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IOL News
05-07-2025
- IOL News
Point of view: PFA orders pension fund to reassess death benefit allocation due to inadequate investigation
The Office of the Pension Funds Adjudicator has ordered a pension fund to reassess its death benefit allocation after finding it failed to properly investigate the financial dependency of the claimant and her children on the deceased. Image: File The Office of the Pension Funds Adjudicator (PFA) has set aside the allocation of a death benefit by a pension fund after finding it failed to adequately investigate the financial dependency of a claimant and her children on the deceased. The Adjudicator, Muvhango Lukhaimane, ordered the Private Security Sector Provident Fund to reassess the matter and make a fair allocation based on dependency. The dispute arose after the complainant, who claimed to be the life partner of the deceased, challenged the distribution of a R254,609.51 death benefit following his passing. The deceased was a member of the provident fund through his employer, Night Guard CC. The fund had distributed the benefit as follows: 10% to the life partner (unemployed) 23% to the deceased's employed adult son 25% to his minor daughter (a scholar) 14% each to three stepchildren, including two toddlers and one scholar The complainant objected to this distribution, asserting that the deceased had named her as the 100% beneficiary of his fund benefit and claimed to have documentary evidence. She also questioned the payment to the deceased's 24-year-old employed son, who, she argued, was not financially dependent on his father at the time of death. She further explained that she currently receives only R2,800 per month from the beneficiary fund, a sum that merely covers school fees, and that the deceased had supported her and her four children, intensifying her financial distress after his death. In response, the fund acknowledged that the deceased had been living with the complainant and her children and had indeed supported them as his own. The fund said it had based its allocation on legal and/or factual dependency at the time of death. However, in her ruling, Lukhaimane stressed that: 'The fact that a person qualifies as a legal or factual dependant does not automatically give them the right to receive a portion of a death benefit. The deciding factor is financial dependency," she says. She confirmed that the deceased had been cohabiting with the complainant and her four children and had provided for them, giving them a legitimate right to be considered for the benefit. 'The deceased and the complainant were living together as husband and wife, and the deceased looked after her four children. There was no dispute that she was the deceased's life partner at the time of his death. Thus, the complainant qualified as a factual dependant," she says. Despite this, Lukhaimane pointed out that financial dependency still needed to be proven. She noted that the couple had previously divorced and had not remarried, and that the complainant was married to someone else at the time of the deceased's death. Though separated from her legal husband, with whom she had three children, she had moved back in with the deceased. Lukhaimane underlined the board's obligation to conduct a thorough investigation before distributing death benefits: According to Lukhaimane, in the present matter, the marital circumstances of the complainant are not clear. It is not clear how long the deceased had been living with the complainant prior to his death. Since the complainant was still married to someone else, he would ordinarily be responsible for her maintenance and the maintenance of their children together. 'Without proof of the extent of her and her children's dependency on the deceased, the fund must err on the side of caution and assume that those with the legal responsibility to maintain the complainant and her children are taking care of that and not necessarily the deceased.
IOL News
14-06-2025
- Business
- IOL News
Adjudicator criticises pension fund for ignoring complaints
The South African Local Authorities Pension Fund faces scrutiny after the Office of the Pension Funds Adjudicator reported it to the FSCA for failing to respond to multiple complaints, raising concerns over its compliance and fiduciary duties. Image: Pexels The Office of the Pension Funds Adjudicator (OPFA) has come down hard on the South African Local Authorities Pension Fund for ignoring repeated requests for information, in what it describes as serious non-compliance with regulatory obligations. Adjudicator Muvhango Lukhaimane reported the fund to the Financial Services Conduct Authority (FSCA) after it failed to respond to multiple enquiries from her office in the course of investigating a complaint. 'There were several complaints against the fund,' Lukhaimane says. 'And the lack of response from the fund reflects a disregard for the Pension Funds Act, its rules, and the best interests of members.' The complaint in question was brought by a former South African Police Service employee who believed his withdrawal benefit had been improperly calculated. He asked the OPFA to determine whether his employer had consistently paid overall contributions to the fund, a factor that would directly affect the value of his benefit. Despite being called upon to respond, the fund failed to file any response to the OPFA's request. As a result, the adjudicator proceeded to determine the matter without their input. Lukhaimane described the fund's behaviour as 'intolerable,' saying it suggested multiple contraventions of the law and showed poor standards of fiduciary duty. 'The fund's unreasonable delay in responding to the complaint could not be entertained as it prejudiced the complainant,' she added. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Noting the volume of cases her office handles, Lukhaimane stressed the importance of timely cooperation. 'It is, therefore, incumbent upon pension funds and administrators to ensure that enquiries from the Adjudicator are properly and adequately responded to. This is especially so since boards of funds and Principal Officers are required to be fit and proper.' She says: 'The failure to respond to enquiries and to timeously response to complaints by such persons is a failure to uphold their fiduciary responsibilities. It impedes the Adjudicator's ability to deliver on its mandate, and if allowed to continue, will render the Adjudicator ineffective. It also constitutes a barrier to the complainant being able to have their complaint properly resolved.' Lukhaimane also raised concerns about systemic issues within the fund's administration. 'When the administrative wheels of a fund come off, it starts with the fund's failure to respond to complaints that require data from its administration system relating to payment of contributions.' She named the fund's administrator, Fairsure Administration (Pty) Ltd, saying: 'All indications are that there is an issue with the receipt and allocation of contributions. It is, therefore, imperative that the FSCA acts with haste to avoid further prejudice to members.' In her ruling, Lukhaimane ordered the fund to reconcile all contributions and advise the employer of any shortfalls. The fund must also furnish the complainant with a full breakdown of both his contributions and withdrawal benefits. In addition, the employer has been ordered to pay any outstanding contributions to the fund, which in turn must credit the complainant for any shortfall. PERSONAL FINANCE
IOL News
31-05-2025
- General
- IOL News
Understanding the allocation of death benefits in South African retirement funds
Explore the complexities of death benefit allocation from retirement funds in South Africa, and understand the legal obligations of trustees and the rights of dependants. Image: Independent Newspapers. It is a sad event when a loved one, especially a parent, passes away. Dealing with grief, family members, funeral arrangements, insurance companies, and the retirement fund of your deceased parent can increase the anxiety levels of adult children who must take control of a situation that most of us cannot fully prepare for. Emotions are high, and we try to control everything. One thing we cannot control is the allocation and payment of the death benefits by the retirement fund of our deceased parents. In terms of section 37C of the Pension Funds Act, the trustees of a retirement fund have the obligation and discretion, to: Find the dependants and nominees of the deceased member; Allocate death benefits to qualifying dependants and nominees in a just and equitable manner; and Pay the allocated benefits to the qualifying dependants and nominees. Section 1 of the Pension Funds Act defines a dependent, about a fund member as: The spouse of the member. The child of the member. A person in respect of whom the member is legally liable for maintenance, for example, an ex-spouse who is legally entitled to maintenance in terms of a divorce order. A person in respect of whom the member is not legally liable for maintenance if such a person was, in the opinion of the fund trustees, factually dependent on the deceased for maintenance, for example, a stepchild. A person regarding whom the member would have become legally liable for maintenance had the member not died. The Supreme Court of Appeal stated in the Guarnieri ruling that the purpose of section 37C of the Pension Funds Act is to protect existing and potential dependants and that it serves a social function to protect dependency, even over the clear wishes of the member. When allocating death benefits, the Office of the Pension Funds Adjudicator has identified the following factors that fund trustees must consider when making just and equitable death benefits allocations: The age of the dependants. Minors and dependants who are retired must receive greater consideration than adult dependants who can earn an income to support themselves. The relationship with the deceased. The spouse and children of the deceased should rank above the parents and siblings of the deceased member. The extent of the dependency. A minor child who was 100% dependant on the deceased for maintenance is treated differently from an adult child who earns an income and is only partially dependent on his or her parent for maintenance. The wishes of the deceased. The persons nominated by the member in a nomination form or a will must be considered for an allocation of benefits if the needs of dependants have been met. The financial affairs of the dependants, including their future earning potential. An adult child of the member has a higher future earning potential than the spouse of the member, who is no longer able to work, and the spouse should thus receive more consideration than the adult child. The amount available for distribution. The death benefit must first be applied to ensure that the future needs of dependants are catered for. If there are surplus funds, the nominees of the deceased who are not dependants, can be taken into account for a benefit allocation. Nominees who are not dependants can therefore be excluded from receiving benefits where the death benefit is small. In the case of Dlamini v South African Local Authorities Pension Fund and Others, the Financial Services Tribunal had to determine if the Pension Funds Adjudicator's decision that the death benefit allocation decision of the fund was just and equitable must be upheld. The eldest daughter of the deceased member complained that the decision by the fund trustees to allocate 45% of the death benefit payable by the fund upon the death of her father to his life partner was not just and equitable. The complainant claimed that the decision of the trustees was based on false documentation, that the dependency of the life partner was overexaggerated, and that the fund contradicted itself in the submissions submitted to the Tribunal. The Tribunal ruled that the onus was on the complainant to prove that the decision of the trustees was not just and equitable. It found that the life partner of the deceased member submitted an affidavit of dependency and that she and the deceased member lived together for a period of two years at the time of his death. The complainant failed to provide any evidence that proved that the deceased member and the life partner were not in a relationship, did not share household expenses, and never resided in the same house.
