Please quote our ref PFANW35852005MN RE DETERMINATION IN by monkey6


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									HEAD OFFICE Johannesburg 2nd Floor, Sandown House Sandton Close 2, Sandton, 2196 PO Box 651826, Benmore, 2010 Tel (011) 884-8454 Fax (011) 884-1144 E-Mail: Cape Town 2nd Floor, Oakdale House, The Oval Oakdale Road, Newlands, 7700 P O Box 23005, Claremont, 7735 Fax (021) 674-0185 Tel (021) 674-0209 E-mail: Website:

Please quote our ref: PFA/NW/3585/2005/MN




At issue in this complaint is the Employees Pension Fund (“the complainants withdrawal benefit on Sentinel Mining Industry Retirement 2005.

refusal and/or failure by the Mine fund”) to effect payment of the his cessation of membership of the Fund (“the second fund”) on 30 May


The complaint was received by this office on 28 May 2005 and a letter acknowledging receipt thereof was sent to you on the same date. On 28 June 2005 a letter was dispatched to the respondent giving it until 19 July 2004 to file a response to the complaint. On 16 November 2005 the respondent filed its response. On the 1 November 2007, the respondent filed another submission. This submission was referred to the complainant on the 5 November 2007. The complainant however omitted to reply. After considering the written submissions before me, I consider it unnecessary to hold a hearing in this matter. Facts in brief

M Mohlala (Adjudicator), C Nkuhlu (Snr Assistant Adjudicator), K MacKenzie (Snr Assistant Adjudicator), R Maharaj (Snr Assistant Adjudicator), M Ndaba (Snr Assistant Adjudicator), M Daki (Snr Assistant Adjudicator), E de la Rey (Snr Assistant Adjudicator), S Mothupi (Senior Assistant Adjudicator), T Dooka (Snr Assistant Adjudicator), L Mbalo (Assistant Adjudicator), M Ramabulana (Assistant Adjudicator), P Mphephu (Assistant Adjudicator), C Seabela (Assistant Adjudicator), P Myokwana (Assistant Adjudicator), L Nevondwe (Assistant Adjudicator), AP Lehana (Assistant Adjudicator), S Mokgara (Assistant adjudicator), L Molete (Assistant Adjudicator), A Mnqinya (Assistant Adjudicator), T Nawane (Assistant Adjudicator), B Mahlalela (Assistant Adjudicator) Financial Manager: F Mantsho, Accountant: R Soldaat, HR Manager: P Mhlambi



The complainant is complaining that after leaving employment in 2004 he was informed that he has to wait for six months before he could claim his benefits. He however when he went there, he was informed that he has to wait until he is fifty years of age in order to claim. Complaint


The complainant is aggrieved by the fund’s refusal to effect payment of his withdrawal benefit which he says amounts to an amount of R93 000. Response


The fund states in its response on the 16 November 2005 is that this complaint relates to the application or interpretation of the rule of the respondent fund that prohibits the complainant from withdrawing his fund credit from the fund. The fund provides, in what it calls its “generic response”, a comprehensive backdrop to the current impasse between what it terms “non contributory members” and the fund. The fund states that prior to 1 March 2003, which is the date when the rules introducing a complete overhaul of the fund structure took effect, if a member left the employ of a participating employer to join another (non-participating) employer, his service with that employer would be deemed to be pensionable service in the fund, albeit on a non-contributory basis. In other words, no withdrawal benefit was paid and his benefit would be retained in the fund. The same position obtained in respect of a member who left service with a minimum period of service (15 years and later reduced to 5 years). This arrangement was apparently designed to encourage preservation of fund benefits. Among its peculiar features was that a member exercised the option to retain fund membership by default, that is, by failing to terminate his membership upon leaving service of the participating employer; and he could at any stage prior to attaining retirement age terminate fund membership and take a withdrawal benefit (category 1). In the case of a member who moved from the fund to the second fund (where the employer participates in both funds) or vice versa, however, different rules applied (category 2). In such a case, the deemed membership was a consequence of the move and a member could not take a benefit from the previous fund until he left service altogether, in other words, discontinued contributing to either fund. The fund further explains that on the restructuring or conversion of the fund into a pure defined contribution scheme on 1 March 2003, category 1 members were, in terms of the rules insisted upon by SARS for continued tax approval, allowed to withdraw their fund credits or transfer to an approved fund within 9 months from the date of conversion. On expiry of this window period, beginning from 1 December 2003, a



category 1 member could no longer withdraw his fund credit and could only transfer it to a current employer fund, a retirement annuity fund or in terms of section 14 of the Act. Transfers to preservation funds were not allowed. As regards category 2 members, such a member could only transfer his benefit to a current employer fund, failing which it would be retained in the fund until he reaches pensionable age. [9] The fund further states that it amended its rules which were registered on 15 November 2004 (“the 2004 rules”) pursuant to changes introduced by SARS when it issued General Note GN 35. The stated purpose of GN 35 is to provide for the taxation of the so-called unclaimed benefits held by pension funds. In a nutshell, GN 35 requires pension funds to provide in their rules that on exiting the fund, a member must exercise an election within six months after the benefit accrues to him (which is interpreted by SARS as a day after exit) either to defer or terminate membership, failing which the benefit is deemed as unclaimed and taxable as such. In the event of deferred membership, the member had to remain as such until he reaches pensionable age or dies or becomes permanently disabled. The basis for SARS’s assessment in respect of unclaimed benefits appears to be that a member acquires a right to claim a benefit at the time the benefit accrues. Even though the member does not claim or receive the benefit at that time, he does acquire, by operation of law, the right to claim the benefit from that time and into the future. The fund further explains that because its rules as they stood at the time were not GN 35 compliant (a member falling within the definition of “noncontributory member” had been permitted to retain deferred membership by default, by simply not applying for a benefit; the rules gave such a member the option to transfer his benefit to certain types of funds prior to retirement age), they had to be hastily amended to ensure compliance with GN 35 by 30 June 2004, that being the cut-off date set by SARS. The response further elaborates that, according to their records, the complainant left service on the 7 October 2004 and that the payment of withdrawal benefits was subjected to a waiting period of 3 months from the last date of service. The respondent states that the complainant only applied for his benefits six months after he had left service. In another submission by the respondent dated the 1 November 2007, the respondent contends that the respondent has since been re-engaged on the 14 December 2005 and as such his status has changed from being a non contributory member to a contributing member. The complainant left service again on the 31 March 2006 and did not elect within six months that he wishes to defer or claim his benefits, and






as such his benefits was transferred to the unclaimed account in terms of GN 35. [14] The respondent submitted that, the complainant is no longer a non contributory member; his fund credit is part of an unclaimed benefit. The respondent elaborated that the complainant is entitled to claim the balance of his fund credit from the fund and will have to contact the South African Revenue Services to claim back any tax that he may be entitled to. The respondent went further to say that the complainants claim is invalid because he has got access to his fund credit. [15] The respondent went further to state that the complainant should contact the fund at (011) 481 8000 to claim his fund credit. Determination and reasons thereof [16] Narrowed down to its essentials, this complaint relates to the application or interpretation of the rules of the fund that purportedly preclude the complainant from claiming payment of his withdrawal benefit prior to him attaining the retirement age, alternatively, an improper exercise of powers; maladministration resulting in prejudice and/or that a dispute of law has arisen between you and the fund. The enquiry here is, in my view, simply whether, in terms of the rules of the fund, the fund is entitled to refuse to effect payment of your withdrawal benefit upon your leaving the service of the employer and in the absence of your electing in writing to become a deferred member of the fund. However, the respondent has already indicated that, they are prepared to release the payment of this benefit to the complainant, and as such, there is no need to delve much into the detail. On the 5 November 2007, this office had written to the complainant, advising him that he should contact the respondent in order to facilitate the payment of the balance of his fund credit. In the circumstances, this tribunal can only reiterate that the complainant should contact the respondent at (011) 481 8000 and request the payment of his fund credit. This complaint can therefore not succeed. DAY OF 2009.





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