In last month’s Benchtest newsletter we cited expert opinion on whether a lump sum death benefit can or must be paid within 12 months of the death of the pension fund member.

The article clarifies that a debt becomes due when the duty to pay arises. Where a debtor’s liability is dependent upon the performance of certain conditions, the debtor will not be in mora until a duty to pay arises, e.g. all dependants of a deceased needed to be and then have been determined.

Mora can arise where the debtor’s need is urgent and the creditor’s delay is unreasonable. The common belief that a fund’s duty to pay is contingent upon the expiry of the 12 month period referred to in Section 37c is not correct. The duty to pay is not dependent on this but rather whether the trustees are satisfied that they have investigated and considered with due diligence and are in a position to make a decision.

Although onerous, most trustees are familiar with the process they need to follow when faced with the disposition of a benefit due in respect of a deceased member. Section 37C (2) then stipulates that “…the payment…shall be deemed to include a payment made by the fund to a trustee contemplated in the Trustee Moneys Protection Act…for the benefit of a dependant…”

Section 37C thus makes no prescription as to the manner of payment but only explicitly allows for payment to a trust. As stated above the obligation of a fund making payment arises upon the fund being ‘in mora’ towards a dependant. This means that either all dependants have been identified or a dependant’s needs are urgent and a delay would be unreasonable.

In practice trustees often believe that they have identified all dependants, but cannot be certain. This is particularly relevant in case of a deceased male member where one can mostly not be certain. In such cases the trustees have to be cognisant that dependants can still appear to lay claim on sharing in a benefit until expiry of the 12 month period following date of death of the member.

In such a case the trustees need to assess the needs of those dependants they have identified. Should there be an urgent need, mora arises and the fund is obliged to pay. Since the quantum of the benefit due to the dependant in urgent need can only be determined upon expiry of the 12 month period following date of death of the member, in my opinion the only manner in which the trustees can reasonably meet their obligation is to make one or more interim payments to the dependants of a portion of the full benefit that would be allocated to him or her in the event of no other dependants being identified subsequently and up to expiry of the 12 month period.

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.