The Limits of PFA’s Authority in Pension Fund Transfers

On 25 March 2025, the Financial Services Tribunal handed down a crucial decision in Auto Workers Provident Fund v Thulani Nyalungu & Others, providing essential guidance on the extent of the Pension Funds Adjudicator’s (“PFA”) authority when handling member complaints concerning pension fund transfers. The ruling emphasises the importance of adhering to pension fund rules and the statutory processes established under the Pension Funds Act and the Financial Sector Regulation Act.

Facts of the Case 

The applicant, Auto Workers Provident Fund (“the Fund”), applied for reconsideration of a PFA determination dated 6 September 2024. The case arose from a complaint by Thulani Nyalungu (“the complainant”), who was previously employed by CFAD Motors and had accumulated pension fund credits with the Fund during that period. Upon leaving CFAD Motors and joining Maponya Motors, a different employer that contributed to the Alexander Forbes Retirement Fund (AFRF), the complainant requested a transfer of his fund credits to AFRF.

The Fund refused to transfer the credits, citing that the complainant remained a member of the Fund due to ongoing employment within the motor industry, as per Rule 4.4 of the Fund’s rules. This rule prohibits the termination of membership while the member remains employed within the motor industry.

The PFA, however, made a determination ordering the Fund to pay the complainant his withdrawal benefits despite the complainant’s request for a transfer of his pension fund credits.

Issues Before the Tribunal 

The issues presented before the Tribunal were: 

1. Whether the PFA exceeded its authority by ordering the payment of withdrawal benefits rather than addressing the transfer request. 
2. Whether the PFA failed to properly apply the Fund’s rules, particularly Rule 4.4, which restricts withdrawal while the complainant remains employed within the motor industry. 
3. Whether the PFA’s decision was procedurally fair and aligned with the statutory framework governing pension funds. 

Tribunal’s Findings 

The Tribunal found that the PFA had incorrectly reformulated the complaint from a request for transfer of credits to an order for payment of withdrawal benefits. The Tribunal highlighted the following: 

• Non-compliance with Rule 4.4: The Tribunal noted that the PFA disregarded the Fund’s rule that membership persists while the member remains employed within the motor industry. 
• Section 14 Transfer Process: The Fund argued that the PFA failed to consider the requirement of a valid section 14 transfer request from the complainant’s new employer, a prerequisite for transferring funds between retirement funds. 
• Scope of the PFA’s Authority: The Tribunal held that the PFA’s determination was ultra vires, as it effectively ordered the Fund to act in violation of its own rules. 

The Tribunal set aside the PFA’s determination and remitted the matter back to the PFA for reconsideration. It directed the PFA to apply the relevant rules of the Fund and consider the complainant’s ongoing employment within the motor industry before making any further orders.

Conclusion 

This decision reaffirms the principle that pension fund rules cannot be disregarded by the PFA when making determinations. It emphasises that the PFA’s authority is limited to applying the statutory framework within the confines of applicable rules. Moreover, it stresses that employers and pension funds must adhere to the established processes for transferring fund credits, including obtaining section 14 transfer approval where necessary.