Adjudicator rules on pensions vs debt
Johannesburg – A request by 58 Avusa employees to use their provident funds to settle outstanding home loans has been dismissed, the Pension Funds Adjudicator said on Wednesday.
In the case of F Dadoo and 57 others vs Avusa Ltd Provident Fund and Alexander Forbes Financial services, acting adjudicator Elmarie de la Rey said that acceding to the request would contravene the Pensions Fund Act of 1956.
Section 37A of the act prohibits any reduction, transfer or execution of pension benefits before a member leaves a fund.
An exception is made when the fund grants a home loan to a member or security on a loan, and the member defaults on payment. The outstanding amount is deducted from the fund if a financial settlement cannot be reached.
The complainants approached Alexander Forbes in August 2008 with the argument that they were struggling to make ends meet and would have more disposable income if their loans were settled.
Their loans with HomePlan were obtained by using their retirement funds as security.
Their request was denied and they lodged a complaint with the adjudicator in January 2009.
De la Ray ruled on July 7 that their retirement funds could not be used to repay loans as the complainants had not defaulted on payment.
She said that both respondents had indicated that they could possibly extend the repayment period should individuals feel financially strained.
“In the result, the complaint cannot succeed and is dismissed,” De la Rey said.
Jul 20 2011 16:12 Sapa