Understanding the allocation of death benefits in South African retirement funds

IT IS a sad event when a loved one, especially a parent, passes away. Dealing with grief, family members, funeral arrangements, insurance companies, and the retirement fund of your deceased parent can increase the anxiety levels of adult children who must take control of a situation that most of us cannot fully prepare for. Emotions are high, and we try to control everything. One thing we cannot control is the allocation and payment of the death benefits by the retirement fund of our deceased parents.

- BRETT LADOUCE

In terms of section 37C of the Pension Funds Act, the trustees of a retirement fund have the obligation and discretion, to:

1. Find the dependants and nominees of the deceased member;

2. Allocate death benefits to qualifying dependants and nominees in a just and equitable manner; and

3. Pay the allocated benefits to the qualifying dependants and nominees.

Section 1 of the Pension Funds Act defines a dependent, about a fund member as:

1. The spouse of the member.

2. The child of the member.

3. A person in respect of whom the member is legally liable for maintenance, for example, an ex-spouse who is legally entitled to maintenance in terms of a divorce order.

4. A person in respect of whom the member is not legally liable for maintenance if such a person was, in the opinion of the fund trustees, factually dependent on the deceased for maintenance, for example, a stepchild.

5. A person regarding whom the member would have become legally liable for maintenance had the member not died.

The Supreme Court of Appeal stated in the Guarnieri ruling that the purpose of section 37C of the Pension Funds Act is to protect existing and potential dependants and that it serves a social function to protect dependency, even over the clear wishes of the member.

When allocating death benefits, the Office of the Pension Funds Adjudicator has identified the following factors that fund trustees must consider when making just and equitable death benefits allocations:

1. The age of the dependants.