In the below legal and regulatory update, Jaya Leibowitz summarises some changes for members, employers and administrators to be aware of, as well as some interesting recent cases in the retirement fund space.
No FSCA approval needed for transfers between retail retirement funds
On 14 July 2025, the Financial Sector Conduct Authority (FSCA) published FSCA RF Notice 8 of 2025, exempting the following transfers from the requirements of section 14(1) of the Pension Funds Act with immediate effect:
- Transfers between retirement annuity funds
- Transfers between preservation funds
- Transfers from a preservation fund to a retirement annuity fund
To protect the rights of retirement fund members, section 14(1) requires transfers between retirement funds to be approved by the FSCA following the submission of all prescribed forms and documents. The FSCA acknowledges that retirement annuity funds and preservation funds are retail funds, meaning that members belong to these funds voluntarily. As a result, any transfer between these funds would be due to an instruction provided by a member who has the right to select their fund provider.
Prior to the exemption, transfers between South African registered retirement funds (excluding beneficiary funds) would only be exempt from obtaining prior FSCA approval where both the transferor and transferee funds were valuation exempt.
Moving forward, the abovementioned transfers will be processed without FSCA approval, in line with the requirements of section 14(8). Transfers from, to or between occupational funds will continue to be subject to section 14(1), unless both funds are valuation exempt.
Changes for retirement fund administrators
On 6 August 2025, the FSCA prescribed new conditions for retirement fund administrators via Conduct Standard 2 of 2025, which significantly increases the regulatory requirements for these service providers.
Administrators have been primarily regulated by section 13B and Regulation 32 of the Pension Funds Act, as well as Board Notice 24 of 2002. The requirements set out in the Conduct Standard are a substantial enhancement to the old Board Notice, which is now being phased out. Many of the provisions in the Conduct Standard are already effective, while others will come into effect in February or August 2026.
While these changes will not directly impact members, employers or advisers, they will go a long way to ensuring that administrators are effectively governed and that services are provided to retirement funds in a more regulated way. Ultimately, the changes brought about by the Conduct Standard will benefit retirement funds and their members.
Case law updates
Dependency in terms of section 37C of the Pension Funds Act
The case of Mutsila v Municipal Gratuity Fund and Others was widely reported on in the South African media, with the Constitutional Court handing down judgment on 8 August 2025.
The matter arose as a result of a death benefit in the Municipal Gratuity Fund (the “Fund”) that was allocated by the Fund’s trustees among Ms Mutsila, the member’s civil wife, and their children and Ms Masete, the member’s alleged customary law wife and her children, who the fund identified as the member’s factual dependants. Ms Mutsila challenged the Fund’s decision to allocate a portion of the benefit to Ms Masete and her children. The Court ruled that the Fund failed to properly investigate dependency and would have to reconsider facts and make a new decision on the allocation of the benefit within three months.
While the facts of this case are interesting, what is more important for advisers and employers to note is how this judgment interprets section 37C of the Pension Funds Act (section 37C).
The Constitutional Court has made it clear that section 37C requires retirement fund trustees to identify individuals who were dependent on the member and assess the level of their dependency as at the date of the member’s death.
While changes in the circumstances of dependants between the date of death and the date on which the allocation decision is made may, and should, impact the allocation of the benefit by the trustees, those changes will not impact the status of an individual as a dependant.
This ruling sets a clear precedent for how retirement funds must handle death benefit claims.
Employer vs employee fund contributions
The case of Mopai v PFA & Others offers some interesting learnings for employers.
The case arose as a result of a complaint lodged to the Pension Funds Adjudicator (PFA) by a member of the FundsAtWork Umbrella Provident Fund (the “Fund”), who alleged that his employer had failed to pay contributions to the Fund. There was a period from August 2020 to September 2021 during which the employer failed to pay any contributions to the Fund despite contributions being due and the PFA rightly ordered the employer to pay those contributions to the Fund.
However, the PFA failed to make any determination in relation to Mopai’s complaint that the employer itself made no contributions to the Fund from 1 June 2013 until the applicant’s retirement on 30 April 2024. Mopai alleged that all contributions made were in fact employee contributions deducted from the applicant’s basic salary, despite the special rules applicable to the employer providing for a member contribution at 0.00% of pensionable salary and an employer contribution at 6.39%.
The complaint was therefore taken on appeal to the Financial Services Tribunal. The question before the Tribunal was whether contributions deducted from a member’s salary and paid over to the Fund could constitute employer contributions.
The employer argued that the deduction was made from the employee’s cost-to-company and therefore constituted the employer contribution.
The Tribunal recognised the employer’s intention but found that this was unclear from the member’s salary slips, which indicated that the contributions were deducted from his basic salary and were not listed under “company contributions”, as would normally be expected. The matter was referred back to the PFA for decision. Although the PFA has not yet published a determination, the principles have been set out by the Tribunal:
- Since 1 March 2016, amendments to the Income Tax Act have meant that both employer and employee contributions must be taxed as fringe benefits and are deemed to be employee contributions that are tax deductible for the benefit of the member (and therefore effectively tax neutral for the member).
- However, this does not mean that the employer can deduct the employer contribution from the member’s basic salary. As explained by the Tribunal: “The implementation of the tax reform merely means that for tax purposes the employer’s contribution is deemed an employee contribution.”
Employers are encouraged to ensure that their employment contracts, payroll and salary slips all accurately reflect the intended employer and employee contributions that are set out in the special rules of their umbrella retirement fund.