Woman waits 27 years for death payout

IN A RECENT determination, Pension Funds Adjudicator Muvhango Lukhaimane has severely criticised a pension fund that delayed paying out a death benefit for an astonishing 27 years.

The determination also emphasises the duty of funds to actively trace beneficiaries of deceased members.

When a retirement fund member dies, two amounts of money normally become due: the member’s accumulated retirement savings, known as “pension interest”, and a life insurance payout.

Together, these make up the member’s “death benefit”, which may be a sizeable sum of money.

Section 37C of the Pension Funds Act governs the distribution of death benefits. Funds must not only take into account beneficiaries named on the nomination form, but also relatives or other people who were financially dependant on the deceased.

Unless there are exceptional circumstances, the fund must finalise the matter within a year of being notified of the member’s death.

In a recent case, the distribution was “put on hold” seemingly indefinitely, to the detriment of dependants who needed the money.

The 27-year wait

In February, the Pension Fund Adjudicator issued a scathing determination against the Metal Industries Provident Fund following a complaint by Ms T disputing the amount she received after claiming her late father’s death benefit. She had submitted the claim in April 2022 and received two lumpsum payouts in 2023; her father had died in May 1995.

The fund was notified of Ms T’s father’s death in 1996 and a death benefit, worth about R1.7 million at today’s value, became due.

The fund allocated the bulk of the amount (76%) to Ms T, with the rest going to a nephew, Tshililo (16%), and a brother of the deceased, Mpho (8%).

It appears the fund was unsuccessful at contacting Ms T, the main beneficiary, at the time.

In her complaint to the adjudicator, Ms T said she only found out which fund held her father’s death benefit in February 2022 after making enquiries with different funds.

More than a year after submitting her claim, in May and August 2023, she received two lump-sum amounts totalling her 76% portion.

Ms T asked the adjudicator to investigate the complaint and order the fund to pay her the remaining balance of the benefit, as she believed she was the sole beneficiary.

On contacting the fund, Lukhumaine’s office discovered that the reason it had sat on the entire death benefit for so long was because it had been unsuccessful in tracing Tshililo and Mpho.

At this point it must be noted that it is the duty of the fund to actively distribute the benefit within 12 months after taking reasonable steps to trace beneficiaries and dependants.

A retirement fund is not like an insurance company, which pays out only once a claim has been received and validated. A retirement fund cannot wait for a beneficiary to submit a claim before paying a benefit.

In her determination, the adjudicator pointed out that if there is no duty on the fund to make payment after the 12 months period has lapsed if it is of the opinion that there is a need for further investigation.

In this case, however, the fund had failed to provide cogent reasons that prevented it from timeously concluding its investigation.

‘Unconscionable conduct’

Lukhaimane said she “viewed in a dim light” the conduct of the fund in taking such a long time to finalise the matter.

“The board has not made any effort to trace the other two beneficiaries, except to rely on the information provided by the complainant.

“For the board to wait for more than 27 years until it was approached by the complainant is inexcusable and unconscionable.

“It is clear that the board failed to conduct a proper investigation within a reasonable time – to the extent that there is an allegation that one of the beneficiaries is homeless and living on the streets while there is a benefit due to him.

“The fund must make efforts to obtain further information on the two beneficiaries. This is clearly an untenable situation that requires positive action by the board … It does not appear that the board has any plans to progress the matter except to wait for the dependants to pitch.

“For the board to do nothing but wait when the benefit is needed for maintenance is a dereliction of fiduciary duties,” Lukhaimane said in her determination.

She ordered the board to trace the remaining beneficiaries by February 2025, reporting to her office on progress in the matter.

If Tshililo and Mpho were traced, the fund was ordered to re-exercise its discretion in deciding on an equitable allocation of the death benefit.

If the two beneficiaries could not be traced, the board had to allocate the remaining benefit to Ms T.