Beneficiary nomination form is only a guide, says PFA

30 January 2014 Muvhango Lukhaimane, Pension Funds Adjudicator

The Pension Funds Adjudicator has ruled that the inclusion of a complainant in the beneficiary nomination form did not entitle her to automatically receive a share of the death benefit.

The nomination was a guide to assist the fund’s board in exercising its discretion in the distribution of a death benefit.

Mr LG Nsukazi who passed away on 5 March 2012 was employed by the Pixley Ka Seme Municipality and was a member of the Municipal Gratuity Fund (first respondent) until his demise. A death benefit in the amount of R407 739.37 became available for distribution to the deceased’s dependants by the first respondent.

Initially, the deceased’s nominees as reflected in his benefit statement as at 30 June 2010 were as follows: his mother 30%; his sister 20% and two children, 10% each.

The deceased later changed the percentages allocated to his nominees as reflected on his benefit statement as at 31 December 2011 as follows: his mother 40%; his sister 30% and two children 15% each.

The board of the first respondent took a decision to allocate the death benefit but reduced the benefit share of his mother (the complainant) in contrast with what the beneficiary nomination form stipulated.

The deceased’s mother complained to the Office of the Pension Funds Adjudicator that a death benefit in the amount of R2 056.92 was paid to her on 10 September 2012. She submitted that she was informed that a further payment of the same amount would be made to her.

She said when she lodged a query with the first respondent as she was not happy with the amount received, she was informed that her benefit was reduced because she was employed. She contended that she was retrenched in July 2012 and was dependent on the benefit from her pension fund. As the deceased had nominated her, she should have been allocated a share of the death benefit in accordance with the deceased’s wishes.

Sanlam Life Insurance Ltd, the second respondent, said the following six minor dependants were identified: a two-year old child, an eight-year old child, three nine-year old children and the deceased’s 16-year old sister.

The second respondent submitted that the complainant declared dependency to the deceased at the rate of R1 000 per month. It further submitted that the complainant indicated that she was employed and earned a monthly salary of R3 369.60. She subsequently advised that she had been retrenched.

It further submitted that the board of the first respondent considered the following factors when making an equitable distribution amongst the dependants: the age of the dependants; the relationship with the deceased; the extent of dependency; the wishes of the deceased captured in the nomination form; and the financial affairs of the dependants including their future earning capacity potential.

The second respondent said the deceased’s children and minor sister were all dependent on the deceased and had no earning capacity in the near future because of their tender ages. It further submitted that according to the actuarial tables which the first respondent used as a guideline to discount for the age difference of the minors, the amount required to provide for the six minors was R559 336.35.

It submitted that the required amount of R559 336.35 represented a shortfall of R155 674.37 compared to the death benefit of R403 661.98, which was almost 40%.

It further submitted that consideration was also given to the position of the complainant compared to the position of the six minor children. It contended that discretion in terms of section 37C of the Act was exercised when allocating R4 077.39 (1%) to the complainant due to her earning potential compared to the minor children and the fact that the death benefit was already insufficient to provide properly for the minor children.

In her determination, Ms Lukhaimane said the payment of death benefits was regulated by Section 37C of the Pension Funds Act, and its primary purpose was to protect those who were financially dependent on the deceased during his lifetime.

"In effect, section 37C of the Act overrides the freedom of testation of the deceased. It is the board’s responsibility when dealing with the payment of death benefits to conduct a thorough investigation to determine the beneficiaries, to decide on an equitable distribution and finally to decide on the most appropriate mode of payment of the benefit.

"The first respondent submitted that while the beneficiary nomination form was considered, the complainant’s share had to be reduced when the multiplicity of other factors including, amongst others, that the available amount of the death benefit was insufficient to cater for the needs of the minor children and that their future earning capacity was unfavourable compared to the complainant, were considered.

"In the circumstances, this Tribunal is satisfied that the inclusion of the complainant in the beneficiary nomination form did not entitle her to receive a share of the death benefit stipulated therein but that it was a guide to assist the board in exercising its discretion.

"This Tribunal is further satisfied that in arriving at its decision, the board of the first respondent considered all the relevant factors and ignored the irrelevant ones.

"Had the complainant been allocated a share of the death benefit as stipulated in the beneficiary nomination form, the other dependants would have been left in a far worse off position as they are minors,” said Ms Lukhaimane in dismissing the complaint.

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