FANews
FANews
RELATED CATEGORIES

PFA: No changes to pension payouts unless it’s in rule book

04 February 2011 Pension Funds Adjudicator
Acting Pension Funds Adjudicator Dr Elmarie de la Rey

Acting Pension Funds Adjudicator Dr Elmarie de la Rey

Changes to your pension investment may only be made prior to receipt of any pension payouts to you, thereafter the transactions are governed only by what is allowed by the rules of the fund in question.

So says Acting Pension Funds Adjudicator Dr Elmarie de la Rey, who ruled a pension fund did not act unlawfully by declining a retiree’s request to invest his monthly pension with another insurance entity.

The complainant, ML Pepler of Durbanville, Cape Town was employed by Eskom Limited and was a member of Eskom Pension and Provident Fund from 1 December 1987. When he resigned from Eskom on 31 March 2005 he opted to retain his withdrawal benefit in the fund as a deferred pensioner until he reached retirement age.

In April 2009 when the complainant notified the respondent of his intention to retire, the respondent proceeded to pay one-third of his retirement benefit to him and the remaining two-thirds through a monthly pension of R5 497.87.

The complainant then indicated he wished to withdraw the remaining two-thirds of his retirement and invest this with an external investment management company. He became aggrieved when the respondent declined his request, maintaining this was unfair and discriminatory as individuals should be entitled to move their living annuities and pre-retirement funds to different insurers and fund managers.

In its submission the respondent referred to section 13 of the Act, which states that the rules of a registered fund are paramount and binding on the fund and the members, shareholders and officers thereof and on any person who claims thereunder.

Its own rules, it submitted, did not make provision for the transfer of a member’s retirement benefit to another institution for investment, or the option to purchase an annuity from another institution.

The only provision allowed for commutation of the benefit was as a lump sum when the whole of the pension payable did not exceed the maximum amount that could be totally commuted in terms of the Income Tax Act. Commutation could also be allowed or at the request of a retiring member whose pension exceeded the maximum amount that may be totally commuted in terms of the Income Tax Act, not more than one- third of his pension.

The Income Tax Act permits full commutation of a benefit only if two-thirds of the benefit is less than R50000.00. Since the complainant’s retirement benefit was R1 376 899.58 and two- thirds equals R917 933.06, the respondent was not permitted to commute his full benefit to cash.

The Pension Funds Adjudicator ruled that the complaint could not succeed and it was dismissed.

Quick Polls

QUESTION

What is your one-liner for the 2024 National Budget speech?

ANSWER

Creepy failure to adjust income tax, medical tax credits
Overall happy, it should support economic growth
Overall unhappy, soaring public sector wages and broken SOEs suck..
There are too few taxpayers, too many grant recipients.
fanews magazine
FAnews February 2024 Get the latest issue of FAnews

This month's headlines

On the insurance industry’s radar in 2024
Insurers, risk managers unsure of AI’s judgement credentials
Is offshore the place to be in 2024?
Gap claims: erosion of medical benefits, soaring specialist fees
Investments and retirement… is conventional wisdom under threat?
Subscribe now