Can a retrospective amendment of a retirement fund rule impact accrued Benefits?

July 2022

For a long time, it was believed that the effect of a retrospective rule amendment to benefits that had accrued before the amendment was approved and registered by the Registrar of Pension Funds (Registrar) was settled in our law.

The decision of the Supreme Court of Appeal (SCA) in Municipal Employees’ Pension Fund (MEPF) and Another v Pandelani Midas Mudau and Another (1159/2020) [2022] ZASCA 46 (8 April 2022).

The central issue for determination in MEPF was effectively this: while section 12 of the Pension Funds Act 24 of 1956 (PFA) authorises the amendment of the rules of a fund with retrospective effect, does this mean that the amendment may operate to take away a right accrued in terms of the pre-amendment rule?

The PFA regulates the MEPF, which Mudau had been a member of since 2003. Mudau resigned from his employment with effect from 31 May 2013 and his membership of the fund also terminated on the same date. In 2013, section 37(1)(b)(ii) of the fund rules provided that a member who joined the fund after June 1998 would, upon resignation, be entitled to withdrawal benefits calculated as follows:

the member’s contributions, plus interest, multiplied by three. Having been warned by its actuaries that this rule provided for unsustainably high returns that could operate to the financial detriment of the fund, it resolved on 21 June 2013 to amend the rule, with effect from 1 April 2013, by providing for membership withdrawal benefits to be: member’s contribution, plus interest, multiplied by 1,5. In other words, a lesser benefit. By making the amendment retroactive the fund sought to prevent a “run”, that is, to avoid the danger that members might have resigned en masse if they were aware of the impending reduction of withdrawal benefits.

The fund applied for the registration of the new rule on 22 July 2013, and the Registrar approved and registered it on 1 April 2014, with the effective date being 1 April 2013. Mudau applied for his withdrawal benefits, which were paid to him on 18 October 2013, in terms of the amended rule. For a long time, it was believed that the effect of a retrospective rule amendment to benefits that had accrued before the amendment was approved and registered by the Registrar of Pension Funds (Registrar) was settled in our law.


Aggrieved by the reduced pay-out, Mudau lodged a complaint with the Pension Fund Adjudicator (Adjudicator), contending that his benefits should have been calculated in terms of the original rule. The argument was based on section 12(4) of the PFA, which provides that the proposed amendment would only take effect after it had been duly registered. The Adjudicator upheld the complaint. She held that the amended rule could not be applied to Mudau since it had not yet been approved by the Registrar when the benefits became due. Also, the amended rule could not be applied to benefits which accrued before the amendment became effective.

Aggrieved, the fund approached the High Court which on an eventual appeal upheld the Adjudicator’s ruling that the amended rule could not be applied to withdrawal benefits that accrued prior to its approval by the Registrar. This in our view is a correct assessment of the law. The SCA, however, held otherwise.

Like almost all other retirement funds, the MEPF under its Rule 48(1) was authorised to amend its rules, subject to the provisions of section 12 of the PFA. Section 12(4) of the PFA provides:

If the Registrar finds that any such alteration, rescission or addition is not inconsistent with this Act, and is satisfied that it is financially sound, he shall register the alteration, rescission or addition and return a copy of the resolution to the principal officer with the date of registration endorsed thereon, and such alteration, rescission or addition, as the case may be, shall take effect as from the date determined by the fund concerned or, if no date has been so determined, as from the said date of registration.”

The Adjudicator found that the amended rules could not be applied to the calculation of a benefit that accrued to a member before the amendment had been approved and registered, even if the amendment was intended to be retrospective to a date before such time.

The Adjudicator’s decision is also consistent with the well-known 2001 decision of the SCA in in Mostert NO v Old Mutual Life Assurance Company (SA) (2001) 4 All SA 250 (A) in which the court said:

“Registration [of the required rule amendments] was an essential prerequisite for any change in the status of the fund. Old Mutual’s reliance upon a so-called practice in the registrar’s office which allowed rule changes to take effect before registration is misplaced … [T]here is simply no basis in law for subjugating the provisions of the Act and regulations to such practice. It is one thing to give amended rules retrospective effect after registration; it is something entirely different to seek to give them binding effect before registration.”


With reference to section12(2) of the interpretation on Act 33 of 1957, the High Court found that the PFA does not authorise the retrospective amendment of rights which have already accrued as was the case of Mudau. The SCA however disagreed, and it held that:

  • section 12 of the PFA empowers a fund, subject to the approval of the Registrar, to amend its rules

and to determine the date on which the amendment will become effective;

  • if by the amendment of its rules the fund intends to interfere with rights retrospectively, this intention must be given effect to; and
  • as the MEPF had decided that the amendment would have retrospective effect from 1 April 2013, its application to the calculation of Mudau’s benefit had not been invalid and unlawful.

The SCA found that the amended rule explicitly provides that it operates retroactively. This would thus reduce pension benefits due to members with effect from 1 April 2013. The SCA held that there could hardly be a clearer indication of an intention by the fund to interfere with existing rights with effect from such earlier date. Also, the court held that there were no statutory impediments to the Registrar approving and registering a rule which sought to impair rights that accrued before its registration. These conclusions, in our view, also overlook section 37A of the PFA which states that:

Save to the extent permitted by this Act, the Income Tax Act, 1962, and the Maintenance Act, 1998, no benefit provided for in the rules of a registered fund … or right to such benefit, or right in respect of contributions made by or on behalf of a member, shall, notwithstanding anything to the contrary contained in the rules of such a fund, be capable of being reduced, transferred or otherwise ceded.”

The financial consequences for member accrued benefits are dire and now become uncertain because of this judgment effectively provides that an accrued right may now be reduced on a rule amendment. An appeal to the Constitutional Court would, in our view, be justified to now settle the law.

K. Cowley
(Chairperson – (CEA – TESD)