ComplianceFinancial Planning

Adjudicator sets the record straight on the protection of pension benefits

Bokamoso Retirement Fund vs Pension Funds Adjudicator

Commenting on a recent draft order endorsed by Crutchfield J in the Johannesburg High Court, the Pension Funds Adjudicator, Adv Muvhango Lukhaimane, said that there should be no reason for members of retirement funds to panic who may falsely be led to believe that their benefits are now capable of being ceded, pledged, or hypothecated. “This is because section 37A of the Pension Funds Act is unambiguous about its prohibition of same and the order handed down in the unopposed motion court in favour of Bokamoso Retirement Fund did not and could not overrule what is expressly provided for in legislation and widely accepted to be the correct legal position”, said Adv Lukhaimane.

According to the Adjudicator, the order by the Johannesburg High Court is the result of an incorrect procedure followed in reopening an investigation into a matter after it was closed when it was discovered that the Bokamoso Retirement Fund unlawfully deducted a student loan from a pension benefit due to an employee of Akani Retirement Fund Administrators. “The order is not precedent for an employer or other types of creditors to make deductions from pension benefits that are prohibited by the Act and should not be misconstrued in that manner. We are aware of a media release that may create a false impression in this regard, and we feel duty bound to set the record straight for the benefit of the public we serve.”

The Pension Funds Act is specifically designed to protect pension benefits from creditors including unscrupulous employers who may utilise their bargaining power against their employees to enter into agreements prejudicial to the employee. Such agreements are unlawful in terms of the Act. “The Act goes so far as to protect benefits against insolvency in section 37B, and in section 37C we find that beneficiaries are protected against even the clear wishes of a deceased member if it results in an inequity. There are specific limited circumstances under which a pension fund may deduct from pension benefits and those are set out inter alia in section 37D”. 

“The order granted, setting aside the determination, was a result of an incorrect procedure that we followed and not because a pension fund is permitted to go against the clear provisions of the Act. This is one of those rare circumstances where form took precedence over substance. The deduction remains unlawful and we expect the Financial Sector Conduct Authority to investigate the unlawful conduct of both the Bokamoso Retirement Fund and Akani Retirement Fund Administrators in effecting the deduction, as both entities are subject to the FSCA’s regulation and should be aware of the trite legal principles.”

In terms of section 37D(1)(b) of the Act, a pension fund may deduct a benefit in favour of an employer in respect of a home loan, or compensation in respect of any damage caused to the employer by reason of any theft, dishonesty, fraud, or misconduct by the member and in respect of which the member has in writing admitted liability to the employer or judgment has been obtained against the member in any court. 

“None of the aforesaid prerequisites were present when Bokamoso unlawfully deducted an amount in respect of a student loan from the pension benefit due to Mr Maseko. The fact that the Adjudicator’s determination was set aside on procedural grounds does not make the deduction lawful and we will resist any attempt to utilise the media to distort the clear legal position. In fact, it is regrettable that persons charged with safe-guarding of member’s retirement fund benefits would seek to distort the tenor of court orders to advance their own selfish interests. It is also incumbent on the FSCA to tighten their fit and proper requirements in the appointment of persons to key positions in the retirement funds industry as the Regulator cannot be at all places at all times to ensure that the law is properly implemented, and where unlawful activities are carried out for such basic legal requirements, the necessary sanctions should follow.”







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