Point of view: PFA orders pension fund to reassess death benefit allocation due to inadequate investigation

The Office of the Pension Funds Adjudicator (PFA) has set aside the allocation of a death benefit by a pension fund after finding it failed to adequately investigate the financial dependency of a claimant and her children on the deceased. The Adjudicator, Muvhango Lukhaimane, ordered the Private Security Sector Provident Fund to reassess the matter and make a fair allocation based on dependency.

The dispute arose after the complainant, who claimed to be the life partner of the deceased, challenged the distribution of a R254,609.51 death benefit following his passing. The deceased was a member of the provident fund through his employer, Night Guard CC.

The fund had distributed the benefit as follows:

• 10% to the life partner (unemployed)
• 23% to the deceased's employed adult son
• 25% to his minor daughter (a scholar)
• 14% each to three stepchildren, including two toddlers and one scholar

The complainant objected to this distribution, asserting that the deceased had named her as the 100% beneficiary of his fund benefit and claimed to have documentary evidence. She also questioned the payment to the deceased's 24-year-old employed son, who, she argued, was not financially dependent on his father at the time of death.

She further explained that she currently receives only R2,800 per month from the beneficiary fund, a sum that merely covers school fees, and that the deceased had supported her and her four children, intensifying her financial distress after his death.

In response, the fund acknowledged that the deceased had been living with the complainant and her children and had indeed supported them as his own. The fund said it had based its allocation on legal and/or factual dependency at the time of death.

However, in her ruling, Lukhaimane stressed that:

“The fact that a person qualifies as a legal or factual dependant does not automatically give them the right to receive a portion of a death benefit. The deciding factor is financial dependency," she says.

She confirmed that the deceased had been cohabiting with the complainant and her four children and had provided for them, giving them a legitimate right to be considered for the benefit.

“The deceased and the complainant were living together as husband and wife, and the deceased looked after her four children. There was no dispute that she was the deceased’s life partner at the time of his death. Thus, the complainant qualified as a factual dependant," she says.

Despite this, Lukhaimane pointed out that financial dependency still needed to be proven. She noted that the couple had previously divorced and had not remarried, and that the complainant was married to someone else at the time of the deceased’s death. Though separated from her legal husband, with whom she had three children, she had moved back in with the deceased.

Lukhaimane underlined the board’s obligation to conduct a thorough investigation before distributing death benefits:

According to Lukhaimane, in the present matter, the marital circumstances of the complainant are not clear. It is not clear how long the deceased had been living with the complainant prior to his death. Since the complainant was still married to someone else, he would ordinarily be responsible for her maintenance and the maintenance of their children together.

“Without proof of the extent of her and her children’s dependency on the deceased, the fund must err on the side of caution and assume that those with the legal responsibility to maintain the complainant and her children are taking care of that and not necessarily the deceased.

“Further, the investigation report does not indicate the financial circumstances of the complainant and the extent of her dependency on the deceased, nor the extent of dependency of her children on the deceased. The mere fact that they resided with the deceased under circumstances where she was still legally married to someone else, which marriage meant that they owed each other a reciprocal duty of maintenance, meant that the fund had to investigate all circumstances thoroughly," she says.

On these grounds, Lukhaimane ruled that the fund had not undertaken a sufficient investigation into the financial dependency of the complainant and her children. As a result, the previous allocation was set aside, and the fund has been ordered to re-examine the financial circumstances and allocate the benefit more equitably.

* Maleke is the editor of Personal Finance.

PERSONAL FINANCE