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PFA : Rulings concerning the payment of parents' pensions and divorce benefits

29 August 2007 PFA

The Pension Funds Adjudicator today issued two important rulings concerning the payment of parents' pensions and divorce benefits.  The issue of a parent's pension arose in the matter of Ntsane v Municipal Employees Pension Fund & Westonaria Local Municipality.
 
The complainant was the mother of the late Mr Ntsane, who was a member of the fund. Upon the death of Mr Ntsane on 27 July 2003, a lump sum benefit of R103,476.20 became available for distribution. The fund decided to pay the complainant R10,347.62, while the minor child of the deceased received R93,128.58.  The minor child also commenced receiving a monthly pension in the sum of R571.54. The Adjudicator, after considering all the evidence before the tribunal, was satisfied that the fund acted reasonably and properly in making the above distribution, in that it had taken into account all the relevant factors and discarded irrelevant considerations.
 
However, the matter did not end there as the rules of the fund provided for the payment of a parent's pension. The Adjudicator examined rule 41, in terms of which where the member is survived by a parent (or parents jointly), who was financially dependent on the member, then such a parent is entitled to a monthly annuity payable by the fund. On the facts of this case, it was common cause that the complainant was the mother of the deceased and financially dependent on the member and therefore the Adjudicator was of the view that the complainant was entitled to a monthly annuity.
 
The fund was ordered to pay the complainant all arrear monthly annuities that were due from August 2003 to the date of this determination as a lump sum, together with interest thereon. Furthermore, the fund was ordered to commence paying the complainant a monthly annuity in terms of the rules of the fund.
 
This ruling again serves as an important reminder to trustees on the one hand and members and beneficiaries on the other that upon the death of a member, the beneficiaries are not only entitled to the lump sum payment, but may also be entitled to specific pensions regulated in the rules of the fund.
 
The Adjudicator also issued an important ruling concerning the payment and computation of divorce benefits payable by Retirement Annuity Funds in the matter of Du Plessis v Central Retirement Annuity Fund and Sanlam Life Insurance Limited.
 
The complainant and the former husband were divorced on 17 August 1999. In terms of the divorce order, she was entitled to one half of the pension interest as at the date of divorce in respect of the two underlying policies held by the fund on behalf of the ex-husband. According to the policy documents, the maturity dates were in January 2001 and August 2001 respectively. However, Mr Du Plessis, in terms of the rules of the fund decided to move his retirement dates to 22 October 2005. Upon his retirement, the complainant received in total R28,387.85 from the fund, representing 50% of the member's pension interest. This amount represented a potion of the member's contributions as at the date of divorce together with simple interest. The complainant was unhappy as firstly she was of the view that the benefit should have been paid to her in 2001 and secondly she was aggrieved that she did not receive 50% of the value of the policies which were projected respectively at R72,048.97 and R28,928.00 in 2001.
 
The Adjudicator examined the provisions of the Divorce Act and held that the law contemplates an award to the non-member spouse of any part of the member's pension interest calculated as at the date of divorce, but with effect from a future date when the pension benefit accrues to the member spouse. On the facts of this case, in terms of the definition of retirement date in the rules of the fund, Mr Du Plessis was entitled to initially and subsequently change his retirement date to any date, the latest being the date of his 70th birthday. Thus, as the benefit only accrued to the member in October 2005, in terms of the current legislation, the benefit could not be paid in 2001.
 
Regarding the computation of the benefit, the Adjudicator held that the complainant's share was correctly based on the member's total contributions, plus simple interest up to the date of divorce. In terms of the existing law, she was not entitled to any other benefits including a portion of the projected values of the policies. Furthermore, the provisions of the Divorce Act do not permit interest or capital growth to be added to the portion of the divorce benefit from the date of divorce to the date of eventual payment.
 
Therefore, the Adjudicator dismissed the complaint. However, she referred to the current Pension Funds Amendment Bill before Parliament, which proposes a radical shift with regard to the payment of divorce benefits.  Unfortunately, this did not assist the complainant in any way but when passed will have an impact on other spouses entitled to divorce benefits.

To read the Ntsane v Municipal Employees Pension Fund ruling click here (PDF File 59KB)

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