Dear valued member

In 2022 we communicated on the Rationalisation of Retirement Funds and the much-anticipated window period that would allow employees the freedom to choose a retirement fund they want to belong to. In our last communication issued NFMW Integrated Report (nationalfund.co.za), we confirmed that the matter was brought before the High Court in October 2022. This was after legal action was taken by certain retirement funds that objected to the South African Local Government Bargaining Council Retirement Funds Agreement, which provided for freedom of such choice/movements and the governance criteria that retirement funds had to comply with for accreditation.

JUDGMENT HANDED DOWN BY THE HIGH COURT SETTING ASIDE THE COLLECTIVE AGREEMENT

The matter was heard on 13 and 14 October 2022, and the High Court of South Africa (Gauteng division) handed down the judgment on 20 February 2023. The court ordered the Retirement Fund Collective Agreement signed on 15 September 2021 to be reviewed and set aside with the exception of clause 8 thereof, which states that ‘each new employee in the sector will be required and permitted to become a member ONLY of a defined contribution fund in which his or her employer participates, and which is accredited as contemplated in the agreement’.

WHAT DOES THIS MEAN FOR EMPLOYEES WANTING TO MOVE TO A FUND OF THEIR CHOICE?

The judgment handed down by the court means that all new employees in the sector will be required only to join an accredited retirement fund, such as ours. However, members of retirement funds who wanted to move to a fund of their choice will not be able to do so at this stage as the window period that would allow for such movement also formed part of the Collective Agreement.

REAFFIRMING OUR POSITION

The court ruling is not the outcome that the Fund and many members currently locked into retirement funds anticipated. However, the Fund still supports and firmly believes in the constitutional right of freedom of association and that retirement funds must provide a fundamental purpose (value), and that members should be given the freedom to choose retirement funds that are cost-effectively managed and whose management practises sound governance and responsible investing to provide members with desirable retirement outcomes. Undergoing and receiving accreditation also reaffirm that current and future NFMW members benefit and will continue to benefit from the Fund’s superior value proposition, knowing that their Fund is appropriately governed, has competitive costs, has an excellent record of investment performance, and communicates well to its members.

As one of the few accredited Funds, the NFMW will continue to actively position itself to encourage new employees in the Local Government sector to join the Fund of Choice to leverage off the confirmation by the High Court of clause 8 of the Collective Agreement.

At this point, we are not sure how the South African Local Government Bargaining Council would want to take the matter forward. However, as always, we will continue to keep you abreast of any new developments on this fast-evolving matter and any other Fund and industry-related developments.