Sister wins order for pension fund to reinvestigate R654,694 death benefit split after challenge

A pension fund has been ordered to reinvestigate how it allocated a R654,693.82 death benefit after a sister disputed the fund’s decision to award 80% to the deceased’s young son and 20% to the deceased’s mother.

What happened

The dispute began after LP died in October 2023, leaving a R654,693.82 death benefit available for distribution. The fund allocated about R523,000 (80%) to the deceased’s son, S, and about R130,000 (20%) to the deceased’s mother, EM. The deceased’s sister, RK, received nothing from the pension fund allocation.

Why the sister challenged the allocation

RK argued that S was not financially dependent on the deceased and said the deceased had denied paternity. DNA testing confirmed that the boy who was three years old when his father died was biologically related to LP. RK also said her elderly mother, a pensioner who she said depended entirely on LP for day-to-day expenses, deserved a larger share than the 20% awarded to EM. RK sought reimbursement for funeral and DNA-test costs.

Responses from the fund and other parties

The retirement fund told the adjudicator that RK was the sole beneficiary of LP’s R1,934,910.72 life insurance benefit and that neither S nor EM had benefited from that insurance payout. The fund said that factored into its decision to allocate the pension fund death benefit between the child and the mother.

EM confirmed she had lived with her son until his death and relied on him for food, housing, transport, utilities and medical expenses. She said she was fully dependent on him and said the allocation favoured S, who, she said, was only partially dependent through maintenance payments.

S’s mother told the adjudicator that the deceased had acknowledged paternity during maintenance court proceedings, which resulted in a court order requiring him to pay R500 a month toward the child’s upkeep. She added that the child had speech delays requiring therapy and additional medical treatment.

Adjudicator’s findings

Deputy Pension Funds Adjudicator Naheem Essop found that S qualified as a legal dependant because he was LP’s child and because a maintenance court had recognised the deceased’s responsibility to support him. However, Essop found the fund had not properly investigated several matters before allocating 80% to the child:

• the child’s actual monthly financial needs;
• the guardian’s financial position;
• the effect of the child’s educational benefit; and
• the deceased mother’s income, financial needs, employment prospects and life expectancy.

Essop also dismissed RK’s claim for reimbursement of funeral expenses and the costs of DNA testing, stating that pension fund death benefits exist to support financial dependants rather than to compensate relatives for burial costs. He noted that the decision to arrange the DNA testing was taken on RK’s initiative and was not required by the fund.

Order and next steps

The adjudicator concluded the fund had failed to conduct a thorough investigation before exercising its discretion. The original allocation was declared improper and set aside. The fund has been ordered to reinvestigate the matter and make a fresh decision on distribution of the death benefit within three months.

The case record notes that LP’s life insurance benefit of R1,934,910.72 had been paid to RK by nomination and that neither the child nor EM benefited from that insurance payout.