2 OF 2021
Boards should not rely on information provided by the beneficiaries, but rather investigate independently
Dingani (Complainant) v Auto Workers Provident Fund (Fund)
The Complainant is the deceased’s mother, and she is dissatisfied with the board’s decision to allocate a portion of a death benefit to the deceased’s customary spouse. She also submitted that the Fund did not communicate to her the total value of the death benefit and the percentage allocation.
Allocation of benefit
The Fund submitted that it initially received a claim form from the Complainant stating that the deceased was not married and had no children. Upon its investigation, it traced a potential dependant who claimed to have been co-habiting with the deceased, was in a customary union and financially dependent on the deceased.
The board allocated the death benefit between the Complainant and the deceased’s customary law widow. The board stated that it advised both the identified beneficiaries of its decision and has no record of any queries or objections raised by either party. The board subsequently paid the benefit to the Complainant and the deceased’s customary wife.
The Complainant submitted that she was dependent on the deceased, as she received food and clothes from the deceased. The financial assessment completed by the deceased’s customary law widow indicated that she was not totally financially dependent on the deceased, as she is employed and also involved in informal trading.
The Adjudicator held that:
- it appeared as though the board had relied only on the information provided by the Complainant and the customary law widow to allocate the death benefit, without any proof of financial dependency on the deceased;
- the board could have requested proof of financial support from the Complainant and the customary law widow, to establish their extent of dependency on the deceased;
- the failure to conduct a proper investigation amounts to an act of maladministration on the board’s part;
- the board had acted irrationally and misdirected itself in allocating the death benefit to the Complainant and customary law widow; and
- the board must investigate the extent of the Complainant’s and customary law widow’s dependency on the deceased.
Lack of communication
Section 37C does not place an obligation on the board to provide any information to potential beneficiaries of a death benefit when identifying the deceased’s dependants.
The Adjudicator relied on section 7D(1)(c) of the Pension Funds Act and PF Circular 86 which provides that funds must, after identifying to whom the benefit must be paid, communicate with those beneficiaries as and when required.
In terms of section 7D(1)(c):
“The duties of the board shall be to:
(c) ensure the adequate and appropriate information is communicated to members and beneficiaries of the fund informing them of their rights, benefits and duties in terms of the rules of the fund, subject to such disclosure requirements as may be prescribed.”
PF Circular 86 provides:
“After the trustees have decided to whom the benefit is payable in terms of section 37C, the beneficiaries/dependants who are to share in the benefit must each receive a letter notifying them of the decisions made by the Trustees and setting out all the options available. Similar statements must be made as envisaged for retirement where the benefit is an annuity of lump sum.”
The Adjudicator found that the Fund ought to have notified the Complainant (as a beneficiary) of the value of the death benefit.
She set aside the board’s decision to allocate the death benefit to the Complainant and deceased’s customary law widow and ordered the board to investigate the extent of the Complainant’s and customary law widow’s dependency on the deceased.
A board cannot merely rely on the information that is provided to the fund, without an investigation into the truth of that information and without proof of the extent of the potential beneficiaries’ dependency on the deceased.
A board must communicate with the deceased’s beneficiaries, once it has been established that they are beneficiaries, and this includes providing them with information regarding the total value of the deceased’s death benefit and the percentage allocation.
Boards must investigate the extent of beneficiaries’ financial dependency
Ngubane (Complainant) v AVI Ltd Provident Fund (Fund)
The Complainant is the deceased’s spouse, and she was dissatisfied with the distribution of the deceased’s death benefit.
The Complainant queried the quantum of the benefit that was paid to her and why a portion of the benefit was retained in the event of an additional beneficiary being located or traced in future. The Fund provided her with a list of the deceased’s beneficiaries and there was a name that had “spouse 2” reflected next to it.
She instructed a private investigator to investigate the whereabouts of the second spouse. However, the private investigator corresponded with the Fund and refused to provide her with the information. She was not aware of the second spouse and neither the deceased nor his relatives had mentioned the second spouse to her.
She submitted that the board refused to disclose the reasons for the allocation to the second spouse, based on the Protection of Personal Information Act (POPIA).
The Complainant wanted to know:
- the name of the second spouse and who decided that the other spouse was entitled to a portion of the death benefit;
- how long it took the board to conclude that all beneficiaries have been identified before payment was made; and
- why the board was enforcing the provisions of the POPIA against her.
The Fund submitted that section 37C requires that the board, when conducting its investigation, must take all reasonable steps to enable it to identify all the beneficiaries of the deceased, taking into account the deceased’s nomination of beneficiary form.
The deceased had completed a nomination of beneficiary form and had nominated his children and the second spouse as his dependants. The board conducted further investigations in order to ascertain if there were other dependants, who were not listed by the deceased. The deceased had not nominated the Complainant as his dependant in his nomination of beneficiary form. However, the board noted her as a legal dependant, as she is the deceased’s civil spouse. The board submitted that the deceased identified the second spouse as a dependant in the nomination form and described the deceased’s relationship with her as his wife.
The board interviewed the second spouse and she confirmed that the deceased paid lobola for her. The board submitted that one of the deceased’s sons and the deceased’s brother confirmed that lobola was paid for the second spouse.
According to the board, the investigation revealed that the second spouse lived with the deceased after lobola was paid for her. At the time that the second spouse moved in with the deceased, the Complainant had moved out of the family home. This was confirmed by the brother of the deceased. The board was also informed that the second spouse subsequently moved out of the family home. However, the deceased continued to support her financially and that included buying her necessities on a monthly basis, as she was unemployed.
The board was satisfied that the second spouse was financially dependent on the deceased and allocated 15% of the death benefit to her.
The board had retained 10% for any further claims, in case there was another beneficiary that the board might have missed at the initial stage. Once the board was satisfied that there were no other beneficiaries, the 10% retained was distributed to the Complainant and the deceased’s minor son.
The Adjudicator held that it was clear that neither the Complainant, nor the second spouse, were living with the deceased at the date of his death. She found that the board failed to determine the extent of financial dependency of the Complainant and the second spouse on the deceased.
The Adjudicator stated that the board had considered the nomination form, the amount available for distribution, the number of beneficiaries, their ages and their relationship with the deceased and was satisfied that they had conducted a proper investigation in terms of section 37C of the Act and that an equitable distribution of the death benefit had been made insofar as the deceased’s children were concerned.
The Adjudicator however, held that the information in respect of the beneficiaries in the allocation of a death benefit should be disclosed to all beneficiaries and cannot be withheld in terms of the POPIA.
The Adjudicator was satisfied with the board’s decision to retain 10% of the benefit for a further 12 months and that such benefit was subsequently paid.
The Adjudicator was however not satisfied that the board conducted a proper investigation in terms of section 37C of the Act, in respect of the Complainant and the second spouse, considering the extent of their financial dependency on the deceased. As a result, she set the board’s decision aside and ordered the board to reinvestigate the extent of the Complainant and the second spouse’s financial dependency on the deceased.
Funds cannot rely on POPIA to refuse to provide information to other beneficiaries. Beneficiaries must be in a position to protect their rights and as such, the minimum information required to do that, must be provided.
Boards must apart from all the other factors to be taken into consideration, also determine the extent of beneficiaries’ financial dependency on the deceased.
Our view is that beneficiaries however, in the spirit of POPIA, do not need to know the personal information of other beneficiaries, in order to protect their rights. It is recommended that boards disclose the amount of the death benefit and the percentage allocation to all beneficiaries, but that if a beneficiary requests personal information with respect to the other beneficiaries, the board should consider the provisions of POPIA and whether to obtain written consent from the relevant beneficiary to do so.
Trustees must actively trace dependants and investigate their extent of dependency on the deceased
Khwela (Applicant) v Toyota SA Provident Fund (Fund), NBC and The Pension Funds Adjudicator (Adjudicator)
The Applicant (the mother of the deceased) lodged a complaint with the Adjudicator because she was unhappy with the distribution of the death benefit of the deceased.
In her determination, the Adjudicator upheld the board’s decision to allocate the death benefit to various family members of the deceased.
The Applicant brought an application for reconsideration to the Financial Services Tribunal (Tribunal), on the basis that the Fund’s investigation in establishing her legal dependency on the deceased, his common law wife and four children was inconclusive.
The board submitted that the deceased had nominated the Applicant and five children as beneficiaries of his death benefit. The board identified a further 14 dependants who were factually dependent on the deceased and proceeded to allocate the benefit accordingly.
The board submitted that it had conducted its own investigation and allocated the benefits to the children depending on their extent of dependency and that the evidence was sufficient to demonstrate that the persons identified were dependent on the deceased at the date of his death.
The Applicant submitted that the board’s findings in relation to legal dependency were inconclusive, because it had not established with certainty whether the deceased was in fact the father of the minor children.
The Tribunal held that the board is obligated by law to undertake its own investigation and ensure that there is an equitable distribution of the death benefit to the beneficiaries. Section 37C requires that a board actively trace dependents and investigate the extent of their dependency on the deceased member.
The Tribunal held that it was only in cases where the board exercised its powers unreasonably and or improperly that the decision could be reviewed.
The board established dependency by relying on affidavits submitted by the Applicant, the common law wife and the children, held interviews and had interactions with the parties. The other dependants were legal dependants to whom the deceased owed a legal duty of financial support and factual dependants to whom he did not owe a legal duty of financial support, but who were financially dependent on him. The board’s allocation was based largely on factual dependency and paternity was not the sole determining factor.
The Tribunal confirmed that dependency in respect of the minor child was established by the board and that the minor child was in fact a legal dependant of the deceased. It also confirmed that the board had established dependency of the other children by relying on affidavits submitted by the Applicant, the customary wife and the children, who all confirmed factual dependency.
The Tribunal held that there was no concrete evidence placed before the Adjudicator, or the Tribunal, that illustrated that the board had made uninformed and incorrect distributions. It was found that the board arrived at a proper and lawful decision.
The Tribunal dismissed the application for reconsideration.
A board must conduct its own investigation regarding the deceased’s beneficiaries and their extent of dependency.
Establishment of financial dependency is sufficient, and paternity is not a deciding factor.
Withholding of benefits
Anax Logistics Services (Employer) vs XJ Qubeka (Member), NBC Umbrella Retirement Fund (Fund), NBC Fund Administration Services and the Pension Fund Adjudicator (Adjudicator)
The Employer and Fund lodged an application to the Tribunal to reconsider the Adjudicator’s decision, following her determination wherein she ordered the Fund to release the Member’s withheld benefit. The Employer and Fund were seeking an order that the Adjudicator’s decision be set aside and that the matter be remitted to the Adjudicator for redetermination.
The Adjudicator’s decision was based on the grounds that the Fund did not comply with the audi alteram partem rule (“listen to the other side”). She also found that it did not inform the Member that his withdrawal benefit had been withheld pending the finalisation of legal proceedings against him and did not ask him for his input.
The Tribunal held that the failure to comply with the audi alteram partem rule cannot be rectified by a default judgment, or an arbitration order as it was done in this matter.
The Tribunal confirmed the following that:
- it will continue referring to and applying the audi alteram partem rule until it is set aside by a higher authority;
- a fund has no legal interest in withholding payment and no legal standing to apply for reconsideration;
- a fund is not, in respect of the withholding of the withdrawal benefits, a person aggrieved as required by the Financial Sector Regulation Act and therefore has no legal standing; and
- The Fund is not the agent of the Employer and as far as issues regarding the Employer and Member are concerned, should act independently.
As a result, the Tribunal dismissed the application.
Funds should comply with the audi alteram partem rule and afford members an opportunity to state their case. A section 37D document setting out how boards should deal with deductions will be circulated.
A fund has no legal standing in withholding matters and therefore should not apply for reconsideration.
Funds should act independently and not in the interest of the employer.