- The Telkom Retirement Fund allocated 10 percent of a R7.68 million death benefit to the deceased employee’s mother. This amounted to R768,407 before tax.
- The High Court found that the fund relied on unverified financial information and assumed frail-care costs of R20,000 a month, but did not obtain medical evidence.
- Acting Judge Van der Merwe confirmed the Pension Funds Adjudicator’s order for a new investigation and ordered the fund to pay the widow’s legal costs.
A widow challenged the Telkom Retirement Fund’s decision to give 10 percent of her late husband’s R7.68 million death benefit to his mother. She argued the fund never proved her mother-in-law actually needed that much support.
The High Court in Pretoria agreed, finding the allocation was partly based on speculation about possible future care costs and not on medical evidence.
How the fund divided the benefit
After the employee’s death on 22 October 2022, the fund had to divide a death benefit of R7,684,069.95 under Section 37C of the Pension Funds Act. The four dependants identified were the widow, their two minor children, and the deceased’s mother. There was no beneficiary form.
The fund’s decision was to give the widow half, the children 20 percent each, and the mother 10 percent. Payments were made between November 2023 and January 2024. The mother received R768,407 before tax, or R633,137.32 after tax, on 26 January 2024. She later gave R100,000 to each grandchild.
The widow objected, saying the fund had not properly checked her mother-in-law’s financial needs before deciding the amount.
Mother’s finances and fund’s assumptions
The deceased’s mother is 77, widowed, and lives in a retirement village. She receives about R15,475 a month from pensions, with expenses of R14,998, leaving a monthly surplus of R477.
The fund accepted the deceased’s brother’s statement that he could not help support their mother, but did not verify his finances. The fund also referred to possible frail-care expenses of R20,000 a month, but did not get medical evidence that such care was needed or likely.
There was no medical report, actuarial calculation, or capital needs analysis to show that these costs were probable, or how much money would be needed. The fund also did not look into what resources the mother might have from her late husband’s estate.
Adjudicator finds allocation unsupported
After the widow’s complaint in June 2024, the Pension Funds Adjudicator set aside the allocation and ordered a new investigation. The fund maintained its decision after reinvestigating, but a second complaint led to Deputy Adjudicator Naheem Essor finding the allocation was exaggerated and based on unproven assumptions.
The adjudicator accepted the mother could be a future dependant, but said the amount was not properly backed by evidence. The fund was told to investigate the extent of her dependency and reconsider the allocation.
The fund then went to the High Court, seeking to overturn the adjudicator’s decision and dismiss the widow’s complaint.
Court finds investigation was inadequate
Acting Judge Van der Merwe found the fund’s investigation into the mother’s share was not thorough enough. The fund accepted the brother’s statement without checking his finances. It relied on possible frail-care costs without medical evidence and did not do the calculations to see what would really be needed for future care.
These mistakes mattered because the allocation reduced the share for the widow and her children, who are clear legal dependants with proven needs. The judge agreed the mother’s small monthly surplus suggested she might need help in future, but said that possibility alone did not justify an immediate payment of R768,407.
The decision explained that while someone may qualify as a dependant, the actual amount they should get must be based on real, verified needs. Section 37C of the Pension Funds Act requires the fund’s board to identify dependants, check how much support they actually need, and distribute the benefit fairly. The board has wide discretion, but it must use reliable, verified information.
The judge cited the Constitutional Court’s decision in Mutsila v Municipal Gratuity Fund, which confirmed that a lack of proper investigation can undermine a fund’s allocation, and that sending it back for a better investigation is usually the right remedy.
The fund relied on Fundsatwork Umbrella Pension Fund v Guarnieri, where an allocation to a member’s mother was upheld. This case was different, the judge found, because in Guarnieri the mother had proven medical needs and frail-care costs. In this matter, the supposed frail-care expenses were unsupported by any medical evidence.
Mother’s status as future dependant not affected
The fund argued the adjudicator confused actual dependency at death with possible future dependency. The judge found there was some confusion, but this did not matter for the result. The adjudicator had accepted the mother as a potential future dependant and had only questioned the amount given to her.
The fund also claimed the adjudicator overstepped by setting aside the allocation. The judge disagreed, noting the Adjudicator did not set a new amount, but sent the issue back to the fund for a proper investigation and decision.
The widow suggested reducing the mother’s share to 2 percent. The fund wanted to keep it at 10 percent. The judge refused to set a new figure, saying the court had no verified medical, actuarial, or financial evidence to make that call.
The fund must now reconsider the amount, using verified evidence about probable future needs, the ability of other family members to help, and the financial situation of all dependants. The mother’s status as a potential dependant is not to be reviewed.
The court dismissed the fund’s challenge, upheld the adjudicator’s order (with some adjustments to timelines), and ordered the fund to pay the widow’s legal costs, including her counsel’s fees.
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