‘Back door’ pension fund told to fix error

Rather than conducting a proper investigation to trace who should be allocated a death benefit, a retirement fund decided to go “through the back door” and allocate the benefit to the deceased’s estate.

This was according to Pension Funds Adjudicator Muvhango Lukhaimane following the decision of the SA Retirement Annuity Fund, administered by Old Mutual Life Assurance Company (SA) Ltd, to pay a death benefit into the deceased’s estate following the death of its member.

Lukhaimane ruled the decision to allocate the death benefit to the deceased’s estate unlawful and set it aside.

The complainant was the spouse of the deceased who was a member of the fund until he died on December 26, 2019. Thereafter a death benefit in the amount of R52 120 became available to his beneficiaries.

The complainant was aggrieved with the fund’s decision to pay the death benefit into the deceased’s estate. She submitted that she did not know that the deceased had a policy issued for his benefit under the fund and only got to know of this when she approached her representative for assistance.

The complainant submitted that she was financially dependent on the deceased and was left destitute after his passing. She relied on the State’s social relief grant.

According to the fund, the deceased did not nominate a beneficiary. The fund submitted that it did not investigate the existence of the deceased’s dependants as he died in late December 2019 and the death claim was only submitted on March 28, 2022.

It submitted that this was after the expiry of the 12-month period since the passing of the deceased. Thus, it applied section 37C(1)(c) of the Act applicable to cases where no beneficiary is nominated, and it does not become aware of the death of its member and consequently does not become aware of the deceased’s dependants.

The fund submitted that the sub-section dictates that if within 12 months of the death of a member, it has not become aware of any dependant, it must pay the death benefit to the estate.

The fund submitted that on July 18, 2022, it concluded that section 37C(1)(c) applied in this matter and allocated the death benefit to the deceased estate.

In her determination, Lukhaimane said the rules of a fund are supreme and binding. If the fund, within 12 months of the death of the member, becomes aware of or traces a dependant or dependants of the member, the benefit shall be paid to such dependant or dependants.

“It is common cause that the fund can only know of the death claim if it is notified of same. Upon receipt of the death benefit claim, the board must then investigate in terms of section 37C of the Act.

“In this matter the fund confirmed that it did not trace the deceased’s dependants simply because it was notified of his death more than 12 months after his death. Thus, it applied Section 37C(1)(c) of the Act.”

Lukhaimane found that the fund misapplied Section 37C(1)(c) of the Act as it misinterpreted this.

“The fund missed the first part of the sub-section, stating, ‘If the fund does not become aware of or cannot trace any dependant of the member within 12 months of the death of the member’ ....

“It is clear that the fund will not know if there are dependants or not without conducting an investigation,” said Lukhaimane.

Citing case law, she said the 12-month period does not refer to the general time period of payment, but rather the period to trace beneficiaries.

The 12-month period to trace beneficiaries runs from the time when the fund learns of the death of the member, not the date of the death itself because the obligation to act cannot be triggered if there is no knowledge of the member’s death.

“Thus, the 12-month period within which the fund had to trace the deceased’s dependants ran from March 28, 2022 when it was notified of the death. The fund’s interpretation of section 37C(1)(c) of the Act is clearly an error in law. It has the potential of prejudicing dependants of a deceased member.

“The fund must ... be ordered to conduct an investigation in terms of section 37C of the Act and to pay the death benefit to the deceased’s beneficiaries,” said Lukhaimane.

Cape Times