Another ruling by the PFA

20 February 2006 Janet Cannan

The Pension Funds Adjudicator issued an important ruling in respect of the various options available to a member when his employment contract is terminated.

In Maqutu v De Beers Pension Fund, the members employment was terminated in May 2003.  In terms of the rules of the fund, he was entitled to either a cash withdrawal benefit (R66 838.13) or a part cash benefit and the balance to be transferred to a preservation fund or a deferred benefit retained in the fund or a transfer of the entire benefit to another fund.  The cash withdrawal benefit was the least generous of the available benefits.

The member elected the part cash part preserved benefit and informed the fund in writing of his choice.  This entitled him to receive a portion in cash and preserve the balance until retirement age.  Notwithstanding the members request, the fund determined that the member should be paid a cash benefit and paid the withdrawal benefit in 2 instalments.  The member was unhappy that his option had not been implemented and a different benefit was paid.

The adjudicator firstly held that the rules of the fund provided for 4 types of benefits upon the termination of service. From the papers before the Tribunal, it was clear that the member elected to receive a part cash and part preservation benefit.  The adjudicator rejected the funds argument that the lack of preservation details meant that the member had not selected this option.  Therefore, the fund did not effect payment in accordance with the members instructions. The fund was directed to compute the members benefit in terms of the option he elected.

This ruling highlights the importance of members being fully aware of the options available in respect of a benefit payable by a pension fund and that the option selected has been implemented.

A copy of the ruling is attached herewith.

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