Pension fund faces backlash for ignoring member's withdrawal instructions
A provident fund has come under fire from the Pension Funds Adjudicator (PFA) for paying out a member’s withdrawal benefit without his consent.
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A provident fund has come under fire from the Pension Funds Adjudicator (PFA) for paying out a member’s withdrawal benefit without his consent and for failing to comply with the rules of the fund and the Pension Funds Act.
In a ruling handed down by Adjudicator Muvhango Lukhaimane, the South African Commercial Catering and Allied Workers Union (SACCAWU) National Provident Fund was found to have acted “in contravention of the rules” after processing a benefit payout despite the member’s request that his money be transferred to an annuity account.
The complainant, a former Pick n Pay employee who worked at the retailer from December 2017 to November 2023, told the adjudicator that he had instructed the fund to transfer his full benefit to an EasyEquities annuity account because it was tax-free. Instead, the fund paid him a withdrawal benefit of R23 322.36 on 2 February 2025, while R30 000 was transferred into a retirement annuity on the same date.
The member also alleged that his employer failed to pay all provident fund contributions on his behalf. However, after reviewing the records, Lukhaimane dismissed this aspect of the complaint, confirming that “all contributions were paid on behalf of the complainant in terms of the rules of the fund and there were no further benefits due.”
The key issue, she said, was the fund’s failure to prove that the complainant had requested a cash withdrawal. The fund claimed that the member had contacted its call centre on 8 March 2024 and asked for his “full benefit in cash” after which a call centre agent initiated the claim.
When requested to provide a recording of the alleged call or a copy of the withdrawal claim form completed by the member, the fund “failed to do so”.
Lukhaimane stated: “In the absence of proof of the complainant’s instruction being heeded to, the fund acted in contravention of the rules and failed to ensure that the interests of members are protected at all times.”
She added that “the failure by a pension fund to provide relevant information required by a member or a beneficiary for the exercise of his/her rights constitutes a breach of the duty to act in good faith and amounts to an improper exercise of powers and maladministration of the fund.”
Lukhaimane directed the complainant to indicate how he wanted his benefit to be paid. Should he opt to transfer the benefit to another pension, provident, or preservation fund, he would be required to refund the amount already received.
The fund was further ordered to liaise with the South African Revenue Service (SARS) to reverse the initial tax directive and apply for a revised one, before transferring the complainant’s full fund credit to his chosen retirement vehicle.