Where a member dies before the normal retirement age and while a member of a retirement fund the provisions of section 37C of the Pension Funds Act, (the Act) must be followed in regard to the death benefit payable by the fund.
This section is one fraught with great difficulty, and must be carefully followed by the trustees. Note too that the trustees are given at least twelve months to decide on the distribution of the award.
In its simplest terms, the act provides for a strict order of distribution of the benefit.
The benefit is not to form part of any estate and the fund must make payment of the benefit to dependants, and, if the fund cannot locate any dependants, to nominees; if there are no nominees, the payment must be made to the estate.
If the member has nominated beneficiaries to benefit from the pension benefit then and in such event the trustees must make the award in those proportions as they see fit, to the dependants and the nominees.
Note, that the trustees have twelve months in which to locate the dependants and a valid proportion might be 0%.
“Dependant” is defined in the Act. A dependant is a person in respect of whom the member is legally liable for maintenance or that person was factually or legally dependant on the deceased member for maintenance. It also specifically makes spouses and children dependants in terms of the act and those persons must be provided for out of the death benefits payable.
“Spouse” is given a wide meaning and includes parties to a customary union in terms of any eastern religion.
Thus the trustees must establish who the persons are who were dependent on the member. These dependants are his children and the spouse who was married to the member.
The trustees would have to investigate the matter and do all in their power to trace any dependants. Once they had traced these dependants the next stage of the enquiry would be to examine the needs of those dependants. The needs of the dependants would be indicated by the income already available to them, their living expenses and any costs and charges which they would incur every month, any recurrent expenses, and so on.
Once their needs had been established, the trustees would make the necessary award from the amounts available for distribution.
The trustees, once they are satisfied with the distribution, would then make the payment. They have a period of twelve months in which to make their decision, and they would also have to make the decision to pay the amounts either to the dependants or to a trust – established on behalf of the minor dependants.
The investigation is a factual one and the trustees must conduct the investigation as thoroughly as possible, taking all surrounding factors and circumstances into account. The wishes or otherwise of the deceased, and the nomination of beneficiaries which he has made, can be largely ignored – certainly for the first part of the enquiry.
Once the trustees have been able to establish who the dependants are, and what their needs and requirements would be, the benefit can then be distributed accordingly.
