Lize de la Harpe, Senior Legal Advisor: Sanlam Life & Savings: Regulatory Unit

Introduction

The Financial Services Tribunal was recently tasked with the question whether the Pensions Fund Adjudicator (Adjudicator) had jurisdiction to determine a grievance arising from the repudiation of a disability benefit claim under an Income Protection Policy held by an employer.

Let’s unpack.

Unapproved risk benefits vs approved risk benefits

First things first, let’s just recap on the difference between unapproved risk benefits and approved risk benefits.

Group risk insurance is designed to insure employees or retirement fund members to protect their families against financial hardship in the event of their death, occupational disablement or severe illness prior to reaching retirement age. Along with retirement savings, group risk benefits such as life insurance, funeral insurance, accident insurance, disability income protection, and critical illness insurance often forms the backbone of an employee’s total benefits package.

Risk benefits can be in the form of unapproved risk benefits offered by employers to their employees or approved risk benefits payable by a fund to its members:

• Unapproved benefits are risk benefits payable in terms of the separate group insurance policy that is issued to the employer as policyholder, in the event of the employee’s death, disability and/or contracting a severe/critical illness. The word “unapproved” refers to the fact that premiums, paid by an employer in terms of the unapproved insurance policy, will be taxed in the hands of employees as a fringe benefit. These benefits are provided separately from a retirement fund – it is not dependent on the employee’s membership to a retirement fund.
• Approved benefits are risk benefits payable in terms of the rules of the fund in the event of the member’s death and/or disability. It’s a policy between the insurer and the fund. The word “approved” refers to the fact that the retirement fund is tax-approved by SARS in terms of the Income Tact Act, 1962 and contributions may therefore be deducted from the member/employee’s pre-tax salary, up to certain legislated maximums.

Jurisdiction of the Pension Funds Adjudicator

The Adjudicator’s main object, as set out in section 30D of the Pension Funds Act, 1956 (the Act), is to dispose of “complaints” lodged in terms of section 30A(3). The office of the Adjudicator is a creature of statute – it has no inherent jurisdiction. Its jurisdiction is limited to “complaints”.

A “complaint” is defined in section 1 of the Act as relating to the administration of a fund, the investment of its funds and the interpretation of its rules alleging that:

1. A decision of the fund or any person taken in terms of the fund rules was ultra vires (in excess of their powers) or an improper exercise of its powers,
2. The complainant has or may sustain prejudice in consequence of the maladministration of the fund, whether by act or omission,
3. A dispute of fact or law has arisen in relation to a fund between the fund or any person and the complainant, or
4. That an employer who participates in the fund has not fulfilled its duties in terms of the rules of the fund.

Put simply: a complaint must deal with at least one of the following three issues:

1. The administration of the fund; and/or
2. The investments of the fund’s assets; and/or
3. The interpretation of the rules of the fund.

Mapungubwe Institute for Strategic Reflection (MISTRA) v Msimang and Others (Case No. PFA56/2026)

Mr Msimang was employed by the Applicant (Mistra) and became a member of the Corporate Selection Umbrella Retirement Fund (the Fund) in March 2012. In late December 2015, Mr Msimang suffered a stroke and was hospitalised. He subsequently developed severe, chronic neurological and psychiatric impairments that progressively deteriorated into psychotic mania.

The Fund operated under master rules and a Certificate of Participation applicable to the Applicant. Section H of the Special Rules dealt with disability benefits. It provided for an investment portion, comprising the members’ share of the Fund, and an insured portion. The Special Rules recorded the insured disability portion as nil.

Separately from the Fund arrangement, the Applicant was the policyholder under an Income Protection Policy issued by Liberty. The policy provided disability-income cover to qualifying employees.

In January 2016 the Applicant informed Liberty in writing that an employee, after suffering a stroke, was absent from work and requested the relevant income-protection disability-claim forms. Liberty supplied the forms and indicated that the claim required a medical report completed by a doctor and a member statement completed by the claimant, which documents were duly supplied.

Mr Msimang returned to work in February 2016. From September 2016, he submitted medical certificates and received psychiatric treatment. The Applicant subsequently engaged him about his health, capacity, possible accommodation and access to medical information. Incapacity meetings were convened during November and December 2016 and Mr Msimang’s employment was terminated on grounds of medical incapacity on 31 January 2017. A completed disability claim was lodged with Liberty, which was rejected on the basis that Liberty had been notified outside the policy’s six-month notification period.

Mr Msimang then lodged a complaint with the Adjudicator. The Adjudicator determined that the complaint was not barred under section 30I of the Act because the delay was attributable to Mr Msimang’s psychiatric incapacity. Regarding the policy’s contractual notification requirement, the Adjudicator found that the Prescription Act 68 of 1969 did not automatically suspend the contractual notification period. Liberty was therefore contractually entitled to repudiate the claim for late notification. However, the Adjudicator further found that clause 18.1 of the policy placed the obligation to notify Liberty upon the employer. The Adjudicator accordingly found that the Applicant had failed to notify Liberty, that this failure caused the repudiation and that the Applicant had to bear the resulting consequences. As such, the Adjudicator directed the Fund to assess within two weeks whether the first respondent qualified for a disability benefit and, if so, pay the benefit.

The Applicant applied to the Financial Services Tribunal in July 2026 for reconsideration of the decision of the Adjudicator.

Liberty subsequently confirmed that it was conducting the assessment as directed by the determination and called for further medical records.

The Fund in turn explained that it neither assesses nor adjudicates disability claims under the employer-held policy and supported the setting aside and remittal of the determination on jurisdictional grounds. The policy in question was an employer owned insurance policy concluded between the Applicant and Liberty. Accordingly, the assessment of a claim, the determination of whether an insured event has occurred and the decision whether the benefit is payable are matters that fall within the mandate of Liberty and insurer, and not the Adjudicator.

On 21 July 2026, Liberty assessed the underlying claim pursuant to the determination and declined it on the basis that continuing disability within the policy definition had not been established for the relevant period and recorded that the Mr Msimang had continued to receive his salary and in fact secured alternate employment in June 2017.

The issues in dispute can be summarised as follows:

1. Whether the claimed disability income benefit was a benefit administered by the Fund in terms of its registered rules.
2. Whether the applicant’s alleged notification obligation arose “in terms of the rules of the fund” or only under the employer-held policy.
3. Whether the first respondent’s grievance was a “complaint” as defined in section 1 of the Act.
4. If the Adjudicator had jurisdiction, whether the finding of breach and causation was sustainable on the full record.

The Tribunal upheld the distinction between an approved benefit administered by a fund and an unapproved benefit under an employer-held policy and found that the latter did not constitute a pension or provident-fund matter falling within the Adjudicator.

The Adjudicator has no inherent jurisdiction – its jurisdiction is limited by the Act. Under section 13, a fund’s registered rules bind the fund, its members, shareholders, and anyone claiming under those rules. An order directing the Fund to perform a function which its rules do not confer is incompatible with section 13 of the Act. The further direction requiring the Applicant to pay an amount determined under an employer-held insurance arrangement similarly depended upon the Adjudicator deciding contractual questions falls outside the statutory definition of “complaint”.

The complaint did not relate to the administration of the Fund, the investment of its assets, or the interpretation and application of a rule conferring the claimed benefit. Falling outside the definition of “complaint” in section 1 of the Act, the Adjudicator lacked jurisdiction to determine it. As such, the application for reconsideration was upheld and the determination by the Adjudicator was set aside.

Conclusion

Group risk benefits are among the most valuable components of an employee benefits package, yet many employees do not understand how their cover is structured, what the cover includes, and who will ultimately make the final call on whether or not a claim will be paid. This determination highlights the importance of ensuring both employers and employees understand their rights and obligations under risk benefit policies.

ENDS