Boss made unlawful deduction from pension fund

Pension funds that deduct members' withdrawal benefits to reimburse employers for whatever reason other than theft, dishonesty, fraud or misconduct, might face the wrath of the fund adjudicator.

A ruling by the pension fund adjudicator ordered one fund to pay a former member more than R27650 of his withdrawal benefit after the money was withheld to repay a car loan he took from his employer.

Adjudicator Mamodupe Mohlala declared as unlawful the deduction by House of Busby Retirement Benefit Fund from a member's withdrawal benefit and ordered the fund to pay the member the money it withheld with interest.

Complainant R Kruger was a member of the fund during the period of his employment until his resignation. His fund membership was terminated on April 25 2006.

While Kruger was employed his employer stood guarantor for a loan by Nedbank to enable him to buy a car. Kruger defaulted on his instalments and the bank repossessed the car and sold it.

This resulted in a R27651 shortfall, which was settled by the employer.

When he resigned Kruger's withdrawal benefit of R33 712,24 was paid to the employer on its instruction as a reimbursement to settle the loan.

The adjudicator found that the deduction from Kruger's withdrawal benefit was unlawful in terms of section 37D of the Pension Act, which allows deductions to be made only when it relates to damage caused by an employee as a result theft, dishonesty, fraud or misconduct.

The employer's argument that he used section 37D to justify his action was dismissed as illegal in that the deduction from Kruger's withdrawal benefit was in relation to a loan and not as required by the act.