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PFA sets aside life partner’s death benefit

04 November 2015 Muvhango Lukhaimane, PFA
Muvhango Lukhaimane, Pension Funds Adjudicator.

Muvhango Lukhaimane, Pension Funds Adjudicator.

The Pension Funds Adjudicator has set aside a R3 082 000 death benefit allocated to a deceased’s partner of 22 months after one of his children complained that the decision was not fair and equitable.

Muvhango Lukhaimane ordered the board of Momentum Provident Preservation Fund (first respondent) to re-exercise its discretion in terms of Section 37C of the Pension Funds Act.

Ms Lukhaimane said the board of the first respondent had failed to consider relevant factors and ignored relevant ones in allocating the death benefit in the manner it did.

“This alludes to inadequate investigation of each dependant’s personal circumstances, an unacceptable fettering of discretion and ignoring of relevant factors,” she said.

The complainant who is also a beneficiary said that at the time of his father’s death on 3 October 2014, his father was a member of the first respondent, administered by MMI Group Limited (second respondent).

Following the deceased’s demise, a death benefit in the amount of R6 828 086 became available  for distribution to the deceased’s beneficiaries and dependants. The death benefit was allocated  and distributed as follows: life partner R3 082 000; major son (complainant) R882 000.00; major  son R882 000 and minor daughter R1 982 086.

The complainant submitted that a few weeks before the deceased’s demise, his will was  discussed with his friend who is a lawyer and he emphasised that he did not want his will to be  changed and that his assets be equally distributed amongst his children, in the event that he passed away.

He submitted that at the time of his demise, the deceased had lived with his partner for  22 months. He was aggrieved with the fact that she was awarded a greater share of the death  benefit and accused the partner of not having presented the first respondent with accurate information.

He averred that the partner was awarded 40% of the death benefit, which was not in accordance with the deceased’s will and wishes and contradicted the verbal arrangement he had with her to  the fact that she would only need about R200 000 from the death benefit, down from her initial proposal of R600 000.

The complainant claimed the board of the first respondent blindly followed a particular formula without having gathered enough facts to support its decision.

He contended that the board did not give sufficient weight to the fact that the other dependants were the deceased’s children and not someone who he knew for a relatively short period of time and to whom he had not shown the commitment of marriage.

He stated it was brought to his attention that one of the issues considered by the board was that the deceased’s partner earned an amount of R42 000 per annum and indicated that she resigned from her employment.

He found it odd that the mere fact that the partner lived with the deceased entitled her to be awarded a 40% share of the death benefit as she had very little wealth when she met the deceased. He disputed that the deceased planned to spend the rest of his life with the partner as he had never mentioned a desire to that effect.

He further stated that the deceased supported his partner to ensure his own comfort and even lent her some funds to start a business. He averred the partner was permanently employed, didnot pay for accommodation and was pursuing her business and had more disposable income.

He lamented that the board of the first respondent did not perform due diligence in verifying information supplied by the partner. The board had failed to gather information from his mother with respect to costs associated with the deceased’s maintenance of his minor daughter.

The complainant requested that the Office of the Pension Funds Adjudicator set aside the board’s decision and the share of the death benefit allocated to the deceased’s partner be reduced to 10%.

In its response, the second respondent stated that the life was regarded the same as a spouse for purposes of the distribution. She was financially dependent on the deceased.

It submitted that the board was required to apply its discretion when allocating benefits to dependants. It was, therefore, not a pure mathematical formula the board followed, but rather, a discretionary decision coupled with some calculations taking into account current financial needs and future earnings capacity.

In her determination, Ms Lukhaimane said based on the evidence, there appeared to be no doubt that the deceased and his partner lived together and shared a household and had an emotional and intimate bond.

“It is imperative to note that the complainant, in his own version, indicated that the deceased lent some money to his partner to open a business, which is viewed by this Tribunal as an indication that both parties had a good inter-dependent relationship.

“In this regard, this Tribunal is convinced that the board of the first respondent acted correctly in identifying and considering the partner as a permanent life partner of the deceased who qualifies as a legal dependant of the deceased and eventually allocating a share of the death benefit to her.

“Therefore, the partner was correctly identified as a spouse for the purposes of section 37C of the Act.

“In this circumstance, the complainant’s view that the partner should not have been considered or at least receive a smaller portion of the death benefit, is misplaced,” said Ms Lukhaimane.

However, she added, that the deceased’s children, including the complainant, were also the legal dependants of the deceased and as such, they were correctly identified as the dependants of the deceased and allocated portions of the death benefit.

Ms Lukhaimane said it was imperative to bring to the complainant’s attention that in matters relating to the distribution of death benefits, the deceased’s will, though an important factor was not a primary determinant of whether or not the partner should have been considered for allocation of the death benefit.

She said from the papers before her, it appeared that the board of the first respondent ignored relevant factors during the distribution phase, in particular, as regards the most probable likelihood that the children of the deceased, including the complainant, did not have an automatic entitlement to be paid by the Liberty Life Retirement Annuity Fund in terms of percentages mentioned in the beneficiary nomination form.

This Tribunal also noted that the board of the first respondent initially resolved to allocate an amount of R2 315 836 to the partner and subsequently changed its decision and allocated an amount of R3 082 000 to her and reduced the amounts allocated to the deceased’s children.

Ms Lukhaimane said the payment made to the partner on top of what had been determined to be the extent of her dependency on the deceased, which had the effect of reducing the initial allocations made to the deceased’s children who were mentioned in the will, was unreasonable and an improper exercise of a discretion vested in the board.

“It is imperative, therefore, that where there are other beneficiaries, dependency be limited to provable expenses and not gratuitous payments,” Ms Lukhaimane said, finding that the board had improperly or unduly exercised it discretion in its decision.

 

 

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