Pension fund ruling offers relief for retirement policy holders

A recent judgment given by the Pension Fund Adjudicator in Meyer vs South African Retirement Annuity Fund and Another deals with restrictive transfer rules in retirement annuity funds, which has meant that members of retirement annuity funds are no longer prevented from requesting transfers to another fund, just because the rules of their current fund prevents this.

A recent judgment given by the Pension Fund Adjudicator in Meyer vs South African Retirement Annuity Fund and Another deals with restrictive transfer rules in retirement annuity funds, which has meant that members of retirement annuity funds are no longer prevented from requesting transfers to another fund, just because the rules of their current fund prevents this.

In short, the essence of the complaint in this matter was that Meyer, a 28-year-old member of the South African Retirement Annuity Fund, had taken out a retirement annuity with the fund.

For reasons not stated in the judgment, Meyer decided that it would be better to move the retirement annuity from the South African Retirement Annuity Fund to an independent, third party fund operated by Allan Gray.

However, when Meyer directed the South African Retirement Annuity Fund to attend to this transfer, she was advised that this transfer would not be possible.

In order to justify its position, the South African Retirement Annuity Fund relied on its own set of rules, by which all members of the fund are bound.

These rules provided that members are not entitled to transfer their retirement annuities from the South African Retirement Annuity Fund until the member has reached an age at least two months before their 55th birthday.

However, the Adjudicator found that this restriction in the rules of the South African Retirement Annuity Fund was not binding on its members, due to the fact that the Pension Funds Amendment Act 11 of 2007, which came into effect in September last year, provided that no retirement annuity fund can restrict its members from transferring their funds to another scheme.

The new amendments in section 14(7) provide that notwithstanding anything to the contrary in the rules of a fund, a retirement annuity fund shall not prohibit the transfer of business that relates to a member's interest or non-member spouse's interest, at the request of such a member or non-member spouse from one retirement annuity fund to another.

It also states that no fees or commissions of any nature, other than fees payable by the transferring member or non-member spouse personally and any fees payable to the registrar, are payable by any party to the transfer or by any agent or mandatory of such party to affect this transfer.

This is a welcome advance in pension fund law which goes a long way towards giving effect to the right of retirement annuity fund members to exercise greater control over their investments and to no longer be at the whim of funds which were able to excuse unsatisfactory performance with the only options being the choice of either making the policy paid up, or continuing to endure the poor performance until the exit window allowed by the rules.

- Bradley Workman-Davies is a senior associate at Werksmans Attorneys

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