Be assured, the law affords a high level of protection to your pension savings

The Pension Funds Adjudicator, Muvhango Lukhaimane.

The Pension Funds Adjudicator, Muvhango Lukhaimane.

Published Jul 5, 2022


If you leave your employer and cease being a member of your pension fund, the amount you have accumulated in the fund (your retirement benefit), is essentially sacrosanct. The fund may make deductions from your retirement benefit only under the very limited conditions set out in the Pension Funds Act.

The Pension Funds Adjudicator, Adv Muvhango Lukhaimane, has set the record straight after the Gauteng High Court overturned her determination about a deduction being unlawful. Lukhaimane says the High Court decision was based on an error of procedure, and that section 37A of the Act is unambiguous about the types of deduction that can be made. She assures pension fund members that there is no reason to panic and “falsely believe that their benefits are now capable of being ceded, pledged or hypothecated”.

The conditions under which a pension fund may deduct money from your retirement benefit are listed in section 37D as follows:

  • For a loan granted under section 19(5), which relates to a mortgage on a property;
  • For compensation to your employer in respect of any damage caused by theft, fraud or dishonesty on your part, to which you have admitted guilt or been found guilty in a court of law;
  • For any outstanding contributions to a medical scheme or insurance company;
  • For the portion of your benefit assigned to an ex-spouse in terms of a divorce agreement;
  • For anything you may owe under a maintenance order;
  • For any income tax you owe to the South African Revenue Service.

Under no other circumstances is a fund permitted to make a deduction, even if, as we shall see, you have come to an agreement with your employer for such a deduction to be made.

Court order

A recent draft order endorsed by Judge Allyson Crutchfield overturned a determination made last year against the Bokamoso Retirement Fund and its administration company, Akani Retirement Fund Administrators.

In November last year, Personal Finance published a story, “Pension fund 'unlawfully' deducted study loan from worker's retirement lump sum”. The case concerned one of Akani’s own employees, Mr A. On leaving Akani, Mr A had come to an agreement with his employer that it would deduct R52 252 from his benefit to repay a study loan. However, on receiving his benefit, Mr A saw that R60 879 had been deducted, and laid a complaint with the adjudicator.

While the adjudicator admits that the correct procedures were not followed by her office in dealing with the complaint, this does not alter the fact that a deduction to repay a student loan is not permitted under the Act.

In a statement released on Friday last week, soon after the court order was granted, Lukhaimane wrote: “The order handed down in the unopposed motion court in favour of Bokamoso Retirement Fund did not and could not overrule what is expressly provided for in legislation and widely accepted to be the correct legal position.”

According to the adjudicator, the court order was the result of an incorrect procedure followed in reopening an investigation into a matter after it was closed, when it was discovered that deduction was unlawful.

On learning of the court order, the Bokomoso Retirement Fund issued a press release saying it had been exonerated by Judge Crutchfield.

“The Bokamoso Retirement Fund welcomes the judgment of the High Court that dismissed and set aside an erroneous determination of the Pensions Funds Adjudicator,” the release said.

The managing director of Akani, Zamani Letjane, said: “We welcome the judgment … for exonerating both Akani and Bokamoso and proving – without a shadow of a doubt – that the decisions the Bokamoso board took were in line with the rules of the fund.”

The Bokamoso release further states that the adjudicator’s determination against Bokamoso ignored two aspects of the complaint – that:

  • The complainant acknowledged that there was an agreement between himself and Akani to make such a deduction; and
  • The issue in dispute was the quantum and not the principles in section 30D [sic] of the Pension Funds Act.

The Act “is paramount”

When asked by Personal Finance whether the fund’s own rules or whether an agreement between an employer and employee can override the provisions of the Act, the Pension Fund Adjudicator’s office responded with an unequivocal “no”.

In the case of an agreement between employer and employee, the office said it is trite law that you cannot agree to something that is unlawful. “Section 37A of the Act is explicit on the prohibition of deductions. It refers to ‘cede, pledge and hypothecate’, meaning that the prohibition lies expressly against purported voluntary deductions. Any argument that it applies only to involuntary deductions ignores the clear language of the Act.”

On whether the rules of the fund could make such a provision, Lukhaimane’s office said section 37A specifically states that it “applies notwithstanding anything to the contrary contained in the rules of a fund and that no rule can be registered by the FSCA if it is in conflict with the Act”.

Lukhaimane says the Pension Funds Act is specifically designed to protect pension benefits from creditors, including unscrupulous employers, who may utilise their bargaining power against their employees to enter into agreements prejudicial to the employee.

“The Act goes so far as to protect benefits against insolvency in section 37B, and in section 37C we find that beneficiaries are protected against even the clear wishes of a deceased member if it results in an inequity.”

Lukhaimane said the order that set aside her determination “was one of those rare circumstances where form took precedence over substance.”

When approached on the legal substance of the matter, Akani responded: “Akani is of the view that if an employee signs an agreement for a study loan and the only means of repayment is from the pension fund at the date of resignation, the fund and the employer can recoup the fees as agreed by both parties.”


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