If you are a pension or provident fund member and are offered membership of a different fund, you must make sure that your employer participates in the fund to which you want to move, or that you won’t breach your conditions of employment by moving.
A failed attempt by a provident fund to sign up 69 members of a rival fund, and their subsequent complaint to the Pension Funds Adjudicator, Muvhango Lukhaimane, resulted in the adjudicator admonishing the fund for conducting “an undesirable business practice that has the effect of causing disharmony in the industry”. She reported the fund to the Registrar of Pension Funds at the Financial Services Board for possible “remedial action”.
The 69 members were employees of Mpact Corrugated and belonged to the Paper, Printing, Wood and Allied Workers’ Union (Ppwawu) National Provident Fund. They complained to the adjudicator that their fund had refused transfer of their membership to the Chemical Industries National (CIN) Provident Fund, a second complainant in the matter.
The members told the adjudicator they believed that the CIN fund offered better benefits and performed better than the Ppwawu fund and contended that they were within their rights to move to a fund of their choice.
In its response, the Ppwawu fund said the CIN fund and its administrator, NBC Fund Administration Services, had written to it indicating that the employees wanted to be transferred. Its board had declined the request.
The fund also submitted that, as part of their conditions of employment, the employees were obliged to become members of a retirement fund, and could choose one of three funds: the Mondi Mpact Group Fund, the Satu Provident Fund or the Ppwawu National Provident Fund.
The CIN fund, which was not on the list, did not have the authority to interfere with the contractual arrangements between the company and its employees, and such interference could result in a breach of their conditions of employment, the Ppwawu fund said.
It added that there had been a three-month transfer window in 2014 during which members who were dissatisfied with their retirement fund could elect to transfer to another approved fund.
In her determination, Lukhaimane says it appeared that Mpact Corrugated’s participation in the Ppwawu National Provident Fund was by virtue of a collective agreement with the union and the CIN fund was not a party to this agreement. Thus, the CIN fund did not qualify as a complainant as set out in the section one of the Pension Funds Act.
Lukhaimane dismissed the complaint, saying the members had the right to transfer to another fund, but only to a participating fund.
“The primary issue ... is whether or not the complainants are free to join any pension fund of their choice that falls outside of the scope mentioned in their contracts of employment. It is imperative to note that an employment contract is a foundation which gives rise to fund membership. Minus a contract of employment, no fund membership exists.
“From an employee management point of view, it was necessary [for the employer] to limit the number of pension funds in which it participates. It is against this background that this tribunal concludes that it favours a more purposive and practicable interpretation that the complainants’ rights to transfer out of the first respondent are limited only to the funds mentioned in their employment contracts,” Lukhaimane says.
The adjudicator is scathing of the conduct of the CIN fund: “It is the view of this tribunal that the behaviour of the [CIN fund] constitutes an undesirable business practice that has the effect of causing disharmony in the industry and endanger its integrity if not sanctioned. This tribunal is of the view that this matter be reported to the Registrar of Pension Funds for her further consideration and possible sanctioning and remedial action.”