Amendments to the rules of pension funds become binding only once they have been registered by the Registrar of Pension Funds, the Pension Funds Adjudicator (PFA), Mamodupi Mohlala, told a pension fund this week when she ordered the fund to make good the shortfall in a former member's benefit payout.
Constantyn Els of Witbank was employed by the McCarthy Group as a car salesman and was a member of the McCarthy Group Pension Fund from March 1981 to April 1996, when he took a retrenchment package.
The McCarthy Group Pension Fund told Els that he had three options regarding his paid-up preservation benefit of R287 775. He could transfer his benefit to the Old Mutual Protektor Fund, or he could transfer it to a pension fund other than the Protektor Fund or he could take the cash. However, if Els chose either of the latter options, he would be paid out a reduced amount of R156 526 (a refund of his contributions plus interest).
In August 1996, Els chose to transfer the reduced benefit to the Independent Retirement Annuity Fund. He then laid a complaint with the PFA against the McCarthy Group Pension Fund, claiming the difference between the R156 526 and the full benefit of R287 775.
In their joint response, the McCarthy Group Pension Fund and Old Mutual, the fund's administrator, stated that the fund's rules had been amended in December 1995 to provide for a restriction on benefits not transferred to the Old Mutual Protektor Fund.
In her ruling, the PFA says a fund cannot decide how to pay benefits or impose restrictions on benefits unless this is clearly provided for in the fund's rules.
Although the fund trustees had approved the amendment in December 1995, the amendment was registered by the Registrar of Pension Funds only in April 1997. Mohlala says the rules of a fund and any amendments become binding only once they have been approved and registered by the Registrar of Pension Funds.
She ruled that the McCarthy Group Pension Fund had placed an unlawful restriction on Els's right to transfer his money to another fund of his choice.
Mohlala also ruled that the reduction of Els's benefit was in contravention of the Pension Funds Act. She ordered the McCarthy Group Pension Fund to pay Els the outstanding benefit of R131 249 plus interest from August 1996 to the date on which the outstanding benefit is paid.