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Review of pension fund trustee decisions







By Gennel Chettiar
Norton Rose Fulbright South Africa Inc.

The role of a board of trustees is inextricably linked to the exercise of discretion.

The ability to review a decision is rarely considered by a board until a situation arises where a decision they have passed is challenged.

The objects and duties of a trustee of a pension fund are contained in sections 7C and 7D of the Pension Funds Act 1956 (PFA). Importantly, the PFA stipulates that trustees have a fiduciary duty to all members. This includes applying their minds to every decision, from ensuring the fund remains financially sound to determining how death benefits should be paid out.

Given the wide decision making power afforded to trustees, it is only natural that there will be instances where individuals are dissatisfied with the outcome and seek to have the decision of the trustees overturned. The initial avenue for relief is to seek the assistance of the Pension Funds Adjudicator, followed by a review of the decision of the Adjudicator if the outcome is unsatisfactory. But if that review is unsuccessful, the aggrieved party may turn to the courts, and specifically the review provisions contained in the Promotion of Administrative Justice Act 2000 (PAJA) to review the decision of the trustees.

In Mmileng v Government Employees Pension Fund and Others one such challenge was mounted.

The applicant was a 62 year old pensioner. She sought an order to compel the Government Employees Pension Fund (Fund), a public fund, to pay the balance of her pension fund benefits after the board of the Fund had taken the decision not to pay her any pension benefit for the period January 1978 to August 1989 because it was alleged that there was no conclusive proof that she made contributions for that period.

The court held that the enquiry into whether there is an exercise of public power or performance of a public function for purposes of establishing whether a decision constitutes administrative action reviewable under PAJA is especially difficult in the pension fund industry because the decisions taken by trustees relate to people’s retirement funding and as such inevitably have a public element. However, where a decision is taken in respect of a particular member it cannot be said to be the exercise of public power or performance of a public function because it only affects that member and not all the members of a pension fund. Unless a decision affects all members of the fund, it will not be reviewable under PAJA.

The Mmileng decision is only relevant to public funds. The court in Gerson v Mondi Pension Fund and Others made it clear that the decision of the board of a private fund does not constitute administrative action for purposes of PAJA.

In any event it is advisable for trustees to exercise caution when making decisions because decisions may be considered to be the exercise of public power or performance of a public function where they have a far reaching impact on all members of that pension fund.

Source: Norton Rose Fulbright South Africa Inc.
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