Municipal Employees’ Pension Fund and Another v Pandelani Midas Mudau and Another

Mr Pandelani Midas Mudau was employed by Vhembe District Municipality and became a member of the Municipal Employees’ Pension Fund in 2003. Upon his resignation effective 31 May 2013, his membership terminated and he became entitled to withdrawal benefits. At that time, the Fund’s rules provided that members joining after June 1998 would receive withdrawal benefits calculated as their contributions plus interest, multiplied by three. Acting on actuarial advice that this rule was financially unsustainable, the Fund resolved on 21 June 2013 to amend the rule, with retrospective effect from 1 April 2013, reducing the multiplier to 1.5. The amendment was registered by the Registrar of Pension Funds on 1 April 2014, with an effective date of 1 April 2013. Mr Mudau’s withdrawal benefits were paid on 18 October 2013 in accordance with the amended rule. He complained to the Pension Fund Adjudicator, arguing that because the amendment was not yet registered when his benefits accrued and were paid, the original rule should apply.

The appeal was upheld with costs. The order of the full court was set aside and replaced with an order upholding the appeal and setting aside the determination of the Pension Fund Adjudicator. The complaint was dismissed with costs.

The case authoritatively confirms that pension funds in South Africa may amend their rules to reduce members’ benefits with retrospective effect, provided the amendment is adopted in accordance with the fund rules and section 12 of the Pension Funds Act and is duly registered. It clarifies the scope of permissible retroactivity in pension fund rule amendments and affirms the statutory framework governing the effective dates of such amendments.