A municipal employee denied access to her two-pot savings withdrawal has secured a fresh order for payment after the Deputy Pension Funds Adjudicator held that the fund’s arrears default rule is drafted for a different part of the scheme and cannot be used to block a defined contribution (DC) member’s two-pot withdrawal.
The Municipal Employees Pension Fund (MEPF) refused the withdrawal on the basis that the member’s contributions were in arrears and argued that one of the fund’s rules “freezes” benefits when contributions remain unpaid after written notice.
But the fresh determination, signed on 8 April 2026, held that the rule’s cross-references tie it to the defined benefit (DB) structure within the MEPF’s hybrid rules. Therefore, it does not apply to the complainant’s DC category and cannot restrict her access to a savings withdrawal benefit.
The member’s and the fund’s submissions
Khutso Mailula was employed by Ba-Phalaborwa Municipality in Limpopo from 1 September 2015 to 31 January 2018. Ba-Phalaborwa was a participating employer in the MEPF, and Mailula was registered as a DC member of the fund.
She joined Polokwane Local Municipality on 1 February 2018, which is also a participating employer. In March 2018, the fund wrote to Polokwane stating that Mailula remained a member, specifying an employer contribution rate under the DC category, requesting ongoing contributions, and warning that non-payment would cause her benefits to lapse.
The fund also wrote to Mailula in April 2018, advising that she remained a member, was not entitled to a withdrawal benefit on changing employers, and must ensure her new employer paid contributions on her behalf.
The two-pot retirement system took effect on 1 September 2024. On 6 September 2024, Mailula lodged a complaint with the Office of the Pension Funds Adjudicator (OPFA) after the MEPF refused her request for a savings withdrawal benefit on the basis that contributions had been in arrears since February 2018.
Mailula said she was told she could not withdraw because she was not a “contributing member”. She complained that her benefit linked to her earlier service was being “held” and sought access to a savings withdrawal benefit based on her fund credit arising from Ba-Phalaborwa contributions.
In its submissions to the Adjudicator, the MEPF maintained that Mailula remained a member when she moved between participating municipalities, so she was not entitled to a resignation benefit. The fund said both member and employer were liable for contributions from 1 February 2018 and that once contributions were up to date, Mailula would be able to withdraw from the savings component account. It characterised her as a “defaulting active member” whose benefits were frozen under the rules.
The fund relied on rule 27(2)(b), arguing it applies to all benefits – including those under the two-pot rule 48A – and therefore prevents savings withdrawals while contributions are in arrears.
The fund also argued that the list of two-pot exclusions referred to in the deputy adjudicator’s previous determination, issued on 11 April 2025, was not a closed list, and the absence of an exclusion did not automatically confer entitlement to a savings withdrawal benefit.
Tribunal sets aside the determination
The determination issued in 2025 ordered the MEPF to provide Mailula access to her savings withdrawal benefit, reasoning that she did not fall within certain excluded categories and therefore could access the two-pot benefit.
The MEPF applied to the Financial Services Tribunal for reconsideration, and on 23 October 2025 the Tribunal set aside that order and remitted the matter to the Adjudicator. The Tribunal’s concern was that payment would be contrary to rule 27(2)(b), would undermine the binding force of rules under section 13 of the Pension Funds Act (PFA), and would be ultra vires.
Read: Tribunal: A fund’s rules control savings component withdrawals
On remittal, Deputy Pension Funds Adjudicator Naheem Essop accepted the Tribunal’s framing of the issue and identified the question as whether Mailula was entitled, in terms of the MEPF’s rules (and relevant legislation), to access a savings withdrawal benefit when contributions were in arrears.
What the arrears rule actually covers
Essop reiterated that fund rules are binding, and a fund must act within the powers those rules confer, citing sections 7C and 13 of the PFA.
“Fund rules are treated as the fund’s constitution, and the fund may act only within the powers conferred by the rules. It is not permissible to venture beyond them. If the board of a fund takes a decision, it must ensure that such decision is within the bounds of what is contained in the fund’s rules, and if not, it may consider amending the rules,” Essop said.
Accordingly, the determination had to proceed by applying and adhering to the fund’s, given their proper interpretation, within the limits set by the PFA.
Essop said the MEPF introduced rule 48A through a registered amendment effective 1 September 2024. Rule 48A(2) establishes a member savings component account and permits an annual tax savings withdrawal benefit on request, subject to a minimum of R2 000 and a maximum of the value in that account.
Although legislation and the rules set the essential features of the savings withdrawal benefit, a fund may not add substantive barriers that are not authorised by its registered rules – and equally, any limitation that is duly contained in and applicable under the rules must be given effect to.
That brought the matter back to the Tribunal’s point: whether rule 27(2)(b) applied to Mailula.
Essop approached interpretation in the standard way: the words must be read in their text, context, and purpose, but the decision-maker may not import terms or cross-references that do not appear in the language adopted.
He noted it was common cause that Mailula is a DC member, and the MEPF is a hybrid fund with a DC component and a DB component. The rules repeatedly treat those categories differently, using separate contribution and benefit provisions for each. In other words, the rules run on two tracks: one set for DB members and a parallel set for DC members.
Rule 27(2)(b) provides that where a member and/or local authority fail to pay contributions “as contemplated in sections 26 and 31” and remain in default after notice, the member (or estate or dependants) “shall only be entitled to benefits in terms of section 37”.
Essop held that these cross-references are central. They identify both the default contemplated and the consequence that follows – and, in a rules scheme that separates DB and DC members, they locate rule 27(2)(b) within the DB structure. DC members are dealt with through parallel “A” rules, and Essop held that he was not permitted to supply missing cross-references or treat DB rule numbers as shorthand for the “A” provisions.
Accordingly, he found rule 27(2)(b) was not applicable to Mailula and therefore did not restrict her from accessing a savings withdrawal benefit under the two-pot provisions.
Essop ordered the MEPF to provide information about the amount in Mailula’s savings account and the process for claiming a savings withdrawal benefit within two weeks of the determination.
He further ordered the fund to pay a savings withdrawal benefit within two weeks of receiving Mailula’s savings withdrawal instruction.
