When a participating employer in an umbrella fund is transferred to another fund by means of a ‘section 14 transfer’, the question arises whether the unclaimed benefits must also be transferred. Where they are not transferred one obviously cannot state that all assets and liabilities were transferred. Does this mean that the transfer contravenes the provisions of section 14 of the Pension Funds Act?

Firstly, a participating employer in an umbrella fund is not a fund as contemplated in the Pension Funds Act. Where the employer is transferred it will in the first instance be the active members that will have to be transferred as their contributions to the transferor fund will discontinue and will henceforth be made to the transferee fund. Section 14 states “…(2) Whenever a scheme for any transaction referred to in subsection (1) has come into force in accordance with the provisions of this section, the relevant assets and liabilities of the bodies so amalgamated shall respectively vest in and become binding upon the resultant body, or as the case may be, the relevant assets and liabilities of the body transferring its assets and liabilities or any portion thereof shall respectively vest in and become binding upon the body to which they are to be transferred.”

Clearly, upon the approval of a transfer or amalgamation i.t.o. section 14 by NAMFISA, only the relevant assets and liabilities as per the supporting certificate of the actuaries and principal officers will be transferred or amalgamated. In a similar fashion if a participating employer or an operation of large group is bought out by another person, only active members would normally be transferred while unpaid benefits, unclaimed benefits and pensioners would remain in the fund of the seller. Whether or not this is what should happen depends on what the rules state. Are unpaid and unclaimed benefits and pensioners tied to the employer or to the fund? If they are tied to the employer they should be transferred to the new fund as well. This comment of course only applies to transfers of portions of a fund (participating employer or an operation of a participating employer) to another fund. If a fund is transferred/ amalgamated with another fund ‘lock, stock and barrel’, then all assets and liabilities must be transferred else it will mean that the transferor fund cannot be deregistered until all remaining liabilities have been disposed of. This would still not be in contravention of section 14 though.

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This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.