The Edcon Pension Fund was closed to new entrants on 7 July 1997, with members offered the opportunity to transfer to provident funds. The fund embarked on a restructuring exercise involving surplus distribution, designed before the Pension Funds Second Amendment Act 39 of 2001 (the "surplus legislation") came into operation on 7 December 2001. Rule amendments were submitted to the Registrar in December 2000, but the Registrar required a negotiated settlement. The fund entered into a negotiated agreement with stakeholders in June 2001, and submitted amended rules in August 2001. These amendments were registered in September 2002, deemed effective from 1 September 2001. Members and pensioners were given options to transfer with 25% benefit enhancements in exchange for forfeiting post-retirement medical aid subsidies. Elections were made between February and May 2003. On 4 June 2003, the fund submitted transfer applications under section 14 of the Pension Funds Act 24 of 1956. The Deputy Registrar rejected the applications as incompatible with the surplus legislation. The fund appealed to the Financial Services Board of Appeal, which dismissed the appeal. The fund then sought judicial review in the Pretoria High Court, which also dismissed the application.
The appeal was dismissed with costs, including costs occasioned by the employment of two counsel.
A right to bring a transfer application under section 14 of the Pension Funds Act only accrues when all conditions for its existence in relation to the particular beneficiary are met. This includes the election by the member in respect of whom the transfer is sought. Where member elections to transfer occur after new legislation comes into force, the transfer applications must be determined in accordance with the new legislation, notwithstanding that rule amendments may have been registered with an earlier deemed effective date. The principle that an applicant has a right to have an application determined in accordance with the law prior to amendment applies only where the applicant has taken sufficient steps prior to the commencement of the amending law to assert the right relied on - this requires that all conditions for the accrual of the right have been fulfilled.
The court assumed, without deciding, that elections made by members and pensioners might be deemed by legal fiction to have been made within a period calculated to have commenced on 1 September 2001 (the deemed effective date of the rule amendments). However, the court observed that even if this assumption were correct, it would not assist the appellant because it was impossible to determine that such deemed elections occurred within the three-month period before the surplus legislation came into effect on 7 December 2001. The court noted that the actual timeline between rule registration (September 2002) and elections (February-May 2003) was considerably longer than the three-month window that would have been available, and counsel for the appellant correctly conceded that it was not possible to find by when the elections would have been made if the rule amendments had been registered on 1 September 2001.
This case establishes important principles regarding the accrual of rights in the context of pension fund transfers and the application of transitional provisions when legislation is amended. It clarifies that for a right to bring a transfer application under section 14 of the Pension Funds Act to accrue, all conditions must be met, including member elections to transfer. The case demonstrates that the mere registration of rule amendments with a retrospective effective date does not necessarily create vested rights that are immune from subsequent legislative changes. It provides guidance on when the principle of accrued rights applies in the pension funds context and distinguishes between situations involving rectification of prior errors (as in Volkswagen) and entirely new applications. The judgment reinforces that pension fund members and administrators cannot avoid the application of new legislation (particularly the surplus legislation) by relying on technical arguments about deemed dates or legal fictions where the substantive steps creating rights occurred after the new legislation came into force. This decision has important implications for the administration of pension fund surpluses and the temporal application of pension legislation amendments.