Provident fund rapped for placing sisters' benefits in a beneficiary fund

Muvhango Lukhaimane, Pension Funds Adjudicator

In a recent determination involving the Old Mutual Superfund Provident Fund, the Pension Funds Adjudicator, Muvhango Lukhaimane, expressed her dissatisfaction with a decision by the fund to make payment of a death benefit allocated to adult beneficiaries to the Fairheads Independent Beneficiary Fund.

The beneficiaries, aged 20, complained to the Adjudicator that they were dissatisfied with the decision by the fund to place their benefits in a beneficiary fund until they attain the age of 23. They submitted that they did not authorise the payment of the benefits to the beneficiary fund and they were not afforded an opportunity to appeal the board’s decision to place same in the beneficiary fund. They were also aggrieved that the beneficiary fund deducts fees every month to manage the benefits on their behalf.

Old Mutual Superfund Provident Fund was the first respondent in the matter with Fairheads Independent Beneficiary Fund as second respondent and Old Mutual Life Assurance Company as third respondent.

The beneficiaries stated that they have been engaging the beneficiary fund, collectively with their father, for the termination of the member account held therein. They stated that the income they receive from the beneficiary fund only covers their rental expenses and is not sufficient to meet their daily living expenses. They stated that they are aggrieved that the fund and the beneficiary fund view them as unqualified to manage lumpsum benefits.

In response, the fund stated that it had received a complaint through the FAIS Ombud lodged by the beneficiaries’ older brother who stated inter alia that the beneficiaries intended to squander their benefits on luxury items such as cars and overseas holidays.

He stated that they were not mature enough to handle their own financial affairs. A special condition was attached to the payment to the beneficiary fund which stipulated that neither the beneficiaries nor their father were allowed to withdraw their capital until the beneficiaries completed their schooling or reach the age of 23. The reason for the condition was mainly due to the fact that the beneficiaries were not deemed mature enough to handle their own financial affairs.

After taking into consideration their financial and living circumstances, the board exercised its discretion and concluded that the beneficiaries would not be able to manage their benefit payments appropriately. Since the beneficiaries have not completed their schooling but have expressed a desire to complete their schooling, the board deemed it appropriate to transfer their benefits to the second respondent until they completed their schooling or attained the age of 23.

The fund also submitted that the beneficiaries’ father informed the fund that in March 2019, the complainants signed a lease to reside in a cottage on his property and they were in arrears for the amount of R142 000 which needed to be paid. Failure to pay the arrear amount will result in summons being issued. The beneficiaries would then seek legal advice in order to serve summons on the beneficiary fund. He further stated that the beneficiaries completed their schooling (grade 10) and that it was not up to the fund and the beneficiary fund to pronounce on whether or not they have completed their schooling. The beneficiaries’ father stated that the beneficiaries completed grade 10, like him who runs a successful business.

The beneficiary fund stated it received correspondence from the father stating: “I would like for you to ignore their request for paying their outstanding R120 000 rental that is owed. They signed a contract with me that they will pay me 10% interest per month on outstanding money owed to me which amounts to R12 000 per month. There are 28 months left before they receive their trust so the interest will be R336 000 excluding the R120 000.

“I will never get revenue like that from any financial institution, so I am happy to wait!

I also informed them that they cannot go for any courses or studies until they receive their pay out because I don’t think there will be much left after they pay me their R446 000.”

The beneficiary fund submitted that in their investigations and dealings with the complainants, they confirmed telephonically that they do want their fund credit terminated and paid to them and that they intend enrolling in a yachting course and obtaining their learner’s license. It stated that the complainants are currently unemployed, have never managed lumpsum payments and have not completed high school, it is for these reasons that it agrees with the fund that the complainants would not be able to properly manage their fund credit if paid to them as a lumpsum now. It stated that the requirements for termination have not been met. The beneficiary fund further stated that it currently pays the complainant’s a monthly income which covers their rent (which they have indicated is paid to their father) and other basic requirements including clothing, toiletries, living and expenses. Should the complainants further their studies, same will be paid from their fund credit held by the beneficiary fund.

In her determination, Ms Lukhaimane set aside the decision of the fund and ordered it to properly investigate the complainants’ ability to administer their financial affairs and thereafter decide on an appropriate mode for payment.

The Adjudicator was concerned that the fund simply relied on submissions received from one individual and failed to conduct further interviews with independent individuals to corroborate the brother’s submissions.

She found that the board failed to carry out its own independent investigations that would probe the complainants’ living circumstances and assess their ability to manage lumpsum benefits.

The Adjudicator stated that there is no evidence to suggest that the complainants were mentally incapacitated nor had a curator appointed to administer their financial affairs.

Further, where a major dependent’s benefit allocation will not be paid in a lump sum, written prior consent must be given. Thus, the board failed to exercise its discretion properly.