Pension funds can’t deviate from beneficiary instructions without proper investigation

Fin24 reports that the Pension Funds Adjudicator has ordered Alexander Forbes to pay a deceased retirement fund member’s benefits as his beneficiary form had ordered, and not according to its own calculations. The latest ruling from the adjudicator, whose role is attending to pension fund complaints, concluded that Alexander Forbes Retirement Fund paid a deceased member’s R662 122.97 according to its board of trustees’ calculations, deviating from what they were ordered to on the beneficiary nomination form. They paid 57% of the benefits to the deceased member’s partner and 21.5% to each of his two sons. Yet the member had stipulated that his sons should get a quarter of his benefits each, and the partner he intended to marry should take half.

But the fund did its own investigation and found that there were four people who could potentially lay a claim on the money. However, the deceased’s former spouse was not financially dependent on him, leaving the partner and two sons as the only eligible beneficiaries. The sons were unemployed and financially dependent on their father. The partner was also unemployed and financially dependent on the man until his death. She was also approaching retirement age. The board of trustees believed that she should get more money because the sons were young and still had more earning potential, despite the instructions on a beneficiary form completed on 8 July 2020. The fund then used a benefits calculator to determine how much more the partner should get, given that her age meant a higher dependency on the deceased member.

But Pension Funds Adjudicator, Muvhango Lukhaimane, said that while section 37C of the Pension Funds Act gives the board the discretion to distribute and allocate death benefits equitably, the beneficiary nomination form was binding. However, Lukhaimane might have ruled differently had the board carried out “proper investigations” instead of relying on its benefit calculator. The adjudicator said that without that proper investigation, it is unclear whether following the instructions on the beneficiary nomination form was appropriate in this case. She said the fund cannot merely rely on a calculator that predetermines entitlements to portions of a salary depending on a beneficiary’s status to calculate the extent of a beneficiary’s dependency on the deceased. What muddied the water more, in this case, was that the sons alleged that the partner owns a business. Lukhaimane said it is not clear whether the board considered the partner’s financial benefits from other sources. 

by Londiwe Buthelezi

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