PFA refuses transfer of provident fund

Muvhango Lukhaimane

The disgruntled fund and the employees then complained to the Office of the Pension Funds Adjudicator that they had been denied transfer to a pension fund of their choice.

Muvhango Lukhaimane, the Pension Funds Adjudicator, dismissed the complaint, describing the behaviour of the fund which coveted new members as "...an undesirable business practice that has the effect of causing disharmony in the industry". The matter has also been reported to the Registrar of Pension Funds.

T Lefatsa and 68 other employees of Mpact Corrugated (Pty) Ltd (third respondent) and who were members of PPWAWU National Provident Fund (first respondent), complained they were refused transfer of their funds to the Chemical Industries National Provident Fund (second complainant) by the first respondent.
Better benefits

They were of the view that the second complainant offered better benefits and performed better than the first respondent. They contended that the rules of the first respondent and Directive PF 6 issued by the Registrar of Pension funds, allowed them to transfer out of the first respondent.

Therefore, the complainants requested the Office of the Pension Funds Adjudicator to compel the first respondent to allow them to transfer to a pension fund of their choice.

In its defence, the first respondent said the second complainant and its administrator, NBC Fund Administration Services (Pty) Ltd, had written to it indicating the complainants wished to be transferred to the second complainant. The board of the first respondent declined the request.

The first respondent also submitted that, as part of their conditions of employment, the complainants were obliged to become members of a retirement fund organisation.
They were given an option to join one of the three such organisations namely, the Mondi Mpact Group Fund, SATU Provident Fund or PPWAWU National Provident Fund.

It said the second complainant did not have the authority to interfere with the contractual arrangements between the employer and the employees and a decision to transfer the complainants to it would cause such interference as it would result in a breach of the conditions of employment.

No relationship

The first respondent also asserted that the second complainant did not have any relationship with the third respondent and it could not be used as a vehicle to espouse such a relationship. Also, the second complainant could not impose on the third respondent an obligation to participate in a fund without the latter's consent.

It further stated that, as a practice, it would require any of the other participating funds to reciprocate an option to their own members to consider joining it. A window period would then be opened during which members could transfer between the funds. It was not possible for such an arrangement to be made with the second complainant.

A transfer window was opened effective from 1 July 2014 to 30 September 2014 within which its members and those of the Mondi Mpact Group Fund could elect to transfer from one fund to the other. This was done to accommodate any employees not satisfied with it, including the complainants. It stated that this was in line with the contract of employment between the relevant parties.

The third respondent said the right to join a pension or provident fund in which the employer participates was determined by the contract of employment. It stated that it was clear that the complainants were offered to join one of three funds - and not the second complainant. Were the first respondent to give effect to the wishes of the complainants, it would be causing the complainants to breach their contracts of employment.

Small proportion

It also submitted that the petition submitted by the complainants had been signed by 54 members based at eight plants. This was a small proportion of the 555 employees who were members of the first respondent.

The third respondent disapproved of the second complainant's conduct which it called 'cynical' as it attempted to increase its membership.

In her determination, Lukhaimane said it appeared from the submissions that the third respondent's participation in the first respondent was by virtue of a negotiated agreement under the auspices of the collective agreement with the union and evidently, the second complainant was not party to. Thus the second complainant did not qualify as a complainant as set out in the section 1 of the Pension Funds Act.

Lukhaimane said once members in a plant felt that they wished to transfer out of the first respondent, they may do so, but only to any approved provident fund.

"The primary issue which needs to be determined in the context of the present matter is whether or not the complainants are free to join any pension fund of their choice, which 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."

Administrative nightmare

"This Tribunal notes that the third respondent has a contingent of 555 employees and thus, from a proper employee management point of view, it was necessary for it to limit the number of pension funds to which it participates as failure to do so would have led to an administrative nightmare with each of its employees belonging to different pension funds.

"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 was scathing of the conduct of the second complainant. "Much has been submitted by the first and third respondents with regards to the conduct of the second complainant, which this Tribunal concurs with. It is the view of this Tribunal that the behaviour of the second complainant constitutes an undesirable business practice that has the effect of causing disharmony in the industry and endanger its integrity if not sanctioned.

"It is against this backdrop that 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," Lukhaimane said, whilst ordering that the complaint be dismissed.