A recent ruling involving the BECSA Provident Fund highlights a crucial principle in South African retirement fund law: marriage alone does not guarantee a share of a deceased member’s death benefits. The Pension Funds Adjudicator and Financial Services Tribunal upheld a decision to allocate benefits to the deceased’s children and financially dependent partner, while excluding his separated wife who could not prove financial dependency. The case underscores the importance of documentary evidence when claiming retirement fund death benefits.
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The allocation of death benefits that the board of trustees of a retirement fund must make upon the death of a member is a difficult, and sometimes, controversial, one. Those of us standing on the sidelines always think that we can make a better or more equitable decision than the trustees based on our belief in our own sense of justice and our life experience. When a “loyal wife” is “slighted” by the trustees of a retirement fund in favour of the woman that steps into her shoes when her husband decides to leave the common household by allocating death benefits to the “other woman” and not to the wife, our blood boils at the perceived injustice of the situation.
The scenario above is exactly what first, the Pension Funds Adjudicator, and later, the Financial Services Tribunal, had to deal with in a recent case involving the BECSA Provident Fund. In the case, the separated spouse of the deceased member, Mrs A, laid a complaint against the fund at the Pension Funds Adjudicator because she was aggrieved that the fund trustees did not allocate any portion of the death benefit to her as the spouse of the deceased member. The fund allocated 85% of the total death benefit to the four children of the deceased member and 15% to his girlfriend, Miss B, with whom the deceased shared a common household at the time of his death.
Although it was established that Mrs A and the deceased member were still married at the time of his death, the fund was furnished with proof that Miss B was the deceased’s partner who had been living with him for more than a year at the time of his death. Miss B provided the fund with bank statements indicating funds received from the deceased proving her financial dependency on the deceased member. The fund trustees came to the conclusion that the deceased and Miss B shared a common household and household responsibilities and was thus a factual dependant of the deceased member. Mrs A, on the other hand, could not provide documentary proof in the form of bank statements that the deceased supported her financially at the time of his death.
The Pension Funds Adjudicator found that the trustees took relevant factors into consideration and ignored irrelevant factors when they made their death benefit allocation. The complaint of Mrs A was therefore dismissed, and the death benefit allocation of the trustees was confirmed as just and equitable.
The Financial Services Tribunal found that it is the task of the Pension Funds Adjudicator to find if the trustees acted rationally and arrived at a proper and lawful decision. The fund trustees have to take the following factors into consideration for them to make a proper and lawful allocation of the death benefits:
The Financial Services Tribunal found that, given the fact that Mrs A could not provide any documentary proof of dependency, the fund trustees could not come to any other allocation decision than the one they made. The onus was thus on Mrs A to provide the trustees of the fund with proof of dependency before the trustees could allocate a portion of the death benefit to her.
There is no formal separation process in terms of the South African law and parties remain married until a divorce order is granted. The legal obligation to financially support your spouse remains until the divorce order is granted.
Where parties apply for a divorce order, it will be possible for a spouse to obtain an interim maintenance order. This order will not only ensure that a spouse who has left the common household for perceived greener pastures is still held responsible for his or her share of the household expenses until the divorce order is granted. It also preserves the rights of the non-member spouse to share in the death benefit should the member spouse die before the divorce order is granted as there will be legal right to financial support as well as documentary proof of payment in terms of the court order.
As a spouse, you do not have an automatic right to a portion of the death benefit that is payable upon the death of a fund member spouse. The portion of the death benefit that is allocated to you will be determined based on your proven, actual, financial dependency on your spouse at the time of his or her death and a realistic estimation of your future financial needs. Without proof, there is no payment.
* Ladouce is a pension funds lawyer and the author of the book, Pensions for Palookas.
PERSONAL FINANCE