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PENSION FUNDS: A Pension Fund Has a Duty to Protect Dependents


Recent Gauteng Business News

A pension fund is under no obligation to strictly adhere to a will or a nomination form when deciding on the allocation of death benefits.
This was stressed by Dr Elmarie de la Rey, acting Pension Funds Adjudicator, in a ruling after an aggrieved daughter-in-law complained she had been excluded as a beneficiary.

Mrs S Kock of Standerton had complained to the Office of the Pension Funds Adjudicator that she was dissatisfied she had not been allocated a portion of the death benefit when her father-in-law died despite the fact that she was a nominee for 50% of the death benefit.
NC Kock passed away on 30 November 2010 while he was a pensioner of the Sappi Pension Fund (first respondent). He was survived by his two children.

Understanding Who Receives the Pension Fund Benefit

After the deceased’s death a sum of R108 408.09 became available for distribution. After investigation the trustees decided to allocate 80% of the benefit to Martin Kock, the deceased’s son who is married to the complainant, and allocated the remaining 20% of the benefit to Elmarie Beytell, the adopted child of the deceased. The allocations were made to the beneficiaries in their capacity as dependants of the deceased.

The board of trustees recognised the complainant as a nominated beneficiary and spouse of Mr Kock.

The Office of the Pension Funds Adjudicator was informed by the first respondent that several nomination forms were received from the deceased. Some included Mr Kock and the complainant as nominees and some included Ms Beytell as a nominee.

The last nomination form mentioned Ms Beytell as a dependant but the deceased only nominated Mr Kock and the complainant.

The complainant only qualified as a nominee but Mr Kock and Ms Beytell were legal dependants of the deceased, so the trustees decided to allocate 80% of the benefit to Mr Kock and 20% to Ms Beytell.

The amount available for distribution was relatively small, so no allocation was made to the complainant.

Since the complainant was married to Mr Kock, the board assumed she would receive some benefit from the allocation through sharing the same household.

In the board’s view Ms Beytell had to be taken into account as a dependant so 20% of the benefit was allocated to her.

In her determination, Dr De la Rey said the payment of death benefits was regulated by section 37C of the Act.

“It is the board of management’s responsibility when dealing with the payment of death benefits to conduct a thorough investigation to determine the beneficiaries, decide on an equitable distribution and finally to decide on the most appropriate mode of payment of the benefit payable.

“The primary purpose of section 37C is to protect those who were dependant on the deceased during her lifetime.

“In effect, section 37C overrides the freedom of testation or wishes of the deceased as contained in a nomination form.

“Thus, although the deceased may have expressed an intention to benefit a certain beneficiary in the nomination form, it does not necessarily imply that the nominee will in fact be awarded anything because the deceased’s wishes as contained in the nomination form is only one of the factors taken into consideration when allocating a death benefit.”

Dealing Without a Will for Pension Fund Beneficiaries

Quoting case law, Dr De la Rey said the fund was “expressly not bound by a will, nor by the nomination form”.

“The contents of the nomination form are there merely as a guide to the trustees in the exercise of their discretion.”

Dr De la Rey said the complainant could not claim to be entitled to a portion of the death benefit only because she was the nominated beneficiary of the deceased.

“Dependency is the overriding factor when it comes to the distribution and allocation of a death benefit.

“The complainant has not submitted that she was in any way dependent on the deceased.

“She merely claims the benefit on the basis that she is the nominated beneficiary. It is common cause that Mr Kock and Ms Beytell are the deceased’s children and qualify as legal dependants of the deceased.”

The tribunal found that there was nothing to suggest that the trustees of the first respondent for the pension fund had erred in allocating 80% of the death benefit to Mr Kock and 20% to Ms Beytell.

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