A former housekeeper who worked for her employer for 31 years has secured a R1.9 million retirement fund death benefit after the Pension Funds Adjudicator dismissed an executor's challenge. The ruling reinforces the protection afforded to financial dependants under South Africa's Pension Funds Act.
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The executor of a deceased woman's estate has failed in an attempt to overturn the award of almost R1.9 million in retirement fund death benefits to the woman's former housekeeper, who served the family faithfully for 31 years and was regarded as a daughter.
In a significant ruling, the Office of the Pension Funds Adjudicator upheld the allocation of the entire death benefit of R1 890 631.03 from the Allan Gray Retirement Annuity Fund to the former employee, despite finding that the fund's legal reasoning in reaching its decision was flawed.
The dispute arose after the executor argued that the retirement fund had incorrectly classified the former housekeeper as the sole dependant of the deceased. She maintained that the benefit should either have been paid into the deceased estate or shared between the estate and the housekeeper.
According to the determination, the housekeeper worked for the deceased for more than three decades before retiring. Even after her retirement, the deceased continued paying her R3 500 a month to assist with groceries and other living expenses.
The deceased died on 21 September 2024. Less than two weeks later, on 3 October 2024, her husband also passed away.
Before their deaths, the couple had each bequeathed R200 000 to the housekeeper in their respective wills. Following the deceased's death, the executor continued making the monthly R3 500 payments.
The Allan Gray Retirement Annuity Fund subsequently resolved to allocate 100% of the deceased's retirement annuity death benefit to the former housekeeper.
The executor challenged that decision before the Pension Funds Adjudicator, arguing that the fund had relied on the incorrect provisions of section 37C of the Pension Funds Act.
She contended that the deceased's husband had been the nominated beneficiary of the retirement annuity and that the fund should therefore have considered either section 37C(1)(bA), which allows benefits to be distributed among dependants and nominees, or section 37C(1)(b), which provides for payment to nominees where appropriate.
The executor further argued that the R200 000 bequests made by both spouses were intended to replace the monthly financial support previously provided to the housekeeper. Having received those inheritances, she submitted, the former employee could no longer be regarded as financially dependent on the deceased.
Deputy pension funds adjudicator Naheem Essop found that the fund's legal reasoning could not stand.
In his determination, Essop held that the fund had incorrectly proceeded on the basis that the former housekeeper was the deceased's only dependant and therefore concluded that no equitable allocation exercise was necessary.
He found that this was legally incorrect because the deceased's husband was also a legal dependant at the time of her death. As a result, the fund was obliged to identify both the husband and the former housekeeper as dependants before undertaking an equitable allocation of the benefit.
"The fund's decision proceeded on the mistaken basis that the former employee was the deceased's sole dependant," Essop found.
He ruled that because the fund had failed to conduct the required equitable allocation exercise, its decision was legally flawed and had to be set aside.
However, Essop stopped short of sending the matter back to the retirement fund for reconsideration.
He found that doing so would merely delay the finalisation of the matter without changing the outcome.
Relying on the Constitutional Court's judgment in Mutsila, Essop held that dependency must be assessed as at the date of the member's death, although subsequent changes in circumstances may be taken into account when determining what constitutes an equitable allocation.
After weighing all the relevant factors, including the husband's death shortly after the deceased and the former housekeeper's continued financial position as the only surviving dependant, Essop substituted the fund's decision with his own.
He awarded the entire R1.89 million death benefit to the former housekeeper.
The determination underscores the protective purpose of section 37C of the Pension Funds Act, which is designed to ensure that people who were financially dependent on deceased retirement fund members are not left without support following their deaths.
Although the adjudicator found fault with the retirement fund's legal reasoning, the ultimate outcome remained unchanged: the woman who had devoted 31 years of service to the deceased and was treated as family will receive the full retirement fund death benefit.
PERSONAL FINANCE