South African Municipal Workers’ Union National Provident Fund v Umzimkhulu Local Municipality and Others

The Umzimkhulu Local Municipality was a participating employer in the South African Municipal Workers’ Union National Provident Fund. Certain municipal employees, with the consent of the Municipality, purported to terminate their membership of the Fund while remaining in service and instead joined the Municipal Employees Pension Fund from 1 January 2014. The Municipality thereafter stopped paying contributions to the Fund in respect of those employees. The Fund instituted proceedings to compel the Municipality to provide contribution statements and to pay arrear contributions. The High Court dismissed the application, holding that the Fund’s rules allowed in-service transfer of membership. The Fund appealed to the Supreme Court of Appeal.

The appeal was upheld with costs. The High Court order was set aside and replaced with an order directing the Municipality to provide prescribed contribution statements to the Fund, granting the Fund leave to supplement its papers to claim arrear contributions, and ordering the Municipality to pay costs.

The case clarifies the interpretation of pension fund rules concerning cessation of membership and confirms that employees may not unilaterally terminate membership of a fund while remaining in service if the rules prohibit it. It draws a clear distinction between individual benefit transfers under section 13A(5) and business transfers under section 14 of the Pension Funds Act, and affirms that compulsory pension fund membership does not infringe freedom of association.