Your retirement fund is legally bound to take reasonable steps to protect your interests at all times, Pension Funds Adjudicator, Professor John Murphy, says.
This means that the fund must ensure that you are able to make an informed choice about your future retirement provision when certain things happen.
This includes situations where your fund amalgamates with another or transfers benefits to other funds, or if your employer ends or reduces contributions to your fund or if your employer withdraws from a fund.
The City Council of Pretoria challenged a decision made by its three participating funds, the Joint Municipal Pension Fund, the Municipal Employees Gratuity Fund and the Municipal Employees Pension Funds recently.
The council complained to Murphy that its 11 000 employees were not given an opportunity to make an informed choice and to exercise an option that they were given to transfer to various union-established funds because the three funds refused to extend the date by which time the options had to be exercised.
Two factors caused a lot of confusion. One was a decision by the Receiver of Revenue in January 1998 that local authority employees would forfeit the tax free portion of their benefits when they transferred from one fund to another.
This could have a dramatic impact on the decision of members to transfer to another fund because the benefit could be reduced by almost 30 percent.
The other factor which caused confusion among employees wanting to transfer was that the retrenchment benefits of some of the funds differed.
Murphy ordered the three funds to allow all the employees to exercise their options.
He said the choice was denied to them by matters outside of their control and the three funds did not take all reasonable steps to ensure that the interests of their members were protected during the transfers.
Two weeks prior to the deadline significant issues remained unresolved.
Members had no clarity on whether the council was able to eliminate the discrimination in retrenchment benefits and the law finally clarifying the tax position was only enacted three days before expiry of the deadline, Murphy said.
"Fairness dictates that they should have had more time to consider the new legislation and to take advice."
"Members of a pension fund who are expected to make a decision likely to have an enduring impact on their lives and livelihood are entitled to be advised unequivocally of the tax and benefits consequences of their decision."