When a member passes away, the fund’s trustees have the onerous duty to distribute the member’s death benefit to his dependants and nominees. Dependency is a factual question and could become subjective. If a person was dependent on the deceased member at the date of death, the trustees are obliged to consider the dependant’s needs vis-à-vis all other dependents. Whether a person is a nominee is an objective, legal question.
Under the Pension Funds Act (PFA), section 37C(b), a valid beneficiary nomination requires that the fund member designates the nominee in writing to the fund. Where the fund did not receive a nomination from the deceased member designating dependants, the PFA’s requirement is not met, and no person has a legal claim as a nominee.
Section 37C(b) prescribes that if the trustees cannot trace any dependants within twelve months, they must award the deceased member’s death benefit as per the member’s nomination form.
Section 37C(c) prescribes that if the trustees traced dependants and the deceased member nominated beneficiaries, they must “…pay the death benefit or such portion thereof to such dependant or nominee in such proportions as the person managing the business of the fund may deem equitable,” meaning the trustees (“the person managing the business of the fund”) must apply their unfettered discretion.
When an employer transfers its pension arrangement from Fund A to Fund B through a section 14 procedure, all nomination forms its members completed in writing and submitted to Fund A are invalid in Fund B. The trustees of Fund B cannot use the nomination form submitted to Fund B to award any portion of the death benefit to a non-dependant nominee. If there were only valid, non-dependent nominees, section 37C(b) directs that the benefit must be paid to the deceased member’s estate. Suppose the deceased member only nominated persons in writing to Fund A, and there are dependants. In that case, the trustees must ignore the nominated persons and pay the benefit to the deceased member’s dependants.
Fund members often submit a completed nomination form reflecting dependant and non-dependent persons. A nomination form to Fund A could, therefore, still be a valuable source for Fund B trustees to identify dependants.
Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. RFS 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 RFS.