- The former housekeeper who served her employer for 31 years was awarded a full R1.9 million pension death benefit.
- The adjudicator found that the retirement fund applied the wrong legal reasoning, but confirmed the full payout.
- Ruling reinforces the protection afforded to financial dependants under Section 37C of the Pension Funds Act.
A former housekeeper who devoted 31 years of service to her employer has been awarded the full R1 890 631.03 death benefit from her late employer's retirement annuity.
The Office of the Pension Funds Adjudicator upheld the allocation despite finding that the retirement fund had relied on flawed legal reasoning when making its decision.
The award was challenged by the executor of the deceased's estate, who complained that the Allan Gray Retirement Annuity Fund had wrongly allocated the entire death benefit to the former employee.
Three decades of service and ongoing support
The former housekeeper worked for the deceased for 31 years before retiring. Even after her retirement, her employer continued paying her R3 500 a month to assist with groceries and other living expenses.
The employer died on 21 September 2024. Less than two weeks later, her husband died on 3 October 2024. Before their deaths, they each bequeathed R200 000 to the former housekeeper in their respective estates. Following the deceased's death, the executor continued making the monthly payments of R3 500.
The retirement fund subsequently resolved to allocate the full death benefit of R1 890 631.03 to the former housekeeper.
Executor challenged the payout
The executor disputed the fund's identification of the former housekeeper as a dependant. She argued that the fund should have based its decision on Section 37C(1)(bA) of the Pension Funds Act, which allows for the distribution of death benefits to both dependants and nominees, or Section 37C(1)(b), which provides for payment of benefits to nominees only.
According to the executor, the fund instead allocated the entire benefit in terms of Section 37C(1)(a), which applies only where there is no nominee. She pointed out that the deceased's husband was the designated nominee of the retirement annuity.
The executor further argued that the R200 000 bequests were intended to replace the monthly stipend so that the former housekeeper would not be left without support. Having received the inheritance, she submitted that the former housekeeper was no longer financially dependent on the deceased.
Adjudicator corrects the legal position
Deputy Pension Funds Adjudicator Naheem Essop found that the fund's legal reasoning for awarding the full benefit to the former housekeeper was flawed and had to be set aside.
However, Essop found that referring the matter back to the fund for reconsideration would only result in further delay. The deceased's husband had died shortly after the member, while the former employee remained the surviving dependant whom the law was intended to protect. He therefore substituted the fund's decision and allocated the full death benefit to the former housekeeper.
Essop said, "The fund's decision proceeded on the mistaken basis that the former employee was the deceased's sole dependant and, therefore, no equitable allocation was necessary."
He explained that the deceased's husband, as her spouse, was also a legal dependant on the date of her death and that an equitable allocation was therefore required. Essop stated, "The husband's subsequent death did not remove him from the class of dependants who had to be considered under section 37C."
He added that the fund was required to recognise both the husband and the former housekeeper as dependants before undertaking an equitable allocation exercise.
Essop said the fund's failure to conduct that equitable allocation exercise rendered its decision legally flawed, and it therefore had to be set aside.
Full payout upheld
Relying on the Constitutional Court's decision in Mutsila, Essop held that dependency must be determined on the date of the member's death, although later changed circumstances may be considered when deciding an equitable allocation.
After considering all the relevant factors, including the husband's death and the former housekeeper's continued position as the surviving dependant, Essop substituted the fund's decision and awarded the full R1 890 631.03 death benefit to the former housekeeper.
Essop said, "The determination highlights the social function that Section 37C of the Pension Funds Act serves, to protect dependency so that those who were dependent on a deceased member are not left without financial support after their demise."
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