Guarding against retirement funds’ arbitrary discretion when allocating death benefits: The urgent need for statutory guidelines

AuthorMarumoagae, M.C.
DOIhttps://doi.org/10.47348/JCCL/V7/i1a2
Published date16 May 2022
Date16 May 2022
Citation(2021) 7(1) JCCL&P 36
Pages36-62
https://doi.org/10.47348/JCCL/V7/i1a2
36
GUARDING AGAINST RETIREMENT
FUNDS’ ARBITRARY DISCRETION
WHEN ALLOCATING DEATH
BENEFITS: THE URGENT NEED FOR
STATUTORY GUIDELINES
Motseotsile Clement Marumoagae*
Associate Professor, School of Law, University of the Witwatersrand
and Visiting Associate Professor, Faculty of Law, National University of
Lesotho
ABSTRACT
This article discusses the enormous power enjoyed by retirement
funds’ boards to implement or reject deceased members’ clearly
expressed wishes in their nomination forms or wills when distributing
their death benefits. It demonstrates that boards are vested with wide
discretion to apportion death benefits which, at times, is difficult
to justify. Further, this leads boards to make incorrect allocations
of death benefits by paying some beneficiaries less than others,
completely excluding some from the distribution or allocating the
entire benefit to one beneficiary. It argues that apart from requiring
boards to honestly, rationally and reasonably allocate death benefits
in line with the material facts placed before them, there is a need for
legislative guidance that can effectively guide discretion exercised by
boards of retirement funds when allocating death benefits.
Keywords: retirement funds, death benefits, distribution, boards,
discretion.
I INTRODUCTION
Disputes concerning the distribution of death benefits are common
in South Africa. Some beneficiaries usually complain about the way
retirement funds boards allocate available death benefits or for being
* LLB LLM Diploma in Corporate Law (Wits) LLM (NWU) PhD (UCT) AIPSA
Diploma in Insolvency Law and Practice (UP).
(2021) 7(1) JCCL&P 36
© Juta and Company (Pty) Ltd
37
GUARDING AGAINST RETIREMENT FUNDS’ ARBITRARY DISCRETION
WHEN ALLOCATING DEATH BENEFITS: THE URGENT NEED FOR
STATUTORY GUIDELINES
https://doi.org/10.47348/JCCL/V7/i1a2
excluded from the distribution.1 It seems that the legislative,2 quasi-
judicial3 and judicial4 guidelines that have been provided over the
years are not able to adequately assist boards in properly exercising
their discretion when allocating death benefits to deceased
members’ beneficiaries. With the assistance of a selected case of
the high court, determination of the Office of the Pension Funds
Adjudicator (Adjudicator) and decision of the Financial Services
Tribunal (Tribunal), this article illustrates how boards of retirement
funds use their wide discretion to arbitrary distribute death benefits.
The purpose of this article is to examine the criteria used in South
Africa when boards decide to allocate respective portions of deceased
members’ death benefits to their identified beneficiaries or not
to allocate benefits to some of the beneficiaries. In this article, as
Lehmann has alluded,5 I also argue that retirement funds should be
guided by legislation when exercising their discretion during the
allocation of death benefits.6
First, I explain the current legislative framework on the distribution
of death benefits in South Africa. I illustrate how the Adjudicator and
courts have sought to provide guidance on how death benefits should
be allocated. Secondly, through recent case law, I demonstrate that
boards of management of retirement funds can fetter their discretion
when allocating death benefits. In addition to decided cases, I also
rely on the Adjudicator’s determinations which, while not having a
precedential force,7 play an important role in the growth of pension
1 See for instance Marks-Bayman v RCL Foods Pension Fund & Others [2021] 2 BPLR
506 (PFA); Mhlontlo v South African Retirement Annuity Fund & Another [2021] 3
BPLR 722 (PFA); Lotlhanyang v Old Mutual Superfund Provident Fund & Another
[2021] 2 BPLR 446 (PFA) and Cele v PRASA Provident Fund & Another [2021] 3 BPLR
622 (PFA).
2 Section 37C of the Pension Funds Act 24 of 1956 (PFA) and s22 of Government
Employees Pension Law (Proclamation 21 of 1996) (GEP Law).
3 Sithole v ICS Provident Fund & Another[2000] 4 BPLR 430 (PFA) paras 24 and 25.
4 See, among others, Fundsatwork Umbrella Pension Fund v Guarnieri & Others 2019
(5) SA 68 (SCA) para 7, Government Employees Pension Fund & Another v Buitendag
& Others 2007 (4) SA 2 (SCA) paras 6–8, Greyling v Government Employees Pension
Fund & Another (51529/2012) [2014] ZAGPPHC 905 (7 November 2014) paras 7,
8 and 9 and Titi v Funds at Work Umbrella Provident Fund (1728/2010) [2011]
ZAECMHC 22 (10 March 2011) para 7.
5 See also K Lehmann The distribution of retirement fund death benefits an analysis
of the equitability and constitutionality of section 37C of the Pension Funds Act 24 of
1956 (Phd Dissertation, University of Cape Town, 2021) 212–13, who argues that
‘… guidelines are best provided by the legislature, not the Adjudicators’.
6 Ibid.
7 SKhumalo ‘Jurisprudential Role Played by the Pension Funds Adjudicator in South
African Law’ Paper presented at the Pension Lawyers Association Conference held
on 05 March 2006 at Cape Town, who argues that ‘… the tribunal is not a court
of law and while it is obliged to follow the decisions of the High Courts, it is not
bound to follow its own previous decisions’.
© Juta and Company (Pty) Ltd

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