Retirement funds should take note of a decision by the Financial Services Tribunal (FST) that involved the automated payment of a pension interest, says law firm Norton Rose Fulbright.
The fund member and his spouse were divorced in June 2020. The divorce order provided that the spouse was entitled to 50% of the member’s pension interest of R225 846 at the date of the divorce.
The member left the Masakhane Provident Fund almost a year after the divorce order was granted, in April 2021.
In June 2021, the spouse claimed payment of the 50% pension interest from the fund, but it was not forthcoming.
The fund said it had already started an automatic payment process on 2 June 2021 that could not be stopped, and the benefit was paid to the member on 4 June 2021, two days after it had been provided with the divorce notice.
The spouse immediately initiated interdict proceedings against the member, presumably to prevent the dissipation of the funds. The spouse’s attorneys informed the fund they were dissatisfied with its conduct because it had paid the member despite being notified of the divorce order.
The spouse filed a complaint with the Pension Funds Adjudicator.
The Adjudicator determined that the issue to be decided was whether the fund failed to pay 50% of the member’s pension interest to the spouse in terms of its rules and the Pension Funds Act.
It was common cause that by the time that the payment was made to the member, the fund had been advised of the divorce order. The fund’s defence was that:
- The automated payment was already in process, and the payment could not be stopped;
- The spouse had taken too long after the divorce was granted to advise the fund; and
- The fund had given the spouse options to remedy the error, and she had not reverted to them.
The Adjudicator found the fund should have interrupted the payment.
Sanlam, the administrator of the fund, applied for the determination to be reconsidered.
The tribunal agreed with the Adjudicator and dismissed the fund’s reconsideration application.
The fund had received the divorce order before making payment to the member.
The fact that fund indicated that the payment was made because of an automated process that could not be interrupted was an internal issue that could not prejudice the spouse, the FST said.
Norton Rose Fulbright said it is no answer to a claim for payment of a debt admittedly due that an internal process paid someone else, despite the payer’s knowledge of the due debt.
Retirement funds, and others, must be careful when using automated payment processes.
