Illustration: Colin Daniel

Same-gender couples need to take extra care when planning for retirement. Despite the pro-tection afforded by the Constitution, they face obstacles that could leave them at a serious financial disadvantage.

Two recent determinations, one by financial advice ombud Noluntu Bam, and the other by deputy Pension Funds Adjudicator Muvhango Lukhaimane, highlight the problems that same-gender couples may experience.

Bam’s determination was in favour of a fund member (see “Advisers must consider all dependants”, left), whereas Lukhaimane ruled in favour of a retirement fund.

Lukhaimane dismissed Mr V’s complaint that he should have received a spouse’s pension from the AECI Pension Fund on the death of his partner, Mr S, because certain conditions laid down in the fund’s rules had not been met.

Pension lawyer Jonathan Mort says the adjudicator’s determination highlights the importance of all retirement fund members knowing the rules of their funds and particularly the requirements for benefits to be distributed. “Members and their dependants cannot simply assume that benefits will be paid as they expect,” he says.

Mort says it is equally important for retirement fund members to complete and update beneficiary nomination forms, which are normally provided to them annually. Although retirement fund trustees do not have to distribute benefits according to the nomination forms, they need to take them into account when dis-tributing benefits on the death of a member.

He says that in terms of the Pension Funds Act, retirement fund trustees must establish the dependants of a member and the extent of the dependency in making allocations.

He says, however, that retirement fund trustees should also point out to members any special conditions that are required for someone to benefit from a fund after a member has retired. This is particularly the case when a retirement fund pays a pension on the death of a member rather than a lump-sum benefit.

When a pension is paid, the trustees have no discretion on the payment of benefits. The benefit, such as a spouse’s pension, must be paid according to the rules of the fund, Mort says.

The AECI Pension Fund specifically allows for a spouse’s pension to be paid to a same-gender partner, provided certain conditions are met.

The conditions are that the non-member partner is “nominated in writing and accepted by the trustees during the member, deferred pensioner or pensioner’s lifetime as being entitled to receive the pension payable to an eligible spouse as provided for in these rules, provided that such nomination was not subsequently cancelled in writing to the trustees”.

The AECI Pension Fund could not find such a record of Mr S having nominated Mr V.

The fund argued that because the member, Mr S, had not nominated Mr V, it had not made any allowance in its actuarial calculations for a spouse’s pension to be paid to Mr V.

Mr S had listed himself in the fund’s records as “single”.

Fortunately, Mr V, who was Mr S’s partner from 1984 to 2009, when he died, will still receive a pension, because he was also an employee of AECI and a member of the fund in his own right.

However, Mr V’s membership of the fund counted against him in his complaint, because the deputy adjudicator was of the opinion that Mr V should have been aware of the fund’s conditions for paying a pension benefit to a same-gender partner.

Mr V argued that the AECI fund ought to have known about his relationship with Mr S, because he and Mr S had shared the same postal address, which the fund used to communicate with them over the years.

Lukhaimane says the Supreme Court of Appeal’s judgment in the case “Tek Corporation Provident Fund and others versus Lorentz and others” has established the precedent that retirement fund trustees must follow the rules of their fund when making decisions.

“The definition of a spouse in the rules of the respondent sets out the requirements that must be met before one may qualify as an eligible spouse. If one or more of these requirements are not met, then a person cannot qualify as an eligible spouse in terms of the rules,” she says.

Even if the fund had been aware of Mr V’s relationship with Mr S, this did not meet the requirement that Mr S should have nominated Mr V as a beneficiary, Lukhaimane says.

Advisers must consider all dependants

Financial advisers must take account not only of the needs of the people they advise, but also those of their dependants – even a dependent partner not legally bound by marriage, such as in a long-term heterosexual or same-gender relationship.

And a dependant, or even “the successor in title of such person or the beneficiary of such service”, is entitled to complain to the financial advice ombud about the advice that was given to the person on whom they depended.

Financial advice ombud Noluntu Bam says the incorporation of the term “successor in title” in the legislation that established her office makes it clear that people in same-gender relationships are entitled to lodge complaints, and that complaints can be laid after the death of a person who received inappropriate advice.

Bam was dealing with a claim by Durban financial adviser Nigel Henson and his company, Nigel Henson & Associates, that she could not rule on a complaint lodged by the same-gender partner of his deceased client.

The complainant, Ms A, who had lived with Henson’s client, Ms C, since 1992, was fully dependent on her.

Ms C had sought Henson’s advice in 2005, when suffering from end-stage cancer. She had commuted a retirement annuity policy, which enabled her to access one-third of her savings. Henson advised her to use the remaining two-thirds, R48 884, to purchase a guaranteed annuity, which provided an income of R347 a month.

Ms C died a year later, with the annuity having paid a total of R3 817. No benefit was paid out.

Ms A, who was Ms C’s sole beneficiary, said Henson should have taken account of her needs and the fact that her partner had terminal cancer.

Bam says Henson was aware of his Ms C’s illness, and an experienced financial adviser would have understood the impact of her illness on the product selected, which had neither a death benefit nor an extended guaranteed term, which would have seen a pension being paid for a certain period after her death.

When Henson was asked why he had not enquired fully about Ms C’s relationship with Ms A, Henson replied that he knew they were close friends, but “it was neither necessary nor appropriate to question the deceased about her relationship with her friends”.

Bam says Henson’s reply “cannot suffice; whilst I appreciate that a degree of sensitivity may be required, the respondent could not have been blinded to the fact that at the very least a close bond existed between the two”.

She ordered Henson and his company to pay R26 353 to Ms A.