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BL Premium reports that a legal challenge before the Constitutional Court (ConCourt) aims to stop pension funds making retrospective changes in their terms that can affect payout rates.
The central question debated before the apex court revolves around provisions of the Pension Funds Act and pension fund rules in general, and whether, after a pension fund amends its rules, a fund can act according to these changes despite not registering the new rules. The applicant’s legal team, in arguments heard in early March, also raised concern about whether a retrospective amendment of a rule affects accrued benefits. The case arose because the applicant, Pandelani Mudau, claims his rights were infringed when a retrospective decision by his fund minimised his retirement benefits. Mudau, a former employee of the Vhembe District Municipality, was a member of the Municipal Employees Pension Fund. He resigned on 31 May 2013, and became entitled to withdrawal benefits from the fund in terms of its then rules. The initial rules indicated that on resignation he would be entitled to three times his contributions plus interest. However, in June 2013, after the fund was warned in an actuarial report that it would not meet its future liabilities, it amended the withdrawal benefit scheme. Instead of three times, the benefit would be one-and-a-half. The amended rule was applied retrospectively from 1 April, almost two months before Mudau’s resignation. According to the Institute of Retirement Funds Africa, the ConCourt’s decision could lead to a “radical change in the established legal position” in which funds operate, and “threaten the stability” of many funds. Judgment was reserved.
- Read the full original of the report in the above regard by Tauriq Moosa at BusinessLive (subscriber access only)
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