Johannesburg - A request by 58 Avusa employees to use their
provident funds to settle outstanding home loans has been dismissed, the
Pension Funds Adjudicator said on Wednesday.
In the case of F Dadoo and 57 others vs Avusa Ltd Provident
Fund and Alexander Forbes Financial services, acting adjudicator Elmarie de la
Rey said that acceding to the request would contravene the Pensions Fund Act of
1956.
Section 37A of the act prohibits any reduction, transfer or
execution of pension benefits before a member leaves a fund.
An exception is made when the fund grants a home loan to a
member or security on a loan, and the member defaults on payment. The outstanding
amount is deducted from the fund if a financial settlement cannot be reached.
The complainants approached Alexander Forbes in August 2008
with the argument that they were struggling to make ends meet and would have
more disposable income if their loans were settled.
Their loans with HomePlan were obtained by using their
retirement funds as security.
Their request was denied and they lodged a complaint with
the adjudicator in January 2009.
De la Ray ruled on July 7 that their retirement funds could
not be used to repay loans as the complainants had not defaulted on payment.
She said that both respondents had indicated that they could
possibly extend the repayment period should individuals feel financially
strained.
"In the result, the complaint cannot succeed and is
dismissed," De la Rey said.