Separation does not disqualify a spouse from being a legal dependant

The Financial Services Tribunal has dismissed an application by a fund member’s daughter to have the allocation of her late father’s entire death benefit to her mother reconsidered on, among other grounds, that her parents were separated at the time of his death.

The fund member (DM) married his wife (SM) in 1966. He retired in 1997, and they lived in the United Kingdom. In December 2019, DM returned to South Africa without his wife. Four months later, he passed away.

In June 2020, the Sentinel Retirement Fund decided to allocate 100% of the lump-sum death benefit of R140 629 to the deceased’s widow because:

• She was a legal dependant;
• She was married to the deceased for 53 years; and
• She was financially dependent on the deceased at the time of his death.

The fund noted that DM and SM had been separated for four months and invoked the rule that gives it the discretion to condone a period of separation.

It was “beyond dispute” that DM and SM’s three children – aged 52, 48 and 45 – were not financially dependent on the deceased.

Reasons for approaching the Adjudicator

The eldest child (KvS) was not happy with the fund’s decision and lodged a complaint with the Pension Funds Adjudicator.

KvS asserted that her mother should not receive the entire death benefit because she was not dependent on her father. Not only were they separated, but KvS said her mother had asked her father to initiate divorce proceedings.

Furthermore, KvS said her father had not nominated her mother as a beneficiary of his death benefit.

KvS also wanted the fund to reimburse her father’s medical and funeral expenses.

The Adjudicator could not find fault with fund’s investigation into DM’s dependants or its allocation of the death benefit. She pointed out that a fund’s trustees are not bound by a deceased’s beneficiary nomination.

The Adjudicator said the medical and funeral expenses should be claimed against the deceased’s estate.

Financial dependency contested

KvS sought an order from the tribunal for the Adjudicator’s determination to be reconsidered. She submitted that her mother was not entirely financially dependent on her father because she received her own pension.

She told the tribunal that her father had not bought a return ticket to the UK; a bank account had been opened in South Africa for the payment of her father’s pension; her mother can support herself and cover her living expenses; and her parents had not communicated with each other while her father was in South Africa.

Reasons for dismissing the application

In dismissing KvS’s application, the tribunal stated the following:

• The fact that DM and SM were married for 53 years established the basis for SM to be considered a legal dependent.
• The separation did not disqualify the applicant’s mother from being a legal dependant. Furthermore, the rules of the Sentinel Retirement Fund empowered the fund to condone the non-cohabitation of a pensioner and his spouse.
• That DM and SM had a joint bank account, were dependent on each other and shared living expenses further established a basis for SM to be considered as a factual dependent.
• Section 37C(1)(a) of the PFA empowers trustees to exercise their discretion in respect of who among the dependants of the deceased should be paid a death benefit. The fund had taken relevant factors into account when deciding to allocate the entire benefit to SM.

With regard to KvS’s request to be reimbursed for her father’s medical and funeral expenses, the tribunal said it would be “wholly contrary to the letter and purpose of section 37C” for the fund to reimburse persons on whom the deceased was dependent.

Furthermore, the tribunal can only grant relief falling within section 234 of the Financial Sector Regulation Act.

The tribunal said it could not find a basis on which to conclude that the fund had taken irrelevant, improper and irrational factors into consideration when arriving at its decision to award the entire benefit to the deceased’s wife.