Naheem Essop, Deputy Pension Funds Adjudicator; Office of the Pension Funds Adjudicator

In a landmark reconsideration, Deputy Pension Funds Adjudicator Naheem Essop has directed the Municipal Employees Pension Fund to grant a complainant access to her two-pot savings withdrawal benefit.

His ruling underscores a fundamental principle: pension funds are bound by their rules, which serve as their constitution, and may act only within the powers those rules confer.

“Fund rules are treated as the fund’s constitution and the fund may act only within the powers conferred by the rules. It is not permissible to venture beyond them,” he stated, stressing that deviation is permissible only through duly registered amendments.

Complaint

The complainant, a member of the Municipal Employees Pension Fund, lodged a complaint regarding the non-payment of a savings withdrawal benefit under the two‑pot retirement system.

She was permanently employed by Ba‑Phalaborwa Municipality from 1 September 2015 to 31 January 2018, during which contributions were made to the fund. On 31 January 2018, she applied for a withdrawal benefit. The following day, she commenced employment with Polokwane Local Municipality, which also participates in the fund.

The complainant contends that she is aggrieved by the fund’s refusal to grant her access to a savings withdrawal benefit, stating that she was informed this was due to her not being a contributing member. She maintains that her entitlement arises from contributions paid during her employment with Ba‑Phalaborwa Municipality and seeks to withdraw from the fund.

Fund’s submission

The fund submitted that the complainant remained a member when she changed employment from Ba‑Phalaborwa Municipality to Polokwane Local Municipality. Accordingly, she was not entitled to a resignation benefit.

The fund argued that both the complainant and her current employer are liable for contributions from 1 February 2018 onwards. It stated that once contributions are paid up to date, she would be entitled to make withdrawals from her two-pot savings component account.

The fund characterised the complainant as a defaulting active member whose benefits are frozen under its rules, except in respect of a withdrawal benefit upon resignation. It relied on rule 27(2)(b), submitting that it applies to all benefits, including those under rule 48A, and prevents access to benefits under the two‑pot retirement system while contributions are in arrears.

The fund further contended that the list of exclusions from the two‑pot retirement system is not closed, and that it was incorrect to conclude that because the complainant did not fall within the exclusions, she must be allowed access to a savings withdrawal benefit.

Fund ordered to pay

The Adjudicator reconsidered the matter after the Financial Services Tribunal (FST) set aside the earlier determination of 11 April 2025 and remitted it for review. The FST had directed that the key issue was whether the complainant could access her savings withdrawal benefit under the fund’s rules while her contributions were in arrears.

In his fresh determination, the Adjudicator held that rule 27(2)(b) does not apply to defined contribution members and, therefore, cannot be used to block the complainant’s access to her savings withdrawal benefit. He stressed that a fund is bound by its rules, which serve as its constitution, and may act only within the powers those rules confer.

The ruling clarified that rule 27(2)(b) was designed to protect the fund from paying defined benefit members under guaranteed formulae despite arrears, but its extension to the two‑pot system does not apply to defined contribution members.

The Adjudicator: “Fund rules are treated as the fund’s constitution and the fund may act only within the powers conferred by the rules. It is not permissible to venture beyond them.” He added that if a board wishes to act outside its rules, it must first amend and register those rules.

Accordingly, the Adjudicator ordered the fund to provide the complainant with details of her savings account and the process for claiming, and to pay her savings withdrawal benefit within two weeks of receiving her instruction.

ENDS