Tek Corporation Provident Fund and Others v Lorentz

The Tek Corporation Pension Fund, a defined benefit fund, accumulated a substantial actuarial surplus which relieved the employer, Tek Corporation, of the obligation to contribute further (a so‑called 'contribution holiday'). Many employees later transferred to a newly established defined contribution provident fund. Despite the transfers, a surplus remained in the pension fund. The employer attempted to rely on that surplus to avoid making contributions to the provident fund. Following a corporate sale, former Tek employees who became members of the Malbak provident fund claimed that part of the surplus should follow them. The trustees and employer denied any employee entitlement to the surplus, asserting it lay under employer control. Mr Lorentz, a former member, sought declaratory relief regarding the lawful use of the surplus.

The appeal succeeded in part. The Supreme Court of Appeal set aside the orders of the court a quo that compelled the trustees to transfer surplus and enhance benefits, holding that such relief was not authorised by the fund rules.

The case is a leading South African authority on the legal nature of pension fund surplus. It clarifies that surplus belongs to the fund itself and not automatically to the employer or members, and that trustees’ powers are strictly confined to the fund rules and governing legislation.