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Ruling on death benefits

Johannesburg - If somebody is nominated as a beneficiary of a death benefit, it does not mean that such a person will automatically get the benefits allocated to him on the beneficiary nomination form.

The Pension Funds Adjudicator has ruled that the nomination is only a guideline to assist the board of a pension fund in exercising its discretion in the distribution of a death benefit.

Muvhango Lukhaimane ruled that the Municipal Gratuity Fund and Sanlam Life Insurance acted correctly in changing the allocations on such a nomination form as there were some beneficiaries who were more dependent on the death benefits than others.

LG Nsukazi, who passed away on March 5 2012, was employed by the Pixley Ka Seme Municipality and was a member of the Municipal Gratuity Fund  until his death.

A death benefit of R407 739.37 became available for distribution to the deceased’s dependants.

The deceased allocated on his latest beneficiary nomination form that 40% of the benefit must go to his mother, 30% to his sister and 15% each to two children.

The pension fund and Sanlam Life, who administered the fund, reduced the percentage amount allocated to the mother, because she was employed.

Six minor dependants were identified, who were all dependent on the deceased and had no earning capacity in the near future, because of their young ages.

The identified dependants were a two-year old child, an eight-year old child, three nine-year old children and the deceased’s 16-year old sister.

When the mother complained about the reduction of the benefit paid to her, she contended that she was no longer employed as she was retrenched and needed the benefit.

The respondents argued that they used their discretion in terms of  section 37c of the Pensions Funds Act when allocating less money to her due to her earning potential compared to the minor children.

They also looked at the fact that the death benefit was already insufficient to provide properly for the minor children.

Lukhaimane said the primary purpose of Section 37C  was to protect those who were financially dependent on the deceased during his lifetime.

“The Act in effect overrides the freedom of testation of the deceased. It is the pension fund’s responsibility when dealing with the payment of death benefits to conduct a thorough investigation to determine the beneficiaries," said Lukhaimane.

"The fund must decide on an equitable distribution and to decide on the most appropriate mode of payment of the benefit."

She ruled that the inclusion of the mother in the beneficiary nomination form did not entitle her to receive the share of the death benefit stipulated therein.

It was merely a guide to assist the board in exercising its discretion.

"Had the complainant been allocated a share of the death benefit as stipulated in the beneficiary nomination form, the other dependants would have been left in a far worse off position as they are minors,”  Lukhaimane said  in dismissing the complaint.

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