Must a pension fund give effect to the wishes of the deceased?

The issue before the court was who a pension fund must pay the death benefits to. In a beneficiary nomination form, the deceased nominated only his mother and his daughter. The guardian of the child (Tsele, the complainant) objected to the fact that the pension fund administrators ignored the wishes of the deceased and appointed his brothers as additional beneficiaries.

The Pension Funds Adjudicator was called upon to make this decision in Tsele v Bidvest South Africa Retirement Fund and another, before the Pension Funds Tribunal.

Mini Summary:

The payment of a death benefit was at the centre of the present complaint to the Pension Funds Adjudicator. The complainant was the mother of a child fathered by a member of the Bidvest’s pension fund. Upon the death of the member, the fund decided to allocate the death benefit payable amongst the two brothers of the deceased, and the complainant’s child.

According to the complainant, the only nominated beneficiaries of the deceased were his mother and his daughter. The complainant contended that as the deceased’s mother had died, the deceased’s daughter should be his only beneficiary. She also complained that despite her having informed the fund that the brothers of the deceased had successful careers, the fund failed to investigate that.

Held that the issue to be determined was whether or not the board of management of the first respondent carried out its duties in terms of section 37C of the Pension Funds Act 24 of 1956.

Section 37C of the act governs the disposition of death benefits. It places a duty on the board of management to identify the beneficiaries of a deceased member and also vests the board with discretionary powers on the proportions and manner of distributing the proceeds of a death benefit. As with the exercise of any discretionary power, in effecting an equitable distribution the board is required to give proper consideration to relevant factors and exclude irrelevant ones from consideration. The board of management may not unduly fetter its discretion by following a rigid policy that takes no account of the personal circumstances of each beneficiary and of the prevailing situation. When making an “equitable distribution” amongst dependants the board of management has to consider the age of the dependants; the relationship with the deceased; the extent of dependency; the wishes of the deceased placed either in the nomination form and / or his last will; and the financial affairs of the dependants including their future earning capacity potential.

Although the deceased completed a beneficiary nomination form, the nomination form serves merely as a guide to assist the board in the exercise of its discretion. The fund’s task in distributing a death benefit in terms of section 37C of the act is to identify all the potential beneficiaries. The board is vested with discretionary powers to decide on an equitable distribution of the death benefit. It is only in cases where it has exercised its powers unreasonably and improperly or unduly fettered the exercise thereof, that its decision can be reviewed.

The adjudicator found that the board of the fund erred in relying solely on affidavits provided by the deceased’s brothers, stating that they were unemployed. The fund fell short of complying with its duty to conduct a proper investigation, and its decision was set aside.