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How trustees should deal with unclaimed benefits is a question for which the industry has not established a common position. We also doubt that there is any Namibian legal precedent upon which trustees can rely in this regard. This of course does not make it any easier for trustees. How should trustees deal with this dilemma?

In the first instance, the fund should comply with its rules. Some fund rules state that a benefit remaining unclaimed for a specified period reverts to the fund. Others direct that such benefits are to be paid into the Guardians Fund at the Master of the High Court after expiry of a specified period while yet other rules are silent.

The Pension Funds Act is very specific on how a death benefit is to be disposed of while it is silent about any other benefits. In the case of death benefits funds must follow the prescriptions of section 37C. The Pension Funds Act therefor does not prohibit payment of unclaimed benefits, other than death benefits, to the Master.

The Administration of Estates Act (abbreviated in this discussion as ‘AE Act’) in section 93 makes reference to benefits that remained unclaimed for a period of 5 years or more and prescribes a lengthy process that needs to be followed whereupon such unclaimed benefits are to be paid into the Guardians Fund at the Master of the High Court.

Namfisa has not taken an official position with regard to the disposition of unclaimed benefits. However, Namfisa cannot of course make the law, at best it can give its opinion on how the law is to be interpreted, but at the end of the day only a court of law can bring clarity on any ambiguity contained in any law.

Pension fund rules of course may not contravene any other law. If a fund acts in accordance with its rules and these rules do contravene another law, it might invoke a penalty provision of that other law. The AE Act makes provision for a penalty of N$ 4,000 or 12 months imprisonment for contravening section 93.

In practice, those funds whose rules provide for payment of unclaimed benefits to the Master, usually require payment sooner than the 5 years provided for in section 93 of the AE Act and our experience throughout has been that the Master has accepted such payments. Would such payment be a contravention of said section 93 and pose the risk of the penalty being invoked?

In as much as trustees no doubt would prefer to act strictly within the confines of prevailing law, trustees, as any other law abiding citizen will at times have to take a ‘business decision’ rather than a decision based on clear facts and the disposition of unclaimed benefits appears to present such a scenario. In such cases, one needs to consider the risks the ‘business decision’ may present.

In assessing the risk of disposing of unclaimed benefits through payment to the Master before expiry of the 5 year period, the question is who would institute a legal challenge and why would a person institute a legal challenge? One would expect the body vested with the enforcement of the provisions of the AE Act (the Master of the High Court) to enforce the penalty provided for. One could also expect the beneficiary to institute a legal challenge.

Approaching this matter pragmatically, we suggest that if the rules provide that an unclaimed benefit is paid to the Master earlier than the 5 years referred to in the AE Act, the Master has no argument for imposing a penalty, as the end result is exactly what the AE Act intends to achieve. It may in any event in our opinion be argued that the 5 year period referred to is the ‘outer limit’ and we would not read this provision as prohibiting earlier payment to the Master.

Considering the matter from a beneficiary’s point of view, he may argue that he should still have been able to receive payment from the fund rather than from the Master. The beneficiary’s argument of payment from the Master rather than the fund could be based on the frustrations he had to endure, the time delays and possible loss of interest and a remote argument of additional costs incurred. In our opinion, the risk a fund might face on the basis of such arguments is small and the probability remote as there are likely to be pro’s and con’s for either alternative from the beneficiary’s perspective.

If a fund is concerned that its rules may be illegal to the extent of not correctly prescribing the procedures for disposing of unclaimed benefits the trustees can either take a legal stance or a business stance. Taking the legal stance it can obtain greater comfort by way of a legal opinion that ideally would rely on a relevant precedent but remains an opinion that can still be shown by a court to have been wrong. Alternatively, taking a business stance, the trustees need to assess the risk of following the prescriptions of the rules. As argued above, in our opinion the risk is small and its probability remote.

Comment by Tilman Friedrich.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.

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