Fund ordered to stick to its rules and pay withdrawal benefit

Advocate Matome Thulare , Deputy Pension Funds Adjudicator

The Deputy Pension Funds Adjudicator Advocate Matome Thulare has interpreted a fund’s rules differently and has upheld a complaint about non-payment of withdrawal benefit.

The complainant was employed at City of Tshwane Local Municipality (third respondent) from 1 June 2007 until 31 August 2019 and was a member of the Municipal Employees Pension Fund (first respondent).

Following his termination of service with the third respondent, the complainant commenced employment with the City of Mbombela Municipality (COMM) on 1 September 2019 for a limited period of five years without a pension scheme.

The complainant submitted withdrawal forms to the first respondent and had not been paid his benefit nor did he receive a formal response in respect of his withdrawal forms.

The complainant submitted that he personally visited the first respondent’s offices in September 2019 and was informed that the first respondent’s policy did not allow payment of his withdrawal benefit.

The first respondent submitted that in terms of its rules “a member shall not cease to be a member while he remains in the service of a local authority”. It confirmed that the COMM is a participating employer in the first respondent.

The first respondent further submitted that the complainant is not permitted to withdraw from it and that the COMM is obliged to continue paying contributions on behalf of the complainant to the first respondent.

In his determination, Advocate Thulare said the rule that the fund relied on did not refer to the situation that the complainant found himself in i.e. the complainant had left the service of a local authority and had thereafter been employed on a contractual basis for a limited period by another participating employer in the first respondent.

He said if the complainant had been re-employed, he would not be entitled to a withdrawal benefit when he left the service of the third respondent and joined the COMM.

“It is apparent that this is not the case and that the rule cannot be used as justification for not paying the complainant his withdrawal benefit. The rule applies to a member who remains in service of a local authority participating in the fund; not
one who has left and been re-employed.

“There does not appear to be any purpose behind not paying withdrawal benefit to a member who has been re-employed by another participating employer on terms and conditions that do not require the member to continue being a contributory
member of the first respondent.

“Accordingly, it is held that the rules of the first respondent do not permit the first respondent to not pay the complainant’s withdrawal benefit,” said Advocate Thulare in ordering that the complainant be paid his withdrawal benefit with interest.