A recent Financial Services Tribunal case highlights the jurisdiction of the Pension Funds Adjudicator (PFA) in so far as group life insurance scheme falls under the Pension Funds Act are concerned.
Case background
| ● | Mr B was the spouse of the late Mr B (the deceased). | |
| ● | The deceased was an employee of the ABSA Group and held membership in both the ABSA Pension Fund and the ABSA Group Life Scheme. | |
| ● | Mr B challenged the allocation in respect of the Group Life Scheme proceeds. | |
| ● | The claims committee of the insurer approved the distribution as follows: | |
| ○ | 80% to the applicant, Mr B; | |
| ○ | 5% to the deceased’s mother in law; | |
| ○ | 15% to the deceased’s father. | |
| ● | Mr B lodged a complaint and as a result of this, no distributions were made to the dependants. (He first lodged a complaint with the Long-term Ombud and then with the PFA). | |
The PFA’s original determination
According to the PFA, it had jurisdiction in terms of a death benefit payable by the first respondent in terms of the rules. In the determination, the PFA submitted that the payment of death benefits is regulated by section 37C of the Act which is read with the definition of “dependent” in section 1. The purpose of the section is to protect those financially dependent on the deceased during his lifetime. However, the Applicant contented that the PFA did not have jurisdiction to issue a determination on insurance schemes and therefore the complaint should be dismissed.
Does a group life insurance scheme fall under the ambit of the Pension Funds Act?
ABSA claimed that the rules of the Scheme governing the distribution of benefits offered under the Scheme, and how the Scheme is administered with regard to death benefits, is aligned with the principles of section 37C of the Act even through the scheme is not governed by the principles of the Pension Funds Act. The Employee Benefit Insurer therefore took cognisance of the fact that:
| ● | the deceased did not complete any nomination form for the Scheme; |
| ● | distribution of the benefits under the Scheme are therefore overseen by the trustees; |
| ● | the distribution was done according to the rules of the Scheme. |
However, in order for the PFA to have jurisdiction, the Fund must be a “pension fund” as defined in the Pension Funds Act, more particularly sections 2 and 4 thereof. Furthermore, section 2 of the PFA specifically require that every pension fund must apply for registration and be provisionally or finally registered under the PFA. Consequently, without having been registered, the Group Life Insurance Scheme will not fall under the provisions of the PFA and consequently the PFA will not have the requisite jurisdiction, even in the event where the scheme meets the definition of a pension fund or pension fund organisation.
It was demonstrated that the Scheme in this case was not registered and therefore the PFA did not have jurisdiction in the matter. As a result the order was dismissed.
We have seen a fair number of Tribunal decisions involving disputes over beneficiary nominations. This case once again highlights the importance of making sure that your intentions regarding the proceeds on death are very clearly reflected. It is interesting to note that the deceased was employed as a financial adviser, and one would have expected more circumspection in such matters.
Click here to download the detailed Tribunal case that specifically highlights all the applicable jurisdictional aspects.
