Can the trustees of a pension fund ignore the wishes of a member as recorded in the member’s nomination form?

The court dealt with this question in Ndwandwe v Trustees of Transnet Retirement Fund and Others [2023] ZAKZDHC 8 (22 February 2023) of Transnet Retirement Fund and Others [2023] ZAKZDHC 8 (22 February 2023).

The conclusion was that the trustees of a fund may apportion death benefits to the member’s nominees as well as identified dependents and beneficiaries who are not included in the nomination form, subject to the wording of its rules.

Ndwandwe (the deceased) worked for Transnet. When he died, he was survived by two wives and 10 children.

Years before his death the deceased completed a beneficiary nomination form, nominating certain family members. Retirement funds rules are the main source of the rights and obligations that regulate the relationship between the fund on one hand, and its members and the employer, on the other. The board of trustees of a fund are therefore guided by the rules of that fund.

Notwithstanding the nominees and percentages stipulated by the deceased in the nomination form, the trustees deviated from the nominations. Mrs Ndwandwe was unhappy with the change and approached the court, seeking to set aside the revised apportionment by the trustees of the fund. She contended that the trustees committed a reviewable irregularity by ignoring the contents and stipulations in the deceased’s nomination form.

The trustees of the fund argued that it was not bound by the nomination form and was entitled to make an independent apportionment of the deceased’s death benefit to his qualifying dependents as defined in terms of the fund’s rules.

The court found that the trustees acted reasonably and rationally in arriving at the decision to vary the proportions of the death benefits amongst the deceased’s dependants, contrary to the express wishes of the deceased, stipulated in his nomination form.

It found that the trustees of the fund had a large discretion to determine, in the light of its assessment of their respective needs, in what proportions the death benefit of the deceased would be distributed among his dependants.

This judgment accords with the prevailing law set out in section 37C of the Pension Funds Act 24 of 1956 (PFA). The PFA empowers a board of trustees to take all reasonable steps to identify and locate all potential dependents and beneficiaries of the deceased member’s death benefits and to distribute the benefits in a rational and equitable manner. The board of trustees is therefore not bound to rely solely on the information that is brought to its attention through a member’s nomination form.