PFA orders fund to rework death benefit allocation

22 May 2024 The Office of the Pension Funds Adjudicator (OPFA)
Muvhango Lukhaimane

Muvhango Lukhaimane

The major children of a deceased member of a pension fund complained to the Pension Funds Adjudicator that they were allocated only one percent each from the death benefit of R1 869 076.45 although they were financially dependent on him.

The deceased’s wife and two minor children were allocated 96% of the death benefit.

The four complainants submitted that the deceased was paying maintenance for two of them and sent money to the other two. They indicated that they were all unemployed, experiencing financial hardship and were left destitute by the death of deceased.

Pension Funds Adjudicator Muvhango Lukhaimane held a hearing where it emerged that the four complainants were dependent on the deceased and thus deserved a better deal.

She ordered the Sanlam Umbrella Pension Fund to set aside its allocation and decide on a more equitable allocation of the death benefit.

The complainants stated that they also noticed that the information on the schedule of potential dependants and nominees was incorrect. They all objected to the fund’s allocation of 1%.

The complainants requested confirmation that an amount of R1 902 639.84 was paid to an FNB estate account. They said (part of) this amount should have been allocated among them.

The complainants averred that the spouse had stated in her claim form that she is a beneficiary of four different funeral policies plus she also solely benefited from his Unemployment Insurance Fund.

The complainants submitted that they visited the Master’s Office after they were told to report fraudulent activities committed against the deceased estate and its beneficiaries by the spouse. It has been over a year since Sanlam Life deposited an unapproved group life benefit of R1 902 639.84 in the late estate account and she had no excuse as to why she had not reported it. The Master’s Office issued a summons to be sent to her and asked them to deliver it by hand at her residence.

In its response, the fund said it had identified the spouse and six children as beneficiaries, including the complainants. The fund submitted that letters were sent to the beneficiaries on 24 July 2022 informing them about the board’s decision and welcomed any objections. Two of the complainants responded, rejecting the one percent allocated to each of them.

The fund submitted that upon receipt of the objections, it requested the spouse to provide contact details of the executor of the estate so that the fund could ascertain how much of the estate was going to devolve to the spouse and each of the children. The spouse responded stating that she was nominated as the Master’s representative. She stated that she was informed by the Master’s office that there was no need to appoint an executor as the estate amounted to less than R250 000.

The fund submitted that it subsequently enquired from Sanlam Life to whom the unapproved group life benefit of R1 902 640 was paid. The insurer confirmed that the full amount was paid to the spouse. The spouse was informed that in terms of the Laws of Intestate Succession, the unapproved group life benefit of R1 902 640.00 should have been allocated equally between herself and the six children of the deceased. She was requested to provide information regarding how much each child had received, how the amounts were calculated, and when the payments were paid.

The fund said the complainants have been adamant that they have not received any inheritance and, therefore, it would appear that the spouse has not paid over the share of the estate to each of the children. The fund submitted that it is very important that the board is aware of what happened to the money because this would give the board a greater understanding of the financial status of the spouse and the children which would have a significant impact on the allocation decision. The spouse had not been forthcoming with the requested information.

Ms Lukhaimane arranged a hearing of all parties to expedite the matter as the fund had insufficient information to arrive at the decision it did; the spouse had not been forthcoming with information to substantiate her financial position; and the major children were going through financial hardship owing to the prolonged finalisation of the matter.

Ms Lukhaimane indicated at the hearing that the fund had failed to establish the spouse’s financial position, her qualifications, and her prospects of earning an income, considering her age. The fund had also ignored that the major children required funds to sustain themselves or to place themselves in a position where they would be able to earn a living following the death of their father.

The spouse gave a breakdown how R902 640.00 of the unapproved group life benefit had been spent and said the remainder of the funds were in the process of being transferred to the estate account opened by the executor.

In her determination, Ms Lukhaimane said Section 37C of the Act serves a social purpose and intends to protect people who were dependent on the deceased during his lifetime and to ensure that they continue to be provided for.

The deceased was legally married to the spouse at the time of his death. She was living with the deceased and was fully financially dependent on him. Therefore, she qualified as a legal dependant. The deceased had six children and they all qualified as legal dependants.

Ms Lukhaimane said complainant “L” submitted that he was unemployed and did not live with the deceased. He was a student at Boston College and had student debt. He did not provide any amount with which the deceased supported him, nor did he provide any proof that the deceased was supporting him financially. He further submitted that he was in the process of claiming maintenance against the deceased.

Complainant “N” was unemployed and was not living with the deceased. She initially mentioned that she was a student at the University of Free State, but subsequently indicated that she was registered with UNISA. She stated on her claim form that she was partially dependent on the deceased and was receiving R710 per month from the deceased through a maintenance order. However, she subsequently submitted that she was fully dependent on the deceased and that the amount of R710 that she received from the deceased was not sufficient to meet her needs.

Complainant “M” was unemployed and was not living with the deceased. She initially submitted that she was employed part-time. However, she subsequently submitted that she was not employed at all and was receiving R350 from the COVID-19 social relief grant. She was receiving R800 per month from the deceased through a maintenance order. She submitted that she also depended on her grandmother's grant income and living in a household of seven people. Therefore, her financial dependency on the deceased was over and above the maintenance order.

Complainant “S” was not living with the deceased and initially submitted that he was partially dependent on the deceased. He was employed as a casual employee and earned R5 000 per month. He submitted that he was unable to pay for his studies. He also subsequently submitted that he was no longer employed and was dependent on his mother for financial assistance. He submitted his bank statement as proof of his financial position.

Ms Lukhaimane said: “During the hearing, the spouse submitted that the group life benefit was paid to her. Following the hearing she submitted information regarding how she used the group life benefit. She provided the deceased’s bank statement but failed to provide both the fixed deposit bank account statements and her own current account statements. She utilised the group life benefit on aspects that cannot be classified as necessities and, therefore, does not appear to be short of money.

“Should the fund be inclined to consider her for a portion of the death benefit, a detailed consideration must be provided to the rest of the beneficiaries as to the reasons. The complainants’ submissions indicate that they are all unemployed, experiencing financial hardship and were left destitute by the death of deceased.”

Ms Lukhaimane added that the spouse was employed and had used the group life benefit and continued to earn interest from the same benefit without considering the position of the complainants. There were cash-send transactions on the deceased’s bank statements to one of the telephone numbers belonging to the complainants. Therefore, the deceased was financially providing for the complainants.

“It should be noted that dependency is a critical point to consider in the allocation of the death benefit. The fund received further submissions after the board initially decided on the allocation of the death benefit and further submissions following the hearing.

“In light of the above, the board's decision is hereby set aside. The fund should be allowed to re-exercise its discretion by considering the new evidence placed before it to decide on an equitable allocation of the death benefit in terms of section 37C of the Act,” Ms Lukhaimane ordered.

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