What happens to a spouse’s pension after the death of a pensioner?

WHEN a fund member reaches retirement age, he or she has a choice to purchase a living annuity.

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A single life annuity provides one or more life annuities and living annuities. A single life annuity is a guaranteed annuity that the pensioner will receive a monthly pension for the rest of his or her life.

The monthly pension can be a set amount (for example, R10 000 per month) or an amount that increases every year by a set percentage (for example, 5%) or an annual increase that is linked to the inflation rate (for example, 100% of the inflation rate of the previous year). The monthly pension payments stop at the death of the pensioner irrespective of the fact that a member might have a spouse who will need financial support after the death of the pensioner.

The pensioner can also decide to purchase a life annuity in terms of a monthly agreement. This will only will the pensioner a monthly pension for the rest of his or her life, but at his or her death, his or her spouse will receive a monthly pension for the rest of his or her life. This ensures that the value of the pension sum does not suffer financially due to the death of the pensioner and the termination of the annuity payments that were made to the pensioner.

Is the spouse of the pensioner automatically entitled to a guaranteed spouse’s pension for life at the death of the pensioner? This question was answered by the Financial Services Tribunal in a review of a Plu Du Plessis v Pension Funds Adjudicator.

Du Plessis was the spouse of a fund pensioner. After the death of the pensioner, Du Plessis claimed that he falls within the distribution on a qualifying spouse in the rules of the fund that entitles him at a spouse’s pension for the rest of his life.