A landmark ruling by the Office of the Pension Funds Adjudicator has ordered a pension fund to recalculate a retiree's benefit, reinforcing that defined benefit pensions must be honoured in line with fund rules.
After nearly 29 years of contributing to his pension fund, a retiree expected to receive the monthly pension promised under the fund's rules. Instead, he was told the lump sum available would buy him almost R21,000 less each month.
Refusing to accept the shortfall, he took the matter to the Office of the Pension Funds Adjudicator, and secured a ruling that could have far-reaching implications for members of defined benefit pension funds across the country.
Deputy Pension Funds Adjudicator Naheem Essop ruled that while actuarial reserve values remain a legitimate method for converting pensions into lump sums, pension fund rules must be interpreted strictly. Where a fund's rules define a pension using a specific formula, the capital value must be sufficient to secure that pension.
The complaint was brought by a former employee of ZF Services South Africa, who retired on October 31, 2023 after joining the company's pension fund in April 1995.
