QUARTERLY UPDATE PENSION LAWYERS ASSOCIATION

1. QUARTERLY UPDATEPENSION LAWYERS ASSOCIATION 13 JUNE 2006

2. CASES • Government Employees Pension Fund v Bezuidenhout (TPD) • Abt v Nedcor Defined Contribution Prov Fund (PFA) • Mes v Art Medical Equipment Pension Fund (PFA) • Kuit v Transnet Pension Fund (WLD) • Bohm v National Productivity Institute • Mahlati v Metropolitan Preservation Provident Fund

3. LEGISLATION Categorisation and annual financial statements the prescribed financial statements applicable to the different categories of funds. Assumption for the determination of minimum individual reserves of members of defined categories of pension funds. Pension Funds Amendment Regulations, 2006.

4. Government Employees Pension Fund v Bezuidenhout (TPD) • Appeal by fund against order of maintenance court • Divorce order – maintenance not complied with – husband resigned and chose lump sum payment – fund paid to ex-wife • Issues: can a maintenance court issue an anti-dissipation interdict? • What factors relevant in issuing such an interdict?

5. GEPF v Bezuidenhout (continued) • Can the court order the fund to administer the benefit • Nature of the order to be made

6. Kuit v Transnet Pension Fund • 1821 plaintiffs • All had left the fund between 1996 and 1999 • Question whether the formula determined by the actuary for the formula rules was the correct formula • DB fund • Members made redundant entitled to benefit determined “in accordance with a formula determined by an actuary”.

7. Kuit (continued) • Plaintiffs said they were paid 11% less than what they should have been paid • Letter from actuary to fund: “…we would tehrefore recommend that the reserve be reduced by 11%, ie an reduction factor of 0.89 be used” • Status of the letter

8. Mes v Art Medical Euipment Pension Fund • Death benefit payable • Non-payment of premiums by fund (now liquidated) • Duties of trustees – in relation to payment of premiums • PF Act 24 of 1956:Note the criminalisation of failure to pay in s 13A • Fin Insts (Investment of Funds) Act 39 of 1984 • Fin Insts (Protection of Funds) Act 28 of 2001

9. Mes (continued) • Trustee’s defences: “unfair and untenable procedure” • Poor health • Decision: personal liability

10. Abt v Nedcor Defined Contribution Prov Fund • Resignation and disinvestment from Fund – allegation that not done timeously and opportunity to invest in rising market lost • Administrator’s defence • Not unreasonable • Unusual circumstances • Fund tardy Fund’s defence - unusual circumstances

11. Abt (continued) • Status of rule providing for interest to be paid • Rule bowing to legislation – usury rate applicable

12. Bohm v National Productivity Institute • Failure of employer to deduct and make contributions to fund • Backdated salary increases • Provisions of Rules not adhered to • Note criminal offence • Interest rate applicable

13. Mahlathi v Metropolitan Preservation Provident Fund • Complainant withdrew from Fund and took out a small amount paid to him, balance paid to a preservation fund (R5 600 of R126 000) • Complainant later requested further withdrawal of R14 000 (the one withdrawal) from the preservation fund • Preservation fund would not allow withdrawal • Preservation fund rules made no reference to “one withdrawal” rule or SARS circulars or practices

14. Mahlathi (continued) • Fund argued that refusal of withdrawal in accordance with Retirement Fund Practice Note RF 1/98. Held : • rules made no reference to RF 1/98 and • rules did not limit withdrawals. • RF 1/98 by itself cannot stop member from asking for withdrawal. RF notes “merely set out the requirements to be complied with by the fund for its approved tax status. • Status of Practice Notes: they do not affect the fund’s obligations, these are set out in the fund rules

15. Mahlathi (continued) • Subsequent amendment of the Rules – too late • Further argument by fund: employer had right to impose a prohibition on any cash withdrawal

16. Legislation Categorisation and annual financial statements the prescribed financial statements applicable to the different categories of funds. Assumption for the determination of minimum individual reserves of members of defined categories of pension funds. Pension Funds Amendment Regulations, 2006.