The intention of the Act is to protect dependents, even over the clear wishes of the member. Often an employer, and, more importantly trustees, are faced with competing interests of people who seek payment of the death benefit. What happens when there is a dispute about the allocation made by the trustees?

On the passing of a member of a retirement fund, the beneficiaries have the right to approach the fund for the allocation and payout of death benefits. Should a beneficiary be aggrieved by the allocation of benefits, after exhausting the fund’s grievance processes, they may approach the Pension Funds Adjudicator (PFA) to set aside the fund’s allocation. Can the PFA override the decision of the trustees?

In Municipal Gratuity Fund v Pension Funds Adjudicator and Another (364/2022) [2023] ZASCA 116 (31 July 2023) the Supreme Court of Appeal was called upon to determine whether the PFA’s decision to set aside the fund’s allocation was valid where the fund was not given the opportunity to put up its case before the PFA.

Brief facts

The deceased was a member of the Municipal Gratuity Fund (fund). At the time of his death, he was married to Mrs X and had a life partner Ms Y. The deceased had five children with Mrs X, while Ms Y had three children of her own. Both Mrs X and Ms Y applied to the fund for payment of death benefits to themselves and their children. After an investigation into the claims, the fund recommended that preference be given to Ms Y and her children, over Mrs X and her children. The basis of this decision was that Ms Y and her children were dependent on the deceased, while Mrs X was employed and financially independent. Aggrieved by the fund’s allocation, Mrs X filed a complaint with the PFA. Attached to her complaint was the custody application of Mr Y, the father of Ms Y’s children, which was intended to demonstrate that Ms Y’s children were not dependent on the deceased.

The PFA informed the fund of the complaint brought by Mrs X. In response, the fund requested that the complaint be held in abeyance pending the finalisation of the custody application brought by Mr Y, considering the direct impact the custody application may have on the re-distribution of death benefits. Notwithstanding the fund’s request, the PFA proceeded to make a determination and ordered the fund to pay Mrs X R300,000 in death benefits to assist with the settling of her home loan.

The court’s findings

The fact that the fund was not afforded the opportunity to make representations was concerning for the court. This is because section 30F of the Act provides that:

“When the adjudicator intends to conduct an investigation into a complaint, he or she shall afford the fund or person against whom the allegations contained in the complaint are made, the opportunity to comment on the allegations.”

The fund not being granted the opportunity to make representations would have impacted the PFA’s determination. Firstly, the PFA would have known that the fund had never resolved to settle Mrs X’s home loan, but rather required more information about the deceased’s estate. Further, disregarding the fund’s right to comment on the complaint before the PFA meant that the issue of Ms Y’s factual dependency on the deceased, which was the basis of the fund’s allocation, was not adequately challenged. 

Conclusion 

Section 30F of the Act affords a party the opportunity to make representations to the PFA. It is important that the fund or “the person against whom the allegations contained in the complaint are made” (and this often is the former employer) is given the opportunity to make the necessary representations to the PFA. Failure to do so means that the fund or the employer forgoes this right. But, where this right is exercised and the PFA ignores the representations, its decision will be subject to attack, as was the case in the Municipal Gratuity Fund judgment.