Zuydam Konsult

Zuydam Konsult Accountants Bellville

Distributing retirement fund death benefits

As per Section 37C of the Pension Funds Act, once trustees have identified dependants of a deceased member, the next step is to allocate the death benefit in a proportion they deem fit.  This article highlights some of the key factors in making this determination.

Section 37C grants trustees at least 12 months to search for dependants, but the timeframe for allocating benefits depends on the completeness of the information provided, as well as the response time of the dependants and nominees.  While trustees should aim to distribute the death benefit as quickly as possible, this process is influenced by individual circumstances and how long it takes to find dependants.

Furthermore, the investigative process is labour-intensive and time consuming, as trustees have a fiduciary duty to investigate the circumstances of every possible dependant in order to establish financial dependency or otherwise.

This includes making direct contact (via email or telephone) with family members, colleagues, dependants, friends, neighbours, and any other third party that may assist with the investigation, gathering relevant information and supporting documents from the various stakeholders related to the death claim.

An investigation by the trustees may sometimes dictate that the trustees should engage the services of a social worker to provide a report on the circumstances of a household or a specific dependant.

There is also the unfortunate reality that there are those that may make fraudulent representations and overstatements of their financial dependency upon a deceased member—further placing the onus on trustees to conduct thorough financial investigations and obtain supporting documentation from potential dependants.

It is therefore important for trustees to obtain corroborating statements from other people and not to simply rely on information provided in sworn affidavits without corroboration of the truthfulness of such information.

It is also important that trustees communicate with beneficiaries throughout the information gathering process in order to help them understand the process and the prescriptions of the legislation—and, at all times, trustees must endeavour to be reasonable and fair in making decisions with the information they have.

Allocating the death benefit

Once the board has successfully identified all the dependants, the next stage of the enquiry would be to examine the financial needs of each dependant so that it can make an equitable financial distribution among them.

In doing so, it has to consider all the relevant facts to the exclusion of irre-levant facts.

In the Pension Funds Adjudicator (PFA) determination of Sithole v ICS Provident Fund and Another [2000] 4 BPLR 430 (PFA), the PFA summarised the factors that the board should consider when making their decision as to the allocation of the death benefit:

  • The age of the parties;
  • The relationship with the deceased;
  • The extent of dependency;
  • The wishes of the deceased placed either in the nomination forms completed during their lifetime and/or their last will; and
  • The financial affairs of the dependants, including their future earning potential.

This basket of factors has been quoted with approval in various court cases regarding Section 37C matters.  Other factors that trustees should also take into account are other sources of income, such as the availability of social assistance grants and financial support available to the dependant, as well as the value of the death benefit that is available to allocate.

Competing needs of the various dependants must also be identified.

 

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Written by ATLEHA-EDU

While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein.  Our material is for informational purposes and should not be construed as financial advice. Errors and omissions excepted (E&OE)

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