The SCA delivers a groundbreaking judgment on pension benefits for deceased members' dependents.
Image: File
A retirement fund has 12 months from the date it becomes aware of a member’s death - not from the date of death itself - to trace dependents and pay out the death benefit.
In a groundbreaking judgment for dependents of pension benefits following the death of a loved one, the SCA has affirmed the Pension Funds Adjudicator’s ruling in this regard. The court dismissed an appeal against the Mpumalanga Division of the High Court’s earlier judgment, brought by the South African Retirement Annuity Fund that had sought to overturn the Adjudicator’s decision.
The Adjudicator found in favour of the complainant, Sophia Viljoen, criticising the fund for bypassing a proper investigation and instead allocating the benefit to the deceased’s estate “through the back door".
The Adjudicator emphasised that the 12-month period refers to tracing beneficiaries, not to a general payment deadline. Since tracing requires investigation, the obligation only arises once the fund learns of the member’s death, it holds. “It is clear that the fund will not know if there are dependents or not without conducting an investigation,” the Adjudicator said, declaring the fund’s decision unlawful.
Marius Viljoen, who died intestate in 2019, left a retirement annuity benefit of R52,120 with no nominated beneficiary. His estate fell below the statutory threshold of R250,000, so no executor was appointed. His widow, reliant solely on a state old age grant, only learned of the benefit through a broker more than two years later and lodged a claim.
The fund repudiated her claim and resolved to pay the benefit into the estate, despite it not being reported to the Master of the High Court. Aggrieved, the widow approached the Adjudicator, who set aside the fund’s decision. The high court confirmed her order, but the fund appealed to the SCA.
SCA Judge Yvonne Mbatha, who penned the judgment, held that the process of identifying and verifying dependents can only begin once the fund has knowledge of the death. To fulfil section 37C of the Act, the fund must identify dependents, determine equitable distribution, and decide on payment. The SCA acknowledged that section 37C could have multiple interpretations. However, it found the fund’s interpretation was illogical and contrary to the Act’s purpose and spirit.
The SCA held that the fund’s interpretation would hinder the fund from fulfilling its mandate to trace dependents and investigate their dependency. The fund could delay taking action until the 12 months lapse and then claim that it was not aware of the death of the member.
The SCA found that the Adjudicator’s order was consistent with the purpose of the Act. The fund’s interpretation could prejudice the dependants of deceased members by allowing the fund to evade its responsibility, the court found.
The SCA further ruled that payment into the estate is permissible only once all statutory avenues to trace dependents and nominees have been exhausted. Judge Mbatha, in slapping the fund with the legal costs, commented that the decision to appeal a judgment where there is a pittance of pension benefit payout was insensitive.
“The fund could have used another matter as a test case,” she said. The judge pointed out that the widow’s lawyer appeared free of charge on her behalf, and she said this legal challenge must have been costly to them.
Pension Funds Adjudicator, Lebogang Mogashoa, meanwhile said: "We believe the judgement provides clarity on this important point of law".
zelda.venter@inl.co.za