Beneficiary nominations for your retirement fund are a guide and not set in stone
The fund trustees have the discretion to award benefits pending their investigation as to who is actually financially dependent on you at the time of your death.
There were a few notable determinations included in the Pension Fund Adjudicator’s annual report for 2022/2023. The two issues that stand out are those related to divorce orders and employers withholding retirement benefits due to criminal charges.
Both these issues keep coming up; more so with divorce orders in the current age of second marriages and cohabitation arrangements.
Divorce orders and life partners
The complainant was divorced from the deceased member of the retirement fund. She claimed that during their marriage the deceased was financially irresponsible and that she had taken out a retirement annuity policy in his name, paid the contributions and made it paid-up prior to their divorce.
She submitted that in their divorce settlement, they agreed that if her ex-husband died before her, the benefit would be paid to her. She intended to divide the benefit between their two sons who were aged 21 and 23 at the time.
She claimed that since she paid for the policy, was the nominee on the policy, was named in his will and was recorded in the divorce settlement as a beneficiary, she should have been awarded the death benefit.
However, the deceased fund member had an 18-month relationship with a “life partner” before he died, and they were engaged to be married.
The fund submitted that although the complainant was married to the deceased for 21 years, she was not financially dependent on him at the time of his death, nor was there a maintenance order in her favour following their divorce. The children submitted affidavits to the fund stating that they were not financially dependent on the deceased.
The fund submitted that the deceased’s life partner shared a joint household with him, and they shared expenses. Based on certain assumptions concerning the permanent life partner’s level of dependency on the deceased and her projected life expectancy, the life partner’s dependency was calculated by the fund to be R657,094. Considering that the amount available for distribution was only R91,761, the fund allocated 100% of the benefit to the permanent life partner.
It is important to note that although you are required to submit beneficiary nominations to your retirement fund, these are considered a guide and are not binding.
The fund trustees have the discretion to award benefits pending their investigation as to who is financially dependent on you at the time of your death.
Pension funds adjudicator, Muvhango Lukhaimane, said the permanent life partner was entitled to be considered for an allocation of benefits and the length of her relationship (with the deceased) did not matter. They shared a household and expenses.
“The fact that the complainant was nominated does not automatically give her a right to receive a portion of the death benefit. Considering that the complainant and her children were majors who were not dependent on the deceased at the time of his death, and that the permanent life partner shared household expenses with the deceased, the board did not act irrationally in allocating 100% of the benefit to the permanent life partner,” she said.
The complaint was dismissed.
Withholding of benefits owing to criminal charges
The complainant said he had sent numerous emails to his employer regarding his withdrawal benefits, but after accepting his resignation, the employer did not submit the withdrawal of benefits form to the fund.
The fund submitted that the withdrawal form was signed by the complainant on 16 February 2021 and only received on 9 March 2021. The form was not signed by the employer, and the financial adviser informed the fund that the employer had laid criminal charges against the complainant for theft of R40,000 from the company safe.
The matter had been reported to the police and the complainant was held in custody for 48 hours before being released with no charges pressed.
The fund asked the employer to provide either a written admission of liability or summons evidencing that it had instituted civil proceedings against the member. The fund also requested confirmation that the criminal case against the member was still being pursued.
However, the employer advised that it did not have a written admission of liability, no civil summons was issued because it was too costly, and the criminal case was not continuing due to police incompetence.
The fund then decided that benefits could not be withheld any longer and that payment should be made to the complainant. However, at the time of the adjudicator’s determination, no payment had been made by the fund to the complainant.
Lukhaimane noted that a significant amount of time had lapsed without any movement in terms of the payment of benefits or a civil case or criminal case.
The fund was ordered to pay the complainant’s withdrawal benefit. DM