PFA says funds must not use POPIA to hide shoddy investigation

A pension fund is obliged to provide the Pension Funds Adjudicator (PFA) with requested information without obtaining consent from the beneficiaries.

Muvhango Lukhaimane

A fund cannot use the Protection of Personal Information Act (POPIA) as a reason to withhold information from the PFA. As a public body as defined in the POPIA, the PFA is permitted to access personal information while performing its functions.

This was stated by the PFA Muvhango Lukhaimane in a recent determination. She added the PFA falls within the meaning of “tribunal” as referred to in the POPIA and the PFA is allowed to collect personal information when necessary for the conduct of proceedings.

Lukhaimane was commenting in a matter in which a fund initially refused to provide her with its investigation report, citing the need to protect beneficiaries’ information. Only after reminding the fund that the POPIA permits the PFA to process personal information while exercising its powers, duties, and functions in accordance with the Act, the fund provided the PFA with the requested information.

Lukhaimane said that in adjudicating disputes relating to death benefits, the PFA’s role is to assess whether the board acted rationally, reasonably, and in accordance with the law. Therefore, a fund cannot hide behind POPIA and bears the onus of demonstrating to the PFA that it has conducted a proper investigation in accordance with section 37C by providing the PFA with the investigation report and supporting documentation.

Furthermore, the Financial Services Tribunal recently remarked that the PFA should insist on investigation reports to ensure sufficient information is available to confirm the fund’s reasoning behind an allocation. This reinforces the need for funds to provide such reports and supporting documents relevant to the decision.

After first refusing to provide the PFA with its investigation report, the fund subsequently provided copies of the documents requested by the PFA.

“It is clear that the Promotion of Access to Information Act 2 of 2000 (PAIA) and POPIA may be used to hide a less than thorough investigation into the circumstances of the dependants of the deceased including the complainant,” said Lukhaimane in her determination.

Lukhaimane comments followed a complaint received, in which she set aside the allocation of a death benefit as she was not satisfied that a proper investigation was conducted in determining how the money should be apportioned. She said the Eskom Pension and Provident Fund has a duty to actively investigate the extent of each of the beneficiaries’ financial dependency on the deceased in order to decide on an equitable allocation of the death benefit. She was not convinced that the board of the fund had considered all the relevant factors.

She had received a complaint from the customary spouse of the deceased who was aggrieved with the decision of the board to allocate a portion of the death benefit to the deceased’s life partner.

Upon the death of the deceased, a lumpsum death benefit of R560 160 became available for allocation to his beneficiaries. The board decided to allocate 28% to his customary spouse, 28% to his life partner, two percent to each of five major children; 30 percent to a minor child, and two percent to each of two other minor children.

The deceased had nominated his customary spouse to receive 80%, two children to receive five percent each and his life partner to receive 10% of the death benefit.

The fund said in deciding whether or not to include the life partner, it considered that she was 50 years old and unemployed at the time of the deceased’s death. She and the deceased had been in a relationship since 2014, and they did not have any children together. The deceased had paid a portion of lobola to her family.

The fund further said the life partner had claimed she was dependent on the deceased for maintenance and support. Considering her age, her income earning potential was very slim and she had more than 15 years before she could qualify to receive an old age grant. She was in receipt of a spouse’s pension from the fund of R6 612.19. Since she qualified as the deceased’s factual dependant, it was necessary to consider her in the allocation of the death benefit.

The fund submitted that during its investigation, the customary wife had stated that the deceased supported her, four major children and a minor child. However, she and the children were unable to provide evidence of their financial dependency except through affidavits. Two other major children did not have any proof of financial dependency and claimed as legal dependants. Another major child did not have proof of financial dependency and claimed as a nominee and legal dependant. The life partner was unemployed and resided with the deceased. Thus, she was solely dependent on him.

In her determination, Lukhaimane said it is the fund’s responsibility when dealing with the payment of death benefits to conduct a thorough investigation to determine the beneficiaries and to, thereafter, decide on an equitable distribution and to finally determine the most appropriate mode of payment. She said it is imperative to note that the law recognises three categories of dependants based on the deceased’s liability to maintain such a person, namely, legal dependants, factual dependants and future dependants.

In principle, a deceased is legally liable for the maintenance of a spouse and children as they rely on him or her for the necessities of life. In the case of non-legal dependants, where there is no duty of support, a person might still be a dependant if the deceased in some way contributed to the maintenance of that person.

The fact that a person qualifies as a legal or factual dependent does not automatically give them the right to receive a portion of a death benefit. The deciding factor is financial dependency. Those who were dependent on the deceased must not be left destitute by the death of the deceased.

Lukhaimane said the beneficiary nomination form is a substantial factor that must be given the necessary credence in reaching the decision to distribute a death benefit.

“It is clear that the fund failed to follow the beneficiary nomination. There must be good reason for a fund not to give effect to a nomination to justify its decision to deviate from the wishes of the deceased.

“Further, it is trite law that the extent to which a dependant was dependent on the deceased is a significant factor to consider by the board when allocating the death benefit.

“The fund indicated that the complainant and the deceased’s major children failed to provide proof of the extent of their financial dependency on the deceased.

“However, there is a duty on the fund to actively investigate the extent of each of the beneficiaries’ financial dependency on the deceased in order to decide on an equitable allocation of the death benefit,” Lukhaimane said, adding the board of the fund must weigh various factors in arriving at its decision.

In this instance, considering the amount available for allocation, which is not significant, the number of beneficiaries, their ages, their income-earning potential, their relationship with the deceased, and the wishes of the deceased, she was not satisfied that the board considered all the relevant factors and set aside the board’s decision.