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This article highlights an issue of concern in the South African retirement fund industry regarding the discrimination experienced by members, trustees and other retirement fund stakeholders who are not regulated by the Pension Funds Act 24 of 1956 (the Act). All these parties do not have specialised pension law forums where they can seek to resolve disputes that arise from the management and administration of retirement funds with whom they are associated. The purpose of this article is to propose amendments to the law that would ensure that there is a specialised forum that would resolve pension law related disputes for all those operating within the retirement industry, irrespective of which legislation regulates their retirement fund.
In South Africa (SA), the majority of retirement funds are regulated by the Act (C Marumoagae ‘Liability to pay retirement benefits when contributions were not paid to the retirement fund’ (2017) 20 PER at 4). Some of the state linked retirement funds that are not regulated under the Act are regulated by their own specific legislation (C Marumoagae ‘The need for effective management of pension fund schemes in South Africa in order to protect members’ benefits’ (2016) 79 THRHR 614). For example, there are government linked retirement funds, such as –
According to M Mhango in ‘The right to equality and access to courts for government employees in South Africa: Time to amend the Government Employees Pension Law’ (2019) 19 African Human Rights Law Journal 337 at 340:
‘One of the benefits of the current parallel pension regime is that it allows the government of the day greater control in the affairs of government funds on matters that affect the national budget. This is relevant given that most government funds, particularly the GEPF, are organised as defined benefit funds where issues of the adequacy of funding levels may have significant political and economic consequences. In other words, at the core of the concern and the need for greater control is the fact that an employer who participates in a defined benefit fund, such as the government of South Africa in this context, guarantees the pension benefits regardless of the investment performance of government funds. In the South African setting, this guarantee, especially in relation to the GEPF, is quite significant and justifies the parallel private pension regime to ensure greater control of government funds’.
I am afraid I am not convinced by this argument. It is nonetheless, worth noting that Mhango does recognise some of the constitutional defects of this fragmented regulation, which often calls for judicial intervention (Mhango (op cit) at 341). He correctly points out how the Constitutional Court (CC) had to eradicate the discrimination experienced by members of the GEPF and the Post Office Retirement Fund in relation to the clean-break principle regarding pension interests on divorce, wherein this benefit was only available to members whose retirement funds are regulated by the Act (Mhango (op cit) at 431, see also Wiese v Government Employees Pension Fund and Others 2012 (6) BCLR 599 (CC), Ngewu and Another v Post Office Retirement Fund and Others 2013 (4) BCLR 421 (CC) and C Marumoagae ‘Breaking up is hard to do, or is it? The clean-break principle explained’ 2013 (Oct) DR 38).
I submit that it is not enough to only have regard to policy issues, which are motivated by political considerations, when drafting the law regulating retirement funds. It is important that the law that regulates the retirement fund takes the actual implications of that law on the administration of the retirement fund and the impact on the members of that retirement fund into consideration. In my view, there should be one legislation that regulates all retirement funds in SA, which will ensure that all retirement funds members are accorded the same legal protection and have access to the same dispute resolution forums. A justifiable differentiation can be made regarding defined benefit funds and defined contribution funds only to the extent of their uniqueness, but that should not extend to general benefits that can easily be unified by legislation. Failure to do this, places the court in a difficult position to constantly do that which legislators should do, by making orders that have policy implications. In my view, this fragmented or parallel regulation of retirement funds is unjustifiable and leads to the unnecessary discrimination of members on the basis of their affiliated funds and thus infringes on s 9 of the Constitution. Discriminatory practices can be eradicated by the promulgation of a uniform retirement fund statute. Establishing a uniform retirement fund statute will not prevent government from having ‘greater control’ over retirement funds. In actual fact, government can then solidify its control over retirement funds to which it contributes financially in such a uniform statute, while at the same time eradicating most of the discriminatory practices within the retirement industry.
The most significant differential treatment is in relation to the resolution of disputes that arise in the retirement industry. Only trustees, members, stakeholders and retirement funds regulated by the Act have access to a specialised pension law tribunal, which is specifically designed to resolve disputes arising out of the management and administration of retirement funds regulated by the Act, namely, the office of the Pension Funds Adjudicator (Adjudicator). The Adjudicator’s office is established in terms of s 30B of the Act, to investigate complaints and determine them through the principles of equity in a procedurally fair, economic and expeditious manner (see ss 30D and 30E). In terms of s 30O of the Act, an order made by the Adjudicator is regarded to be a judgment of a court of law – as if the matter before the Adjudicator was heard by a civil court – and if not complied with, can be executed by the Sheriff of the court on the strength of a writ of execution issued by a civil court (see C Marumoagae ‘Recognition of the concept of Contempt of “Determination” of the Pension Fund Adjudicator’s Determination: A missed opportunity – with particular reference to Mantsho v Managing Director of the Municipal Employee Pension Fund and Others (37226/14) [2015] ZAGPPHC 408 (26 June 2015)’ (2017) 50 De Jure 175 at 181).
Other retirement fund related statutes are silent on the issue of dispute resolution. These statutes neither establish dispute resolution forums, nor the manner in which members, trustees, retirement funds and stakeholders can seek to resolve their disputes that arise in the course of the administration of the retirement funds they regulate. In other words, stakeholders in these funds do not have a forum that can resolve their disputes in an expeditious, procedurally fair and economic manner. It is not clear why the legislature has not extended such an important forum to all those operating within the retirement industry. I submit that this omission violates the equality clause of the Constitution. In terms of s 9(3) of the Constitution, ‘[t]he state may not unfairly discriminate directly or indirectly against anyone on one or more grounds, including race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture, language and birth’. The CC designed the test of discrimination in Harksen v Lane NO and Others 1998 (1) SA 300 (CC) at para 53. In terms of this test, it must first be determined whether the identified differentiation amounts to discrimination. If the differentiation is on a listed ground in s 9(3) of the Constitution then discrimination would have been established. If the differentiation is not on a listed ground, then it must be determined that the identified discrimination may lead to the infringement of the fundamental human dignity of people. If discrimination is established, then its fairness must be assessed. If any of the grounds listed in s 9(3) are established, then unfairness is presumed.
‘If the differentiation is on an unspecified or analogous ground, unfairness will have to be established by the complainant. The test of unfairness focuses primarily on the impact of the discrimination on the complainant and others in his or her situation’ (A Smith ‘Equality constitutional adjudication in South Africa’ (2014) 14 African Human Rights Law Journal 609 at 617). Denying retirement fund members access to a specialised dispute resolution forum is not a listed ground in s 9(3) of the Constitution. As an unlisted ground, it is important to assess its impact on retirement fund members not regulated by the Act, who do not have access to a specialised pension law dispute resolution forum in the same way those whose retirement funds are regulated by the Act do. It is true, as it was stated in Gaum and Others v Van Rensburg NO and Others (Commission for Gender Equality and Another as amici curiae) [2019] 2 All SA 722 (GP) at para 70, that ‘[t]o determine the unfairness of discrimination, the determining factor is the impact on the members of the affected group’. Mhango cites Ntshangase v Government Employees Pension Fund (KZD) (unreported case no 6166/16, 11-8-2017) (Van Zyl J), where the court highlighted that GEPF members do not have access to cost-effective dispute resolution mechanism for their retirement fund related disputes (Mhango (op cit) at 351-2). Mhango then correctly argues that ‘the Government Employees Pension Law [and all other retirement fund statutes that do not afford their members a specialised retirement fund dispute resolution forum are] unconstitutional to the extent that [they do] not afford members of the GEPF the advantage of and access to the dispute resolution services at the [Office of the Pension Funds Adjudicator] or similar tribunal’ (Mhango (op cit) at 341). Those who are not afforded a specialised pension forum are forced to approach a civil court at great cost in order to have their disputes resolved by the court, which is a luxury that is not available to all. As such, retirement fund members are being unfairly discriminated against, based on being associated with retirement funds that are not regulated by the Act.
Currently, legal practitioners assisting clients with complaints against retirement funds, which are not regulated by the Act, have to complain to those funds directly. At times, depending on the efficiency or lack thereof from the officials who are assisting them, retirement fund members’ complaints may not be responded to on time or at all. Or if responded to, their complaints may simply be dismissed. As such, retirement fund members will be forced to approach the court. Given the fact that retirement funds that are not regulated by the Act are associated with the state, there have been members who have taken their complaints against these retirement funds to the Office of the Public Protector. Apart from not having the necessary pension law expertise, the Office of the Public Protector does not have human and financial capacity to investigate the complaints and produce individual reports for each and every retirement fund member that complains to it, in the same way the Adjudicator’s office does. Given the fact that the GEPF is the largest retirement fund in SA with the largest membership, the Office of the Public Protector is not adequately equipped to address disputes from GEPF members (see C Marumoagae ‘The need to provide members of retirement funds which are not regulated by the Pension Funds Act access to a specialised dispute resolution forum’ (2019) 52 De Jure 115 at 123).
In conclusion, I recommended that the legislature should repeal all pension law statutes and promulgate a uniform retirement fund legislation that will regulate the South African retirement fund industry. This legislation should establish a specialised pension law tribunal that will be accessible to all within the retirement fund industry. I have argued elsewhere that ‘the jurisdiction of the current Adjudicator’s office should be extended to other retirement funds. If this proposal is adhered to, then the state should financially resource this office in order to make it easily accessible nationally by creating at least one office in each province. Each office should be duly capacitated to deal with the complaints, which will be lodged with it’ (Marumoagae (op cit) De Jure at 131). Currently, those retirement funds regulated under the Act experience preferential treatment and can have their disputes resolved by a specialised dispute resolution tribunal. They enjoy another benefit that of orders that they are dissatisfied with being reconsidered by the Financial Services Tribunal in terms of s 230 of the Financial Sector Regulation Act 9 of 2017.
Clement Marumoagae LLB LLM (Wits) LLM (NWU) Dip Insolvency Practice (UP) is a legal consultant at Rambevha & Morobane Attorneys and a senior lecturer at the University of Witwatersrand in Johannesburg. Mr Marumoagae is also a council member of the Legal Practice Council.
This article was first published in De Rebus in 2020 (July) DR 22.
