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Settling Housing Loans with Pension Money

rfs vincent shimutwikeni banner NEWContributed by Vincent Shimutwikeni, Manager: Legal Support Services, RFS Fund Administrators

The Issue at Stake
The complaint centred on a fund's refusal to permit members, while still employed, to use a portion of their accumulated fund values to settle their outstanding housing loans. The members argued that financial hardship necessitated the pre-exit set-off to improve disposable income. The respondents (Fund and Administrator) cited the overriding protective legislation.

Core Legal Principles and Analysis
The Adjudicator dismissed the complaint by reinforcing the fundamental principles governing the protection and payment of retirement benefits:
  1. Statutory Preservation (Section 37A): Section 37A(1) of the Pension Funds Act is a "firewall," prohibiting any reduction, attachment, cession, transfer, or pledge of a member's benefit prior to it becoming payable (i.e., upon exit/retirement). The legislative intent is clear: to safeguard benefits from premature erosion and potential impoverishment.
  2. Fund Rules are Binding (Section 13): The Adjudicator affirmed that the fund’s rules are binding on the fund and its members. Citing the Supreme Court of Appeal's precedent in Tek Corporation Provident Fund v Lorentz, trustees have only the powers explicitly conferred by the fund rules. Since the rules restricted benefit payments to circumstances of service termination, the trustees could not unilaterally authorise an in-service payout or reduction.
  3. The Narrow Exception (Section 37D): Section 37D provides the only relevant exception where a set-off against a housing loan may occur. Specifically, Section 37D(1)(a)(ii)(cc) allows for a deduction only if:
    • The loan was granted under Section 19(5).
    • The member is in default of the loan repayments.
    • No other arrangements for repayment can be made.
Technical Takeaway
Because the complainants were not in default, the narrow statutory exception under Section 37D did not apply. The Adjudicator concluded that allowing the voluntary set-off, despite the member’s financial distress, would undermine the protective purpose of the Act.

This determination underscores a critical principle for funds and administrators: the statutory duty of benefit preservation (S37A) is paramount and takes precedence over member autonomy or compassionate considerations unless one of the explicitly defined, limited exceptions (such as S37D in the case of default) is met.

Read the article in this link.
  
 

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. RFS 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 RFS. 

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