The Pension Funds Adjudicator is appealing to retirement funds “to be reasonable” while the industry awaits the outcome of legal action involving the Old Mutual-sponsored South African Retirement Annuity Fund (SARAF) and two respondents, the Adjudicator and a fund member’s widow.
On Tuesday, the Adjudicator, Muvhango Lukhaimane, told delegates to the Institute of Retirement Funds Africa conference in Cape Town that she does not usually talk about pending litigation, but that she was “raising this one case because it will have far-reaching implications on members if some of us were to immediately start implementing SARAF’s interpretation of the issue”.
A retirement fund is required to finalise the tracing and investigation of a deceased member’s dependants within 12 months. The subject of the litigation is whether the 12 months should be counted from the date of the member’s death or from the date the fund becomes aware of his or her death.
The pertinent provisions in this case are outlined in section 37(1) of the Pension Funds Act (PFA), specifically paragraphs (a) and (c).
The member died in December 2019 without nominating a beneficiary or leaving a will. SARAF became aware of the member’s death only in March 2022, when a claim was submitted by the widow, who was initially unaware of her husband’s membership in the fund.
Her claim was filed by brokers she contacted after receiving a referral. SARAF recognised that section 37C(1)(a) of the Act requires it to investigate and locate all dependants of the deceased member to distribute the death benefit.
However, SARAF interpreted its obligation as arising only if it learned of the member’s death within 12 months of the event, which was not the case. As a result, it chose not to investigate the dependants and opted to pay the death benefit into the member’s estate instead.
Unhappy with this decision, the widow lodged a complaint with the Office of the Pension Funds Adjudicator. In a ruling issued in June 2023, the Adjudicator stated that the obligation to trace dependants begins as soon as the fund is notified of the member’s death, rather than from the actual date of death.
SARAF disagreed with the Adjudicator’s interpretation, claiming it contradicted the literal meaning of the statutory provision, and subsequently filed an application under section 30P of the PFA to have the Adjudicator’s decision overturned.
In August, Judge Takalani Ratshibvumo of the High Court in Mpumalanga ruled that SARAF’s interpretation was illogical and contrary to the intent of the PFA, which aims to protect members’ dependants and ensure they can access benefits without competing against other creditors making claims on the estate.
The judge dismissed SARAF’s application, ordering it to pay costs, and upheld the Adjudicator’s decision.
Read: When does the countdown for tracing a fund member’s dependants start?
Lukhaimane told the conference that SARAF has filed an appeal with the Supreme Court of Appeal, and while they are appealing, there is a conflicting interpretation.
Lukhaimane outlined her Office’s stance while the appeal is pending. In its view, the 12-month investigation period begins when the fund is notified of the member’s death, rather than from the date of death itself.
She said it is important to consider the main purpose of those 12 months. “The purpose of the period was to give yourselves, as boards, an opportunity over that judgment period to investigate.”
She said that if the calculation starts from the date of death and funds only learn about the death in month 11, that will give them only one month to investigate.
“We do not think that the Act meant for you to have the 12 months calculated like that.”
On the flip side, she said that if someone refers to a fund in month 13 from the date of death, funds would be paying into the estate.
“Which would be good for yourselves as administrators and funds, because you just look for the person with the letter of authority, but it will completely undermine section 37,” Lukhaimane said.
