By Clement Marumoagae
While there are several pieces of legislation that established and regulate different retirement funds in South Africa, most retirement funds in South Africa are regulated by the Pension Funds Act 24 of 1956 (hereafter PFA). Section 37C of the PFA provides a legal framework for the distribution of death benefits when retirement funds’ members die. This provision overrules any contrary law or rule that deals with death benefits. It is intended to serve a social function and is designed to protect dependency, even against the clear wishes of the deceased. It specifically excludes accumulated benefits from members’ estates.
The supremacy of this provision operates to limit members’ freedom of testation, any settlement agreement between the beneficiaries, or customary law rule on inheritance. Trustees are duty bound to distribute and pay death benefits in a way they deem fair and equitable. Trustees must identify dependents and those nominated by members to whom they should equitably distribute the available death benefits. Being an overriding provision, section 37C is not impacted by the members’ matrimonial property regimes. It is totally irrelevant for trustees when distributing death benefits, that members are married in community of property. However, marriage is an important factor that can establish dependency.
The Office of the Pension Funds Adjudicator provided some guidance on how trustees can exercise their discretion. When distributing death benefits, trustees are urged to consider the age of dependants; the relationship of those dependents with the deceased; the extent of those dependents’ dependency of the deceased; the wishes of the deceased contained either in the nomination and/or last will and; financial affairs of the dependants including their future earning capacity potential. This approach has been endorsed by various divisions of the High Court.
Unfortunately, notwithstanding the quasi-judicial and judicial guidance, different boards of retirement funds continue to distribute death benefits is a way that can be described as arbitrary. The first major challenge is that it is not entirely clear what informs trustees decisions to allocate available death benefits. At times, some dependents and nominees are excluded from the allocation, and some are provided more benefits than others while others are provided the entire benefits. Dependants and nominees often lodge complaints against distribution decisions of the trustees, where they express their unhappiness with the way the distribution was effected.
Dependents who have been excluded from the distribution or provided less benefits that other beneficiaries have a right to challenge such distributions at the specialised tribunals or courts. We assist our clients who wish to complain against the way retirement funds have decided to distribute death benefits by engaging such retirement funds and instituting legal proceedings. We write adequate letters to such funds, lodge complaints with the Office of the Pension Funds Adjudicator and ultimately litigate pension related disputes at the High Court.
Should you wish to find out more about the distribution of death benefit, please do not hesitate to contact us.
