A retirement fund must properly investigate the extent to which beneficiaries were financially dependent on a fund member when deciding how to allocate a death benefit.
In a recent determination, Muvhango Lukhaimane, the Pension Funds Adjudicator, said a certain fund was “derelict” in its duties because, although the fund had established that three beneficiaries depended on a deceased member, it had failed to determine the level of dependency of two of them.
The complainant in the case, TT, was the deceased’s girlfriend and the mother of his five-year-old daughter.
TM, a member of the Bidvest South Africa Retirement Fund, and his mother died in a motor accident in April 2013. TM had nominated his mother and his child as his beneficiaries.
In August 2014, the trustees awarded 70 percent of TM’s death benefit of R317 736 to his child and 15 percent each to his brothers.
TT told the adjudicator’s office that TM’s daughter was his only dependant, not his brothers. She said she had told the fund that one of the brothers was a self-employed businessman and television game-show host, and the other was an attorney.
TT said the fund did not properly investigate the information she provided. As a result, the interests of her daughter were prejudiced. She asked the adjudicator to order the fund to pay the entire death benefit to her daughter.
In its response, the Bidvest retirement fund said both brothers had provided sworn affidavits to the effect that they were unemployed and partially dependent on their late brother. The fund said there was no contrary finding or information to suggest that the brothers were not dependent on the deceased.
It said TT had not informed the fund of the brothers’ alleged employment before the death benefit had been allocated and paid out.
In her determination, Lukhaimane said that, when a retirement fund distributes a death benefit among a fund member’s dependants, the fund must take the following factors into account:
* The age of the dependants;
* The relationship with the deceased;
* The extent of dependency;
* The wishes of the deceased as stated on a nomination form and/or his or her will; and
* The financial affairs of the dependants, including their future earning potential.
She said the fund’s decision to allocate part of the deceased’s benefit to his brothers was based solely on the information provided in their affidavits. However, the fund had no proof of the extent to which the brothers were dependent on the deceased.
Lukhaimane said “the mere reliance” on the affidavits meant that the fund established only dependency and not the level thereof, “which is crucial when dealing with multiple beneficiaries in order to ensure equity, otherwise the decision is arbitrary, as it is not based on factual information”. Therefore, she said, the fund did not conduct a proper investigation into the deceased’s beneficiaries, as required by section 37C of the Pension Funds Act.
The adjudicator ordered the fund to re-investigate the allocation of the death benefit in respect of the deceased’s brothers, and to re-allocate the benefit taking into consideration the issues raised in her determination.
MEMBER CANNOT SWITCH TO ANOTHER FUND
The rules of your retirement fund set out the conditions under which you, as a member, can resign from the fund and transfer your benefit to another fund. It may well be that you cannot leave your fund while you are working for the employer that sponsors or participates in the fund. And if you have a choice of funds when you join a company, you generally cannot go back on your choice.
Muvhango Lukhaimane, the Pension Funds Adjudicator, recently dismissed a complaint by a provident fund member, PM, who wanted to change funds because the fund to which he belonged was allegedly in financial difficulty.
Lukhaimane said that, in terms of the fund’s rules, PM was obliged to remain a member of his fund until his retirement, retrenchment, termination of service or death.
PM, an employee of Sun International, elected in 2004 to join the National Provident Fund of the South African Commercial, Catering and Allied Workers’ Union (Saccawu) instead of the Sun International Provident Fund, but some time later he wanted to switch to the Sun International Fund.
In his complaint, lodged in August 2015, PM told the adjudicator’s office that the Saccawu fund would not allow him to transfer to the Sun International fund. He said the Saccawu fund had been under administration for a long time and his benefit was not growing.
Old Mutual, the administrator of the Saccawu fund, told the adjudicator’s office that the fund was not under administration, but the High Court had provisionally placed the fund under curatorship in September 2003. The court confirmed the curatorship the following year.
Old Mutual said the fund’s assets had tripled in value since it had been placed under curatorship. It provided a breakdown of PM’s contribution history and the growth of his accumulated fund credit since the date he joined the fund.
In her determination, Lukhaimane said the rules of a fund are paramount and always prevail over any other document that purports to bestow rights on the members of a fund, such as a benefit statement or information booklet.
After examining the fund’s rules, she concluded that PM was obliged to remain a member of the Saccawu National Provident Fund until his retirement, retrenchment, termination of service or death. The Saccawu fund would be acting contrary to its rules if it allowed PM to transfer to the Sun International fund, the adjudicator said, and dismissed the complaint.
Lukhaimane said she would ask the Registrar of Pension Funds at the Financial Services Board to review whether it was still necessary for the Saccawu fund to be in curatorship.