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PFA Rulings concerning definition os dependant and distribution of death benefits

06 September 2007 Pension Fund Adjudicator

The Pension Funds Adjudicator issued two important rulings dealing with the duties of trustees with regard to the identification of dependants and distribution of death benefits. The first ruling concerns the meaning of spouse in the matter of Mashego & Others v SATU National Provident Fund & Another.
 
The complainants are the children of the late Mrs Mashego, who was a member of the fund until her death on 23 December 2002. As a result, a lump sum benefit of R69,968.93 became available for distribution. During the investigation of the fund, the board identified the second respondent, Mr M Muhammed Al-Ameen as the surviving spouse. The fund resolved to pay 50% of the benefit to the surviving spouse and the remainder to the complainants in equal shares.
 
The complainants were dissatisfied with the trustees'  decision to regard Mr Muhamed Al-Ameen as the sole dependant. Furthermore, they contended that the deceased in a nomination form indicated them to be the dependants and therefore the benefit ought to be paid to the complainants to the exclusion of the surviving spouse.

The Adjudicator firstly held that the fact that the complainants were nominated as  beneficiaries does not automatically entitle them to a portion of the benefit. It only entitles them to be included in the circle of beneficiaries and to be considered during the distribution phase.

The Adjudicator then examined the question of whether the second respondent qualified as a spouse of the deceased member. In this regard, the Adjudicator held that when the deceased passed away, there was an existing customary union, between herself and the second respondent, which was solemnised according to Islamic rights. Furthermore, the mere fact that the deceased and the second respondent were separated prior to her death, does not automatically constitute a divorce in terms of Islamic law. In terms of Islamic law the marriage is resolved when the husband pronounces or issues a Talaq for the third time. There was no evidence before the tribunal that the second respondent pronounced or issued a Talaq. Therefore, the tribunal was satisfied that the Islamic marriage was still in existence at the time of the deceaseds death, in terms of which, the second respondent qualified as a spouse and therefore a dependant.

Furthermore, the Adjudicator stated that even if the customary union in terms of Islamic law was not properly constituted, the complainants failed to submit any evidence showing that the deceased and the second respondent were not married in terms of African Customary law prior to the conversion of their marriage to an Islamic marriage.

The Adjudicator then turned to the equitable distribution of the benefit and held that the fund must consider a series of relevant factors to the exclusion of irrelevant considerations. From the evidence, it was evident that the trustees ignored the ages of the dependants, their financial status, relationship between the deceased and the second respondent, the wishes of the deceased and the extent of dependency on the deceased. Moreover, the adjudicator criticised the funds approach, in particular, their acceptance of the spouse's version whereby he was prepared to accept a 50/50 split of the benefit between him and the complainant. The acceptance of such a proposal alludes to an inadequate investigation of each dependants personal circumstances, and an unacceptable fettering of a trustee's discretion.

Therefore, the decision of the fund to award 50% of the benefit to the second respondent and the balance to the complainants was set aside and the matter was referred back to the board of trustees to re-exercise their discretion considering all the relevant factors outlined in the determination.

The Pension Funds Adjudicator also issued an important ruling concerning the payment of death benefits in the matter of Gowing v Lifestyle Retirement Annuity Fund & Others.

The complainant was the sister of Mr Hasseriis, who passed away on 18 March 2004. As a result, a lump sum benefit of approximately R70,000 became available for distribution payable by the fund. During his life time, the deceased had nominated the complainant as his sole beneficiary. The board resolved to distribute the benefit between the two minor children of the deceased, born to the second respondent, Miss Karin Hasseriis and the third respondent, Miss Felicity Loopstra, thus excluding the complainant from any share in the benefit.

The complainant was unhappy with the exclusion and contended that she was 60 years of age at the time of lodging the complaint and also that she is in a constrained financial position. The complainant further alleged that the minor children to whom the benefits were awarded are not in financial need in that, they have been provided for by the deceased in terms of trusts that have been established and other assets that form part of the estate.

The Adjudicator, after examining the legislative provisions and its consequences for dependants and nominees, held that the Act specifically mandates the board to consider the circumstances of all beneficiaries. Thus, the Adjudicator rejected the funds argument that once a dependant is identified, the claim of a nominee need no longer be entertained. The Adjudicator stated that a nominee is not entitled to be considered a beneficiary because he or she was financially dependant on the deceased. Rather, the entitlement flows from the fact that the person concerned was nominated by the deceased. No more is required. Thus, the failure of the fund to consider the complainant in the distribution phase meant that the decision of the fund had to be set aside.

The Adjudicator, after considering a series of factors, including the financial status of all the beneficiaries, firstly held that the two daughters of the deceased are adequately provided for in terms of what they have or will receive from the estate.

The Adjudicator further held that while the trustees are not bound by the members wishes, nevertheless, where possible, they should consider the nomination. In the circumstances of this case, especially bearing in mind the financial position of the complainant, the Adjudicator could find no reason for not following the deceased's nomination form.

As a result, the decision of the fund to exclude the complainant from the death benefit was set aside and furthermore the fund was ordered to pay the entire benefit to the complainant, together with interest thereon at 15.5% from 19 March 2005 to date of final payment, within two weeks of the date of this ruling.

Click here to download the Mashego & Others v SATU National Provident Fund & Another ruling (PDF file 63KB)

Click here to download the Gowing v Lifestyle Retirement Annuity Fund & Others ruling (PDF file 93KB)

 

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