Nominated beneficiaries are not automatically entitled to benefits

GZ complained to the adjudicator that she was married to BZ in community of property and was not aware of any loans made to him from the fund. During their marriage, they had not owned a home but stayed in a house provided for by a family member.

De la Rey asked the Nampak Contributory Provident Fund for a copy of the loan agreement and was provided with a list of 12 different loans ranging from less than R3 000 to R20 000, taken over a period of 10 years.

She says it is apparent from the submitted list of the loans that they could not have been for any of the purposes provided for in the Pension Funds Act.

The fund and its administrator conceded as much, she says, because they state that it was not their duty to verify the purpose for which the loans were used.

But De la Rey says the Pension Funds Act does require funds that grant such loans to be satisfied that the loans are for housing purposes.

“No questions seem to have been raised by the frequency of the loans and the amounts involved, which ought to have alerted any responsible person that the loans could not have been for housing purposes,” she says.

As a result, the acting adjudicator If a retirement fund member nominates you as a beneficiary, it does not necessarily mean that you will receive a death benefit. Trustees are obliged to consider the nominated beneficiaries, but they are bound by law to distribute death benefits to the dependants of the retirement fund member.

Nominated beneficiaries who are not dependants of a deceased member may not receive any benefits if the trustees decide that the dependants need all the money the fund will pay out.

This was the case in a complaint that came before the office of the Pension Funds Adjudicator recently.

Elmarie de la Rey, the acting adjudicator, dismissed the complaint brought by the daughterin-law of a member of the Sappi Pension Fund, because the woman’s claim was based on the fact that she was a nominated beneficiary and not on the basis that she was a dependant. The Sappi Pension Fund distributed a death benefit of R108 408, which became available when one of its pensioner members, NK, died in 2010.

The trustees decided to give 80 percent of the benefit to the member’s son, MK, and 20 percent to the member’s adopted daughter, because they were both dependants. The board of trustees told De la Rey that, because the benefit to be distributed was relatively small, no allocation was made to MK’S wife, SK. The trustees had assumed that SK would derive some benefit from the allocation because she shared a home with her husband.

The member had nominated his son and his daughter-in-law as beneficiaries of his death benefit and had stipulated that they should receive 50 percent each.

De la Rey says in her ruling that, although the deceased member may have expressed an intention to benefit certain people in the nomination form, it does not necessarily imply that the nominees will, in fact, be awarded anything.

The deceased’s wishes, as contained in the form, are only one of the factors taken into consideration when allocating a death benefit, the ruling says.

Quoting from a High Court ruling, De la Rey’s ruling says that section 37C of the Pension Funds Act, which deals with the distribution of retirement fund benefits, “was intended to serve a social function. It was enacted to protect dependency, even over the clear wishes of the deceased.

“The section specifically restricts freedom of testation in order that no dependants are left without support … The fund is expressly not bound by a will, nor is it bound 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.”

SK cannot claim to be entitled to a portion of the death benefit because she is a nominated beneficiary of the deceased, and she had not submitted that she was a dependant of the deceased. Therefore, there is nothing to suggest that the trustees of the Sappi fund erred in their decision on how to allocate the member’s death benefits; they acted rationally and arrived at a proper and lawful decision, the acting adjudicator says. – Laura du Preez