Pension fund’s decision to permit withholding of withdrawal benefit upheld

A former Nedbank employee whose withdrawal benefit was withheld has failed to convince the Financial Services Tribunal (FST) to have the Pension Funds Adjudicator reconsider her decision to dismiss his complaint.

At Nedbank’s request, the Old Mutual Superfund Provident Fund withheld the withdrawal benefit of “GF”, on the grounds that he was overpaid from February 2017 to March 2019.

Nedbank told the Adjudicator that the overpayments resulted in it suffering a loss of R1 756 384.72, and GF benefited by R1 030 037.52 after tax.

The determination and the reconsideration centred on the application of sub-paragraph 37D(1)(b)(ii) of the Pension Funds Act (PFA). This paragraph entitles a fund to deduct from a member’s withdrawal benefit compensation in respect of damage caused to the employer by reason of theft, dishonesty, fraud or misconduct, and in respect of which:

(aa) the member has in writing admitted liability to the employer; or

(bb) judgment has been obtained against the member in any court.


GF left Nedbank’s permanent employ in May 2016. He then entered fixed-term contracts with the bank from June 2016 to January 2017. His remuneration was R500 an hour.

On 1 February 2017, GF again became a full-time employee, and his rate of remuneration changed to R414 per hour capped at 158 hours a month.

Later, Nedbank suspended GF while it conducted an investigation into erroneous overpayments made to him from February 2017 to March 2019.

Following a disciplinary hearing, Nedbank dismissed GF in September 2019 for dishonesty.

GF challenged his dismissal at the CCMA. After the reconciliation phase, he abandoned the arbitration phase.

In October 2019, Nedbank asked Old Mutual Life Assurance Company, the administrator of the Superfund Provident Fund, to withhold GF’s withdrawal benefit of R387 423.31.

GF lodged a complaint with the Adjudicator in June 2020.

Submissions before the Adjudicator

GF told the Adjudicator that his conduct did not meet the requirements of section 37D(1)(b)(ii)(aa) of the PFA and therefore no deduction could be made from his benefit.

GF submitted that:

  • He noticed the discrepancy in his salary but assumed this was because of the transition from fixed-term to permanent employment, and the discrepancy would resolve itself over time.
  • The change in the frequency of the payments, from weekly to monthly, was the reason the overpayment was not obvious.
  • His failure to notify Nedbank of the additional payments did not stem from dishonesty, but a misconception and/or an oversight.
  • He had signed a statement in which he conceded that he was not entitled to a second salary, and he was willing to refund Nedbank the undue payments.
  • Nedbank’s request to withhold his benefit was not accompanied by the required information to enable the fund to do so lawfully, and some of the information was submitted five months after his dismissal.

The provident fund told the Adjudicator that Nedbank had a prima facie case against GF.

It said Nedbank had confirmed that a criminal case of fraud was opened against GF in March 2020, which was six months from the date on which the bank had terminated GF’s employment. The fund referred to a previous decision of the Adjudicator where she found six months to be reasonable.

Nedbank told the Adjudicator that in December 2020 it instituted civil proceedings for R1 030 037.52 against GF.

The Adjudicator agreed with Nedbank’s submission that GF had a duty to speak up about the additional salary, and his failure to do so constituted dishonesty.

She said the fund did not have to continue withholding GF’s withdrawal benefit pending the outcome of the civil or criminal proceedings, because the provisions of section 37D(1)(b)(ii)(aa) have been met.

Admission of liability

GF challenged the dismissal of his complaint on various grounds, including:

  • The fund had not complied with its policy and rules, and
  • The fund had not met the requirements of 37D(l)(b(ii) or the principles of natural justice.

However, the tribunal agreed with Adjudicator’s conclusion that Nedbank was within its rights to claim a deduction.

It disagreed with GF’s submission that his written admission of liability did not pass muster as an admission of liability in terms of the fund’s policy, because:

  • He admitted that he was not entitled to the additional amount;
  • He was willing to make an arrangement with Nedbank to pay back the money;
  • He submitted a written proposal in which he provided possible scenarios that would enable him to reimburse Nedbank; and
  • During his disciplinary hearing, he stated that he accepted responsibility for not doing a due diligence about the funds and was willing to correct his mistake.

The tribunal said that even if Nedbank fell short of the provisions of section 37D(1)(b)(ii)(aa), the withholding of the withdrawal benefit would fall within the jurisdiction of section 37D(1)(b)(ii)(bb) because there were pending civil proceedings against GF.

The tribunal referred to Highveld Steel and Vanadium Corporation Ltd v Oosthuizen (2009), where the Supreme Court of Appeal found that, to give it efficacy, section 37D(1)(b)(ii) must be read to confer a discretion on the fund to withhold the member’s withdrawal benefit pending the finalisation of the proceedings against him or her.

‘Element of dishonesty’

GF’s counsel argued that his client’s conduct amounted to negligence, not dishonesty.

But the FST said this contention was not supported by the information before it:

  • GF’s pay-slips show he was receiving a second salary;
  • GF knew he was receiving a salary for a fixed-term contract that he was not entitled to receive;
  • He received the additional salary for 26 months and took no steps to correct it; and
  • He had a common law obligation and a duty in terms of his contract of employment to disclose the overpayments to Nedbank, but he did not do so.

In the tribunal’s view, it was clear from the facts that GF’s conduct did contain an element of dishonesty.

The FST said it could find no reason to interfere in the Adjudicator’s determination and dismissed GF’s application for reconsideration.

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