Secondary

Opinion that a fund’s benefit allocation is unfair isn’t grounds for interfering

Opinion that a fund’s benefit allocation is unfair isn’t grounds for interfering

A decision made by a fund’s trustees can be interfered with only where it can be shown that they have taken irrelevant, improper and irrational factors into consideration, and where it can be shown that no reasonable board of trustees, properly directing itself, would have reached such a decision.

This was said by the Financial Services Tribunal when it dismissed an application for the Pension Funds Adjudicator to reconsider her decision to uphold how the Allan Gray Retirement Annuity Fund allocated a death benefit.

The applicant was unhappy that the fund had allocated only 50% of his partner’s death benefit of about R1.1 million to their nine-year-old daughter.

The fund allocated the remaining 50%, in various percentages, to the fund member’s siblings and nephew, even though the member nominated the child as her sole beneficiary.

When the fund investigated the member’s dependants, it found that the applicant and the minor daughter received payments of R960 000 and R1.44m, respectively, from another RA fund. The daughter also received R1.4m from an insurance policy.

It also found that the fund member had supported her brother, two sisters and two nephews. The fund excluded the applicant (the member’s former partner) and one of the nephews from the allocation, because they were employed.

In his complaint to the Adjudicator, the applicant alleged the fund had made allocations to people who had not proved (via independent documentary evidence) they were financially dependent on the deceased.

However, the Adjudicator was satisfied with how the fund allocated the death benefit.

‘Unreasonable and unfair’

The applicant argued in his submission to the tribunal that:

  • The 50% allocation to their daughter was unreasonable and unfair;
  • The fund should not have taken the other insurance benefits received by the child into account; and
  • The assistance the deceased provided to her family was “occasional”, not regular monthly payments, and therefore they could not be described as dependants.

In addition, although he conceded that dependants are not required to provide independent documentary proof to qualify as such, the Adjudicator should be alert to the risk of fraudulent claims.

Beneficiary nomination not decisive

The tribunal pointed out that the Pension Funds Act is clear that a member’s will or beneficiary nomination cannot override section 37C of the Act, and a fund’s trustees are responsible for deciding how a death benefit must be distributed.

“The primary goal is to ensure that no one who was financially dependent on the deceased member is left without adequate support.”

The tribunal also pointed out that the fund was obliged to consider the proceeds from the other insurance policies when determining the allocation to the daughter.

On whether the support had been occasional or permanent, the tribunal said the fund’s investigation had found that the member supported the identified dependants for 30 years. They were unemployed, and the member’s gross monthly income left no doubt that she was able to support them.

“The applicant has not produced any evidence or affidavit to contradict the evidence presented to the fund by the deceased siblings. The applicant does not allege any illegality, procedural irregularity, error in the application of the law or lack of authority on the part of the Adjudicator.”

The tribunal said the applicant had to provide a factual basis for allegations of fraud and prove them. He could not expect the Adjudicator and the tribunal to infer that there was fraud in an absence of at least prima facie evidence pointing in that direction.

In conclusion, the tribunal said the applicant’s “subjective opinion” that the allocation was unfair and unreasonable was not grounds for interfering with the fund’s decision.

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