Pension fund death benefit – Rights of dependants, nominees and children clarified

Does the PFA have the power to substitute a board of trustee’s decision? Can the PFA change the decision with regards to the allocation of death benefits? When are adult children regarded as dependents and when not? These questions were recently addressed by the FSCA Tribunal.

The death benefit and the allocation

On the death of Mr T, his death benefit became available. The deceased had nominated three beneficiaries, namely Ms P (the Applicant) and his two adult daughters and had instructed in his pension nomination form that the benefits be allocated in proportions of 33% to each of his beneficiaries.

However, the pension fund, after investigations, allocated 70% to the Applicant and 15% each to the two daughters of the deceased. This allocation was contrary to the instructions of the deceased as indicated above.

Considerations by the pension funds

The deceased, Mr T, was the father of two adult women (his daughters) and a life partner of Ms P, the current Applicant. The deceased was divorced from the mother of the daughters.
Before his death, the deceased instructed his attorney to ensure that on his death Ms P would have a usufruct giving her the right to stay in their home for the rest of her life.
He also instructed that 50% of the cash remaining in his estate be allocated to Ms P while the other 50% was to be made available to his daughters.
The pension fund was about to allocate 100% of the amount to Ms P, when the daughters halted the process for further investigation.
As a result of the objections by both the daughters and Ms P, the board of trustees undertook to do a further investigation.
Although the report of the investigation indicated that only Ms P could prove her dependence on the deceased and neither the daughters managed to provide concrete proof of factual support to them by the deceased, the pension fund still allocated 15% to each of the daughters and 70% to Ms P.

The Tribunal’s assessment and legal framework

“In our view, the allocation appears like a cop out by the board of trustees and is indicative of an inability to make decisions based on the law and simple logic. It also smells of a desire to bend over backwards to advantage Ms P and disadvantage the daughters,” the Tribunal states in its case documents.

One of the grounds relied on by the board of trustees to exclude the daughters from eligibility to benefit from their father’s death benefit, is that as major children of the deceased, they do not qualify as dependants in terms of section 1(b)(111) of the Pension Funds Act. However, the reasoning is contrary to the provisions of section 1(b) (111) which provides as follows:” “Dependant” in relation to a member, means –

a) a person in respect of whom the member is legally liable for maintenance;
b) a person in respect of whom the member is not legally liable for maintenance, if such person.
i. was, in the opinion of the Board, upon the death of the member in fact dependant on the member for maintenance;
ii. is the spouse of the member;
iii. is a child of the member, including a posthumous child, an adopted child and an illegitimate child;
c) a person in respect of whom the member would have become legally liable for maintenance, had the member not died…”

According to the Tribunal, the word “child” must be understood in its ordinary meaning. It therefore refers to someone’s offspring, irrespective of such offspring’s age. Therefore, the conclusion reached in the pension fund’s investigation report that the two daughters are not the deceased’s dependants because of their status as majors, is obviously wrong. One becomes a dependant of a member of a pension fund by the mere fact that one is such member’s child. Age is not a required in order for a child of a pension fund member to qualify as a dependant. Consequently, the board of trustees’ decision to exclude the two daughters from sharing in their fathers benefit is based on the wrong legal premise.

“If a child of a member of a pension fund has not been nominated by the member, he will of course not be eligible to share in the allocation of the deceased’s death benefit where there are nominees, unless he can demonstrate that he has suffered damages in respect of his maintenance. In casu the daughters were nominees and as such qualified for allocation of the death benefit on this ground also,” the Tribunal mentions.

Furthermore, the Tribunal pointed out that Section 30E(1)(a) of the Pension Funds Act empowers the Pension Funds Adjudicator, after investigating a complaint, to make any order which a court of law may make. The Tribunal agreed that there was sufficient justification to conclude that the board was both incompetent and biased against the daughters and no plausible explanation was provided for their decisions.

Consequently, the application was dismissed.

Click here to download the detailed Tribunal case.

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