don't exercise their discretion fully, you can complain to the Pension Funds Adjudicator in writing: PO Box 23005, Claremont, 7735. Telephone (021) 6740209 for the information brochure "How to lodge your complaint". Remember that when trustees exercise their discretion it doesn't necessarily mean they will hand you more money. It does mean that they must apply their minds to the issue and treat you fairly; and
* If the minimum benefits specified in your fund seem unfair to you, ask your trustees to get the rules changed.
DEFINITIONS
Defined Contribution Fund:
A fund into which both you and your employer pay contributions, but the employer does not necessarily guarantee you anything at retirement. Money paid into the fund is invested and you have to take your chances on its value when you retire.
Defined Benefit Fund:
A fund from which your employer undertakes to pay you a specific amount when you retire - regardless of market movements. The employer takes the risk of having to make good a shortfall in the fund if the markets crash.