Issue: March/May 09
Editorials

DEATH BENEFITS

Living together is OK

At least in terms of the Pensions Funds Act, that is. Although there is no statute recognising cohabitation, Assistant Pension Funds Adjudicator LUFUNO NEVONDWE shows that the surviving partner can qualify for benefits when a fund member dies.

Payment of death benefits is regulated by s37C of the Pension Funds Act. This section’s primary purpose is to protect those who were financially dependent on the deceased fund member during his lifetime.

In effect, s37C overrides the deceased person’s freedom to have disposed of his or her property by testament. So, although the deceased may have expressed an intention (in his nomination form) to benefit a certain nominated beneficiary, it does not necessarily imply that the whole amount of the benefit will be awarded to this nominated beneficiary. The deceased’s intention, as contained in his nomination form, is only one factor to be considered by trustees.

It is the responsibility of the pension or provident fund’s board to determine the beneficiaries. Only after thorough investigation may it decide on an equitable distribution to them, and then finally to resolve the most appropriate mode of payment.

In exercising their discretion, trustees are required to consider relevant factors only. The trustees are also required to exercise their discretionary power properly, and not to fetter their discretion. But the Act does not prescribe the relevant factors.

In other words, the trustees have an unfettered discretion to determine which dependants will share in the benefit. The trustees’ discretion extends to the point of granting no benefit to some dependants. Of course, the rider is always that the board has properly exercised its discretion by considering relevant factors and ignoring irrelevant ones.

What is relevant? Guidelines have been set out in reported Adjudicator determinations. They are that the fund “should have regard to a basket of factors, including but not limited to” the

  • age of the parties;
  • relationship with the deceased;
  • extent of the dependency;
  • financial affairs of the dependants;
  • future earning potential and prospects of the dependants.

Under s1 of the Act, a dependant “is a person in respect of whom the member is legally liable for maintenance or person in respect of whom the member is not legally liable for maintenance if such a person was, in the opinion of the trustees, dependent on the member for maintenance; is a spouse or a child of the member”. Posthumous, adopted and illegitimate children are therefore covered by the definition. And a spouse is “a person who is the permanent life partner or spouse or civil union partner of a member...”

A spouse is “a person who is the permanent life partner or spouse or civil union partner of a member...”

Intriguing, then, is whether s1 qualifies a cohabiting partner as a dependant. Of the three dependant classes – legal, non-legal and future – it would seem that the cohabiting partner will qualify as a non-legal dependant or the so-called “factual dependant”. Clearly, she (assuming the person is female) cannot qualify as a legal dependant because she is not a spouse of the deceased fund member.

A person can qualify as a factual dependant even if the deceased fund member owed her no duty of support. But a person might still be a dependant if the deceased in some way contributed to that person’s maintenance. The person claiming to be a factual dependant will have to prove she was dependent on the deceased at the time of his death. A person can also qualify as a factual dependant if she was the cohabiting partner, living with the fund member as his wife. Yet there is no statute that recognises their union.

Some years back, then Adjudicator John Murphy determined that a woman complainant had no right to a death benefit purely on grounds of cohabitation. Nevertheless, he held, she qualified as a factual dependant under s1 and should have been considered for the benefit under s37C. Accordingly, he ordered the trustees to pay her the benefit.

Pension funds are part of social security. They are a mechanism that enables people to escape destitution. Social security thus meets people’s basic needs when their income stream has stopped or has been disrupted, or was never adequately developed.

Although there is no statutory recognition of the cohabitation relationship as similar to common-law marriage, the Act does protect cohabitees who might have spent their adult lives together. When a fund member dies, the surviving cohabitee will be entitled to share in the death benefit.

Nevondwe is an Assistant Pension Funds Adjudicator