Provisions in pension fund rules that a member may not withdraw from membership of the fund while remaining in service of the employer to transfer benefits to another fund, were held to be valid and not unconstitutional or contrary to public policy, said the appeal court.

Section 13A(5) of the Pension Funds Act read with the definition of ‘member’ means that a person cannot demand the transfer of any benefits from one fund to another fund unless that person’s membership of the first fund has ceased. Cessation of the employee’s membership of the fund in terms of its rules is a necessary condition to be satisfied before the employee may demand that a benefit or right to a benefit be transferred to another fund. Such a transfer is not a transfer of business governed by section 14. The transfer of funds after ceasing to be a member is regulated by section 13A(5) and not section 14.

These provisions do not offend against the right to freedom of association under the Constitution. By joining the particular fund the members consent to any restrictions that might be placed on their right to freedom of association, in terms of the rules of the fund. In addition, the members are entitled to join additional retirement funds.

The purpose of compulsory membership of a particular pension fund is to enhance pension benefits and secure the viability of the fund by ensuring it has a significant number of members. Any limitation on the right to disassociate is justified. Once they make the choice at the outset which fund to join they are bound by those rules which have financial implications for them. In addition, the rule does not infringe the right to freedom of trade. The rule is part of the way of engaging in trade and competition in the pension fund sector. The competing fund cannot say that its right to trade freely is infringed in circumstances where it applies the same restriction in relation to other funds.

The attempt by one fund to enforce a transfer of employees’ benefits failed.

The case is MEPF v SAMWU PF.