Former housekeeper awarded R1.9m pension death benefit

The executor of a deceased estate has suffered a decisive defeat in her bid to overturn the award of nearly R1,9 million to the deceased’s former housekeeper who served her faithfully for 31 years and was embraced as a daughter.

The executor complained to the Office of the Pension Funds Adjudicator that Allan Gray Retirement Annuity Fund had erred in allocating the full death benefit of R1 890 631.03 to the housekeeper. She said the benefit should have been paid in full to the estate or shared with the housekeeper.

When the housekeeper retired, the deceased continued to pay her an amount of R3 500 per month which was used for the purposes of purchasing groceries and towards other living expenses.

The deceased passed away on 21 September 2024 and less than two weeks later, her husband passed away on 3 October 2024. They each bequeathed an amount of R200 000 each to the housekeeper from their respective estates. The complainant, in her capacity as executor of the deceased’s estate, continued the monthly payments of R3 500 to the complainant.

Following the death of the deceased and her husband, the fund resolved to allocate 100% of the death benefit to the housekeeper.

The complainant was aggrieved with the fund’s identification of the housekeeper as a dependant. The complainant submitted that the fund should have based its decision on Section 37C(1)(bA) of the Pension Funds Act which allows for distribution of death benefits to both dependants and nominees or section 37C(1)(b) which provides for payment of benefits to nominees only.

She submitted that the fund decided to allocate the entire benefit to the housekeeper in terms of section 37C(1)(a), which only applies where there is no nominee. The deceased’s husband was the designated nominee of the retirement annuity.

The bequests of R200 000 each were for the purpose of replacing the monthly stipend to ensure the housekeeper was not left without support. The housekeeper, having received the inheritance, was no longer dependent on the deceased.

Deputy Pension Funds Adjudicator, Naheem Essop, found that the fund’s legal reasons for awarding the full benefit to the housekeeper was flawed, and had to be set aside.

However, after considering the facts, the Deputy Adjudicator found that sending the matter back to the fund for reconsideration would only cause further delay. The late spouse had passed away shortly after the member, while the former employee remained the surviving dependant whom the law was intended to protect. The Deputy Adjudicator, therefore, substituted the fund’s decision and allocated the full death benefit to the former employee.

He said in his determination that the fund’s decision proceeded on the mistaken basis that the housekeeper was the deceased’s sole dependant and, therefore, no equitable allocation was necessary. He found that the husband, as the deceased’s spouse, was also a legal dependant at the date of the deceased’s death and, therefore, an equitable allocation was necessary.

The husband’s subsequent death did not remove him from the class of dependants who had to be considered under section 37C. The fund was, therefore, required to recognise both the husband and the former housekeeper as dependants and then undertake an equitable allocation exercise.

Because the fund failed to conduct that equitable allocation exercise, its decision was legally flawed and had to be set aside.

Relying on the Constitutional Court’s decision in Mutsila, the Deputy Adjudicator held that dependency must be determined at the date of the member’s death, although later changed circumstances may be considered when deciding an equitable allocation.

Having considered all relevant factors, including the husband’s death and the former housekeeper’s continued position as a surviving dependant, the Deputy Adjudicator substituted the fund’s decision and allocated the entire death benefit to the former housekeeper based on proper legal reasoning.

The determination highlights the social function that section 37C of the Pension Funds Act serves: to protect dependency so that those who were dependent on a deceased member are not left without financial support after their demise.