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PFA orders fund to relook its decision

20 November 2017Muvhango Lukhaimane, PFA
Muvhango Lukhaimane, Pension Funds Adjudicator.

Muvhango Lukhaimane, Pension Funds Adjudicator.

The board of a pension board did not conduct a proper investigation when it resolved to allocate the entire amount of the death benefit to the deceased mother, to the exclusion of the complainant who had been nominated as beneficiary.

This was the finding of Pension Funds Adjudicator Muvhango Lukhaimane when she ordered University of Kwazulu-Natal Pension Fund to relook at how it arrived at its decision.

T Norris brought a complaint against University of Kwazulu-Natal Pension Fund (first respondent) and Absa Consultants & Actuaries (Pty) Ltd (second respondent) as he was dissatisfied with the distribution of a death benefit and its allocation.

The complainant was the friend of the late S Roche who passed away on 5 January 2016. The deceased was a member of the first respondent by virtue of his employment with the University of KwaZulu-Natal. The deceased nominated the complainant as a sole nominee on his beneficiary nomination form signed on 13 December 2015.

Following the deceased’s demise, a death benefit in the amount of R917 373.60 became available for distribution to his dependants and beneficiaries in terms of section 37C of the Act. The board of the first respondent resolved to allocate the entire death benefit to the deceased’s mother, Mrs Jeannete Roche, to the exclusion of the complainant.

The complainant said Mrs Roche was not a dependant of the deceased and, therefore, she should not have been allocated the death benefit.

He attached letters written by his legal representatives to the first respondent wherein it was expressed that, amongst other factors, the complainant and the deceased had been friends for a long time, the complainant took care of the deceased when he was ill and made him his next of kin in hospital and the deceased made him his sole nominee.

He accordingly requested that the allocation made to Mrs Roche be reversed and that same be paid to him.

In its capacity as the administrator of the first respondent, the second respondent submitted that during the investigation in terms of section 37C of the Act, the board established that the deceased completed a beneficiary nomination form on 13 December 2015 wherein he made the complainant a sole nominee.

It was also established that the deceased was not married and did not have children. It stated that the complainant informed the employer that he was the deceased’s partner.

Upon interviewing the deceased’s friends, it was established that he was neither the complainant’s partner nor lived with him.

It stated that Mrs Roche informed the board that the complainant lived with someone in Gauteng, while the deceased lived alone in KwaZulu-Natal and supported himself.

The deceased did not support the complainant in any way. Another friend of the deceased for 15 years indicated that she had not seen the complainant prior to meeting him for the first time in hospital.

The second respondent said the complainant indicated that he was not financially dependent on the deceased and did not rely on him for any form of support.

It contended that the board considered that the complainant was a nominee. However, it resolved not to allocate a share of the death benefit to him as he could not prove a relationship of mutual dependence with the deceased and did not live with him.

The board considered that the deceased was survived by a brother, a sister and an 85 year old mother, Mrs Roche, who lived in an old age home in KwaZulu-Natal and had poor health.

It said the board considered the definition of a dependant in terms of the Act, and in particular, the part that reads as follows: “…a person in respect of whom the member would have become legally liable for maintenance, had the member not died”.

Section 37C of the Act gave the board discretion to act fairly and reasonably in distributing the death benefits. The objective of this provision was to ensure that all those who were dependent on the deceased member were not left destitute when he died.

The second respondent said it was clear from the interviews and statements obtained during the investigation that Mrs Roche would have been dependent on the deceased had he not died, considering the rising costs of her care and the fact that her savings were running out.

It asserted that the board considered that Mrs Roche did not have any future earning potential and her children lived in England and Australia and had their own children to look after. It was against this background that the board resolved to allocate the entire death benefit to her.

It further indicated that in terms of the first respondent’s rules, there was payable spouse’s and children’s benefit. Due to the fact that the complainant could not prove that he qualified as the deceased’s spouse, no such benefit was payable to him.

In her determination, Ms Lukhaimane said the payment of death benefits was regulated by section 37C of the Act, read in conjunction with the definition of a “dependant” in section 1. The primary purpose of this section was to protect those who were financially dependent on the deceased during his lifetime.

“The complainant argues that Mrs Roche is not the dependant of the deceased. However, when one considers that if she could not take care of herself, she would have resorted to the deceased for support. This makes her a dependant of the deceased.

“In the circumstance, this Tribunal is satisfied that under the circumstances, Mrs Roche was correctly determined to be a factual dependant of the deceased as contemplated in terms of section 1(c) of the Act, and the complainant’s assertion to the contrary, is rejected,” said Ms Lukhaimane.

She said it was further noted the main thrust of the complainant’s contention was that the deceased’s beneficiary nomination form was not considered by the board as he was the sole nominee.

She said the board was not bound by the nomination form completed by the deceased as the form merely served as a guide to assist it in the exercise of its discretion.

Ms Lukhaimane said the rationale behind the enactment of section 37C of the Act was to ensure that all those who were financially dependent on the deceased were not left destitute when he died.

“In the present matter, the complainant is a nominee and there was no onus on him to prove that he was financially dependent on the deceased or had a relationship with him for him to be allocated a share of the death benefit, contrary to the second respondent’s assertion.

“It was probably the first and second respondent’s communication with the complainant that led him to believe that he had to concoct unnecessary tales of his dependence on the deceased.

“The board of the first respondent resolved to allocate the entire death benefit to Mrs Roche on the basis that she has poor health and there is a possibility that her savings may run out.

“However, it was not demonstrated by the board that Mrs Roche was financially dependent on the deceased during his lifetime. Furthermore, the contention that Mrs Roche’s savings are running out appears to be speculative as no indication has been made how much her savings are and the tools used to determine that she might not be able to take care of herself in future.”

Ms Lukhaimane said the board did not appear to have considered that, despite having their own families, Mrs Roche’s children also had a responsibility to take care of her in the event that she ran into financial problems.

“Whether or not they would fall short in discharging this responsibility was not investigated by the board.

“The fact that the deceased did not have children and his siblings have families to support does not make it the deceased’s responsibility to take care of his mother.

“In fact, by even considering this as a reason to ignore the equal duty of the deceased’s siblings to take care of their mother, the board totally misdirects itself.

“In the circumstance, this Tribunal is of the considered view that the board of the first respondent misdirected itself and failed to investigate and consider all the relevant factors before arriving at the decision to allocate the entire death benefit to Mrs Roche.

“Therefore, when a board fails to do a thorough investigation with respect to the personal circumstances of each beneficiary, as evident in this matter, there is a greater likelihood of the objectives of section 37C being subverted.

“In the circumstance, this Tribunal is of the considered view that the board did not conduct a proper investigation and failed to apply its mind when it resolved to allocate the entire amount of the death benefit to Mrs Roche, to the exclusion of the complainant.”

Ms Lukhaimane ordered the board of the first respondent to re-exercise its discretion in terms of section 37C of the Act.

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