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Welcome to the Trustee Training Program by Fingroup Presenters Jim Ash CFP® Daniel Bediako CA Greg Ash Financial Planner 1.

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Presentation on theme: "Welcome to the Trustee Training Program by Fingroup Presenters Jim Ash CFP® Daniel Bediako CA Greg Ash Financial Planner 1."— Presentation transcript:

1 Welcome to the Trustee Training Program by Fingroup Presenters Jim Ash CFP® Daniel Bediako CA Greg Ash Financial Planner 1

2 The History of Retirement Funds 1. The role of extended families and local community 2. Pension funds owe existence to industrial revolution 3. Mass urbanization 4. Employees began to reward good employees as part of business Efficiency 5. Competition also led to formal ways of attracting better skilled Employees 6. Initially pensions paid from current earnings until prudent employers began to pre-fund the benefits 7. Around the early 1920s, governments also saw the advantage of encouraging more formal arrangements as society became more dependent on savings made during employment as a means of survival in old age, rather than reliance on the family or community unit. 2

3 What is a Retirement Fund The term retirement fund is defined in the RFA to mean any plan, fund, or programme or business established for purpose of providing annuities or lump sum benefits for its members on their retirement or dependants of such members on the death of such members. This is a generic term for any arrangement providing retirement and death benefits for its members. 3

4 What is a Retirement Fund In practice, however, there are many different types of retirement funds, providing different types of benefits, and these are differentiated in the Income Tax Act, where different tax provisions apply to them. The term retirement fund in the RFA includes a pension fund, provident fund, and retirement annuity fund as defined in the Income Tax Act. 4

5 Types of Pension Funds (1) Provident Fund A provident fund is generally pension fund which pays its retirement benefits as a lump sum cash benefit at retirement date. Furthermore, only the employer contributions are tax deductible. 5

6 Types of Pension Funds Contd (2) Retirement Annuity Fund Most retirement funds are set up for the employees of a specific employer, or a group of participating employers, but a retirement annuity fund is a retirement fund that caters for individuals who become members voluntarily. Therefore, unlike pension and provident funds, there is no participating employer in a retirement annuity Fund. This type of fund does not provide for an early withdrawal benefit. See Tshabalala &Others v South African Retirement Annuity Fund [2001] 1 BPLR 1534 (PFA). 6

7 Types of Pension Funds Contd Most, but not all, retirement annuity funds are sponsored and administered by insurance companies, and are sold in the open market as products. Although the individual members assets are generally invested in some kind of policy issued by the insurer, the fund itself is a separate entity that is subject to the same provisions of the RFA as any other retirement fund. 7

8 Types of Pension Funds Contd (3) Preservation Fund A recent development in the industry is the preservation fund, which provides a vehicle for members, who leave the service of their employer, to transfer their withdrawal benefits and preserve them until retirement age. No tax is levied on benefits transferred directly into a preservation fund. Preservation funds are subject to the fairly stringent conditions determined by tax authorities. In SA, the SA Revenue Service regulates this in terms of practice notes RF1/98 and addendum A. 8

9 Formula for calculating Benefits The manner in which a retirement benefit is calculated is not prescribed in the RFA or the Income Tax Act. It is only required that the benefit promise and the rate of contribution are clearly defined in the rules. The two common basis for calculating retirement benefits used by the industry are the defined benefit fund and defined contribution fund. The Retirement Fund Regulations of 2008 defines these two formulas or type of funds. 9

10 Defined benefit fund (or DB Fund) Defined Benefit Fund is defined in the regulations as a fund in which the rules define the pension and other benefits payable to the member or dependants independently of the contributions payable and the benefits are not directly related to the investment of the fund. The benefit promised is calculated in relation to the members salary times the number of years of service. Where there is a shortfall the employer is liable to make up the difference. 10

11 Defined Contribution Fund (or DC Fund) The Regulations defines a defined contribution fund as a fund in which an individual members pension benefit is determined by reference to the conditions paid into the fund by or on behalf of that member and the investment earned on those contributions. The amount of a members actual retirement benefit cannot be determined until he has retired. These funds are also referred to as fixed contribution funds. 11

12 The Main Role Players in a Pension Fund Most of the people involved in the business of retirement funds are either defined in the RFA or indirectly referred to in the RFA. The purpose here is only to look at the main players and to indicate how they interact in carrying out their collective roles in the provision of benefits. 12

13 Member The primary purpose of a fund is to provide benefits for its members and beneficiaries. Until recently, members played an entirely passive role and were simply on the receiving end of what the fund, and employer decides to provide. Now members are being required to take a more active role, e.g., the RFA provides in section 8(2) for the election of member-representative trustees, and increasingly members are given the opportunity to decide on investment matters in DC funds. 13

14 Pensioner A member who has retired and is in receipt of a pension. It is interesting to note that a pensioner whose pension has been purchased in his or her own name from an insurer ceases to be a member in terms of the RFA. Only a pensioner whose pension is being paid by the fund remains a member of the fund in retirement and has certain rights under the RFA. See section 1 of the definition of a complainant. 14

15 Beneficiary This includes a members dependants as defined, his nominees, or anyone other than a member entitled to benefit in terms of the rules of the fund, such as an ex- spouse where a court has made an order in relation to a divorce agreement. 15

16 Management Board The RFA requires that every fund shall have a controlling body called the management board, whose main object is to control the business of the retirement fund. Section 8(1). 16

17 Trustees The term trustee is defined in the RFA to mean a member of the board This is due to the nature of the functions they perform and the fiduciary duties imposed on them by law. Although individual trustees, may be appointed by the sponsoring employer or elected by the members as the case may be, it is their individual and collective duty to ensure that the interest of members is protected at all times. Section 10 of the RFA. 17

18 Principal Officer (PO) The RFA requires that every retirement fund must have a PO who is a Swazi citizen A PO is equivalent to a company secretary of a company. 18

19 Other Players Employer Administrator Insurance companies Consultants (The RFA does not expect the board to carry out all the responsibilities of managing the fund) Valuator Auditor Regulator Tax authorities 19

20 Dispute Resolution under the RFA The Office of the Retirement Funds Adjudicator is established in terms of section 44(1) of the RFA to adjudicate complaints lodged by complainants in terms of the RFA, in a procedurally fair, economical and expeditious manner. 20

21 Jurisdiction of the Adjudicator Complaint is defined in section 1. According to this definition the complaint must relate to a specific complainant, and must also relate to either: (1)the administration of the fund, or (2)the investment of its funds, or Durban Meat Security Association Pension Fund and Others v Momentum Employee Benefits (Pty) Ltd [1999] 10 BPLR 127 (PFA). (3)the interpretation or application of its rules IBM Pensioners Action Group v IBM South Africa (Pty) Ltd & Another [2000] 3 BPLR 268 (PFA) 21

22 Jurisdiction of the Adjudicator Further, the complainant must allege one of the following: (a)that a decision of the fund or any person purportedly taken in terms of the rules was in excess of the powers of that fund or person, or an improper exercise of its powers; See, Khambule v CNA Ltd (now CNA (Pty) Ltd (1) [2001] 9 BPLR 2472 (PFA) (holding that board acted ultra vires when it failed to protect member interest when a consultant refused to grant a housing loan application ) (b)that the interests of the complainant has or will be prejudiced as a result of the administration of the fund by any person, whether by act or omission. 22

23 Jurisdiction of the Adjudicator that a dispute of fact or law has arisen between the fund or any person and the complainant; Shell Southern Africa Pension Fund & Another v Sligo & Others [1999] 11BPLR 235 (C); or (d)that an employer who participates in a fund has not fulfilled its duties in terms of the rules of the fund. Harris v AECI Pension Fund & Another [2000] 7 BPLR 737 (PFA). 23

24 Statutory Exclusion of the Adjudicator's jurisdiction A Complaint that does not relate to a specific complaint Complaints in respect of which proceedings have already been instituted in a civil court, if the subject matter is the same. Section 50(2) 24

25 Statutory Exclusion of the Adjudicator jurisdiction SACTWU v Feltex Sick Benefit Fund & Another (2003) 9 BPLR 5141 (PFA)(holding that adjudicators jurisdiction is limited to complaints that fall strictly with the definition of a complaint) Mungal v Old Mutual Life Assurance (2009) ZASCA 141 (holding that it is the substance of the complaint that must be consistent with the definition not the way the complaint is formulated). 25

26 Statutory exclusion of the Adjudicators jurisdiction Time Barring and prescription. Section 51 provides that a complaint must be lodged within three years of the act or omission that gave rise to the complaint. This period commences when the complainant became aware of the act or omission, or should reasonably have become aware thereof. Matters that arose before the RFA can be investigated provided it is not received more than 3 years after it arose. 26

27 Investigations by the Adjudicator Broad investigative and judicial powers under sections 47, 48 and 52 of the RFA. The decisions of the Adjudicator are binding and have the same status as a civil judgment. Section 57(1) A writ or warrant of execution of the determination can be issued by clerk or registrar of the court which would otherwise have had jurisdiction and may be executed by the sheriff of such court as long as no appeal has been lodged. Section 57(2) 27

28 Management Board of a Retirement Fund Section 8 of the RFA requires that every retirement fund must have a Board Board must consist of at least 4 persons. 50% of them have to be elected by members and the remainder can be appointed by the employer. Section 8(2) allows for exemptions to certain kinds of retirement funds. E.g. retirement annuity funds, umbrella funds or if it is too expensive to have 4 persons on the Board, but the 50% rule cannot be exempted. 28

29 Management Board of a Retirement Fund The RFA expressly provides that certain matters must be included in the rules of the fund. Such as the constitution of the Board, election procedures, procedures at meetings, voting procedures of the trustees, procedures for breaking deadlocks and the powers of the Board. The RFA requires that decisions of the Board must be carried by in a resolution which is minuted and signed by the Chair of the Board. 29

30 Management Board of a Retirement Fund Duties of the Board are to ensure that: 1. Records of the operations of the fund are kept. This duty is normally delegated to fund administrators 2. Minutes of meetings are maintained to reflect resolutions of the board. This is consistent with section 8(5)(resolution requirement) That the minutes of the board are kept in a bound book. 3. That member of the fund are informed about their rights and benefits. This is a statutory duty as well as an element of a duty to act in good faith. 30

31 Benefit statement Wentworth v GG Umbrella Provident Fund and Others [2009] 1 BPLR 87 (PFA)(on the provisions of benefit statements). Bona v South African Local Authority Fund and Another (1) [2001] 10 BPLR 2563 (PFA)(on the accuracy of information provided to members) Naicker v Orion Money Purchase Pension Fund [2002] 3 BPLR 3218 (PFA)(on appropriate remedies arising out of reliance on an inaccurate benefit statement). East Sussex County Council v. Barbara Jacobs [2003] EWHC 3323 (Ch)(on compensation for actual loss arising out of inaccurate benefit statements) 31

32 Westminster City Council v. Haywood [1998] Ch 378 (on distress and inconvenience as appropriate remedies for retirement fund maladministration). Duty presupposes information must be accurate RFA does not require disclosure of all information pertaining to the fund (balance sheet, valuation reports, rule amendments, information relating to changes in fund policies) Information that members reasonably require for the protection and enforcement of their rights, even if it involves expenditure by the fund. Caffin & Dooling v African Oxygen Pension Fund [1999] 10 BPLR 113 (PFA) 32

33 5. That contributions are timeously paid to the fund This may include an obligation to institute legal action against an employer liable to pay contributions. Emma v Orion Money Purchase Provident Fund (SA) (1) [2004] 2 BPLR 5443 (PFA) Duty to ensure that administrators software and proper control systems are in place. 6. That rules and operations of the fund are not in violation of the RFA There are many statutes that are binding on the board, including common law principles and the Constitution. 33

34 7. That the fund is managed in accordance with its registered rules. This provision should be read together with section 13 of RFA Section 13 makes rules of the fund binding on the fund and its members, employers and officers and any person with a claim on the fund. Tek Corporation Provident Fund and Others v Lorentz [2000] 3 BPLR 227 (SCA) (held that retirement funds are empowered to act only in terms of the rules, common law or legislation; that actions not provided for in the rules are ultra vires). Abrahamse v Connocks Pension Fund 1963 (2) SA 76 (W)(held that the rules constitute the constitution of the fund). 34

35 Fiduciary Responsibilities of the Fund 1. RFA requires that the board must protect the interest of the members at all times. Interest of the members versus of the fund debate Relation between the fund its board and members is analogous to relationship between company, its board and shareholders Retirement funds are legal entities capable of suing or being sued and members have no rights to its assets., except in terms of the rules. Board does not owe duty to members just like a company board owes no duty to individuals shareholders. Percival v Wright [1902] 2 CH 421. 35

36 Fiduciary Responsibilities of the Fund 2. Act with care, diligence and good faith Board owes a duty of good faith to members and other stakeholders including the employer. South African Association of Retired Persons v Transet Ltd (1999) 4 ALL SA 25 (W). 3. A ct in good faith- Duty of loyalty means trustee must act in good faith with the powers conferred. Must not make secret profits and avoid conflict of interest. Robinson v Randfontein Estates Gold Mining Ltd 1921 AD 168. Board must exercise its powers and discretion only for its proper purpose. Manzini v Metro Group Retirement Fund (2001) 12 BPLR 2808 (PFA). 36

37 Board must take into account only those relevant factors and considerations in making decisions Van der Linde v Telkom Retirement Fund [2004] 11 BPLR 6257, 6259 (PFA). Disregard irrelevant factors. Van der Linde v Telkom Retirement Fund [2004] 11 BPLR 6257, 6259 (PFA). Decisions taken must be reasonable and reasons for its decisions must be available. Jeffries v Industrial Sewing Machine Pension Fund (3003) 5 BPLR 4687 (PFA) 37

38 4. Principles Governing Trustees (Cameron et al, Honoress South African Law of Trusts (1992) I. Trustee must give effect to the trust instrument in so far as it is lawful II. Trustee must perform his functions with diligence and skill reasonably expected of a person who manages the affairs of others III. Trustee must exercise independent discretion. 38

39 5. Duty of Care requires board to act with care, and will be breached if Fund negligently conveys inaccurate information to a member which causes prejudice. Lewis v First National Bank Group Pension Funds (2001) 5 BPLR 2028 (PFA) Fund negligently fails to provide its members with information to protect their rights. Bona v South African Local Authority Fund and Another (1) [2001] and Naicker v Orion Money Purchase Pension Fund [2002] 3 BPLR 3218 (PFA) 39

40 6. Avoid conflict of Interest. A trustee must declare their interests in writing or otherwise to the board e.g., according to the funds code of conduct. This requires the trustee to exercise their powers in loyalty to the fund and members and not to their personal interests. A trustee who is also a senior member of the employer? 40

41 7. Act impartially- This duty requires that the board must not unfairly discriminate against members or beneficiaries. (to do so would be contrary to the duty of good faith) Sometimes board can take a decision that benefits one group of member and not others, but not violate its duties. Conradie v Credit Agricole Indosuez South African Branch Pension Fund [2000] 7 BPLR 721 (PFA)(where fund decided it was fair and equitable to distribute the surplus to the transferring members and not pensioners) What is required is that discrimination should be reasonable and rationally related to the purpose sought to be achieved. 41

42 Duty of the board to member is limited to the protection of their interests in the rules Can the board change its mind in relation to any decisions made regarding benefits? Board will be functus officio (having performed his office) in regard to its first decision. Smith v Smith (2009) JOL 22926 (D) Board can change its mind only with consent of person affected. Bafana Mabopane v Makwakwa (2006) 4 All SA 1 (SCA) (holding that rights conferred in terms of a statute can be waived) 42

43 Principal Officer has the following responsibilities: 1. Receive and process communications between the fund and other authorities concerning the fund 2. Ensure implementation of decisions of the board 3. Ensure that all legislatively required returns are submitted on time (valuations reports, audited financial statements, details of funds investments, etc) 4. Responsible for all administrative functions in terms of the rules and legislation. Principal officer is like the company secretary 43

44 Death Benefits under Section 33 of the RFA The distribution of benefits payable on the death of a member of a retirement fund is regulated in terms of section 33 of the RFA. The section was primarily introduced to ensure that death benefits are paid in accordance with the legislative policy to reduce government dependency. 44

45 Section 33(1) reads: Notwithstanding anything to the contrary contained in any law or in the rules of a registered fund, any benefit payable by such a fund in respect of a deceased member, shall, subject to a any guarantee issued or loan in terms of section 19, not form part of the assets in the estate of such a member, but shall be dealt with as in this section Death Benefits under Section 33 of the RFA 45

46 The object and policy behind the section is to ensure that those persons who were dependent on the deceased member are not left destitute by the death of the member. It is a social engineering or protection policy. In order to achieve this, section 33 overrides the freedom of testation and the board is not bound by the wishes of the deceased in the nomination form or by the last testament of the deceased. Mashazi v African Products Retirement Benefit Provident Fund [2002] 8 BPLR 3703 (W), 46

47 Three Duties under Section 33 The board is bound by formula in section 33. The section essentially imposes three primary duties on the board namely: 1. To identify the dependants and nominees of the deceased member; 2. To effect an equitable distribution of the benefit amongst the beneficiaries; and 3. To determine an appropriate mode of payment. 47

48 The Duty to Investigate From a reading of section 33 in its entirety, it is clear that dependants are favoured over nominees in the distribution phase. In terms of section 33(2), there is a duty on the board to trace and locate the dependants of the deceased member. The mere fact that a person qualifies as a dependant does not entitle him to the entire benefit. It only entitles him to be considered by the board in the distribution phase. 48

49 The RFA defines a dependant as follows: (a)a person in respect of whom the member is legally liable for maintenance; (b)a person in respect of whom the member is not legally liable for maintenance, if such person- 1. was, in the opinion of the board, upon the death of the member in fact dependent on the member for maintenance; 2. is the spouse of the member and shall include a souse as a result of any customary or religious union; 3. is the child of the member and shall include a posthumous child, an adopted child and an illegitimate child; (c) A person in respect of whom the member would have become legally liable for maintenance, had the member not died. 49

50 From this definition, the RFA creates three categories of dependants: (1) Legal dependants Paragraph (a) Spouse Lekhozi v Auto Workers Pension Fund [2004] 5 BPLR 5714 (PFA). Children. Others 50

51 ( 2)Factual Dependants Para (b) A person that the deceased in some way contributed to their maintenance. In order to constitute maintenance, the deceased need to have made regular payments. Govender v Alpha Group Employees Provident Fund and Another (2) [2001] 8 BPLR 2358 (PFA). The person alleging to be a factual dependant will have to prove that he was dependent on the deceased at the time of the members death 51

52 Factual dependants contd This section may apply to spouses in respect of whom there exists no law in terms of which the marriage or union is recognized, such as those that are staying in a monogamous homosexual relationship TWC and Others v Rentokil Pension Fund [2000] 2 BPLR 216 (PFA). -co-habitees living as husband and wife. Chittenden v Escourt Butchery Provident Fund and Another, [2001] 5 BPLR 2001 (PFA). -Any child, of the deceased member whom he was not legally required to support and maintain will qualify as a dependant, for example, financially independent major children of the deceased. 52

53 Future Dependants (para (C)) A person may qualify as a dependant, if he can show that the deceased would have become liable to maintain them had he notionally been alive. Possible dependants in terms of this category may include parents that are not legally dependent on the deceased for maintenance at the time of his death. Wellens v Unsgaard Pension Fund [2002] 12 BPLR 4214 (PFA). Fiancée. Van Zyl v Delta Motor Corporation Salaried Provident Fund & Another PFA/EC?698/04/Z/CN (2005) Unborn children Van der Merwe and Others v Southern Life Association Ltd and Another [2000] 3 BPLR 321 (PFA) 53

54 Nominees Contrary to popular belief, nominees are not by virtue of having being nominated entitled to a death benefit. -The term nominee is not defined in the RFA. -For a beneficiary to claim to be a nominee, there must exist a valid nomination form, which must be in writing, the beneficiary must not be a dependant and the nomination form must be directed to the fund. Kruger v Central Retirement Annuity Fund [2002] 7 BPLR 3634 (PFA), (holding that the nomination is similar to a contract, as a result the ordinary contractual principles apply) Annie Gowing v Lifestyle Retirement Annuity Fund 2007 2 BPLR 212 (PFA)(explaining the status of nominated beneficiaries) 54

55 12 Month Period in Section 33 The board has 12 months within which to trace and identify the possible beneficiaries that might share in the benefit. No duty on the board to pay if there is a need for further investigation. The duty to pay is dependent on whether the board is satisfied that it has investigated and considered the matter with due diligence and is in a position to make an equitable allocation. Dobie NO v National Technikon Retirement Pension Fund [1999] 9 BPLR 29 (PFA). 55

56 12 Month Period in section 33 The 12 month period is most relevant insofar as payment to a nominee is concerned. A nominee will only be considered when the 12 month period has lapsed and the fund did trace dependants. Any claim before the 12 month period is premature. Section 33(3) also provides that if member dies without a dependant but with a nominee, such nominee gets benefits only if the fund is satisfied that the deceased estate has enough assets to settle its debts. 56

57 If member had a dependant and nominee, fund is required to pay within 12 months in a manner that Board deems equitable. Section 33(4) If Board has traced no dependants within 12 moths and no nominee exist, the benefit is paid into estate or insurance and retirement trust account. Section 33(5) If no dependants are found within 12 months but a nominee to receive a portion of benefit, the remaining portion is paid into the estate. Section 33(5) 57

58 Duty to Effect Equitable Distribution RFA says board must pay equitably, but no guidelines exists. When exercising their discretion to effect an equitable distribution the board needs to consider the following six factors: 1. The wishes of the deceased. Moir v Reef Group Pension Plan 2000] 6 BPLR 629 (PFA).(where board decision set aside because it did not consider other factors such as that the deceased was living with complainant as husband and wife. Instead they relied on nomination form alone.) 2. The financial status of the dependants including their future earning potential Van Vuuren v Central Retirement Annuity Fund and another [2000] 6 BPLR 661 (PFA). (the fact that the surviving spouse was the sole beneficiary on an insurance policy was not taken into account) 58

59 3. The relationship with the deceased Karam v Amrel Provident Fund (2003] 9 BPLR 5098 (PFA). 4. The extent of dependency Robinson v Central Retirement Annuity Fund, [2001] 10 BPLR 2623 (PFA). 5. The amount available for distribution Nieuwenhuizen v SAB Staff Provident Fund and Another [2000] 12 BPLR 1413 (PFA).(board may not overemphase one factor) 6. The age of the dependant. Sithole v ICS Provident Fund and Another, [2000] 4 BPLR 430 (PFA) These factors will be relevant under the RFA. 59

60 Distribution to a Nominee A distribution to nominees will only take place when no dependants exist and the deceased has completed a valid nomination form. Section 33(3) Payment of the benefit to a nominee is subject to the following conditions: 1. No dependants have been traced or identified by the board; 2. The 12-month period has lapsed; 3. The deceased has completed a valid nomination form directed to the fund in which the person nominated is not a dependant; and 4. The aggregate assets do not exceed the debts 5. Only one dependant must be indentified together with a nominee. Section 33(4). 60

61 Where the deceased member has only allocated a certain percentage of the benefit to a nominated beneficiary, that nominee will only be entitled to the portion specified. The remainder of the benefit will be paid into the estate or an insurance and retirement trust account in terms of section 33(5). Krishnasamy and Others v ABI Pension Fund [2004] 2 BPLR 5471 (PFA). 61

62 Distribution to the Estate Under 33 The fund can only pay a benefit into the deceaseds estate in the following three scenarios: (1) The fund has not discovered any dependants and there is a nominated beneficiary, but the deceaseds estates liabilities exceed its assets, or (2)The deceased member has no dependants and did not designate a nominee in writing; or (3)The deceased has designated a nominee only to receive a portion of the benefit, then the remaining balance must be paid to the estate. Jacobs NO v Central Retirement Annuity Fund and Another [2001] 1 BPLR 1488 (PFA). 62

63 Duty to Determine Appropriate Mode of Payment Payment to beneficiaries (minor and major) The board has 2 options insofar as payment to a minor is concerned under section 33(7). 1. Installment payments Board has discretion as to amounts of installments Best interest of child are paramount At majority age or death full payment required 2. Make Lump sum payment Pay into a trust for the benefit of a dependant. Section 33(6) 63

64 Recent Determinations Kowa v Corporate Selection Retirement Fund & Another, PFA/GA/14151/2007/SM unreported; Mafe v Barloworld (SA) Retirement Fund Respondent, PFA/ FS/13033/07/CN. Ramanyelo v Mine Workers Provident Fund [2005] 1 BPLR 67 (PFA )(amount of the benefit; the ability of the guardian ; qualifications; benefit used until 18 years) The above cases deal with problems arising from a decision by the board on whether or not a parent or guardian should be deprived of the right to administer benefits on behalf of minor beneficiaries 64

65 Payment to a major beneficiary 1. Payment to a major can be made in installments provided the beneficiary has agreed in writing. section 33(8). 2. The agreement between the beneficiary and the board can be cancelled by either party on written notice not exceeding 90 days. Section 33(8)(a) 3. The balance of the benefit shall be payable in full to the beneficiary on the cancellation of the agreement. Sec 33(9) 65

66 Steps to Take In Death Benefit Cases Obtain a copy of the final decision of the fund, together with reasons. Sec 8(5)(resolution requirement) Obtain the rules of the fund and any resolutions by the fund. Obtain all the documents (affidavits, minutes of meetings, liquidation and distribution account etc) that the board considered during their deliberations. Examine sec 33 and research the case law commenting on the relevant provisions applicable to your case. 66

67 Quick Reference Guide on Death Benefits Cases Did the death benefit become payable upon the death of a person who was a member of retirement fund? If yes, section 33 applies. Death benefits provided for by a retirement fund with certain exceptions does not form part of the deceased estate. 67

68 Did the board identify the circle of beneficiaries? To identify the circle of beneficiaries the board will normally conduct an investigation. Did the deceased submit a written nomination form? Is it the latest one? Is it addressed to the retirement fund? Is the nominee a dependant of the deceased? Nomination form, is similar to a ordinary contract, consequently the ordinary principles of contract law apply. 68

69 Did the beneficiaries other than those nominated, make out a case for dependency? The purpose of the section is to ensure that those people who were dependent on the deceased during his life time are not left destitute by his death. Dependency is therefore critical in determining whether a beneficiary will share in the benefit 69

70 Was each of the identified beneficiaries given an opportunity to address the board? In Van der Merwe & others v Southern Life association Ltd & Another [2000] 3 BPLR 321 (PFA), the Adjudicator held, that the funds decision insofar as the distribution of a death benefit is concerned will impact significantly on the rights and property of each dependant, consequently the fund ought to properly investigate the circumstances of each dependant and give each an opportunity to be heard. The content and nature of such a hearing will depend on the circumstances of each case. 70

71 What was the mode of payment used? The following modes of payments can be used: Direct lump sum payment to the beneficiary, if a major; Consider payment into trust for the benefit of the beneficiary, or payment to the parent or guardian for the benefit of the minor beneficiary. Payment in installments to minor or major beneficiaries 71

72 Withdrawal Benefits and Deductions Whilst the primary aim of a retirement fund is to provide retirement benefits, members are often forced to leave a fund prior to retirement age, and in these circumstances a withdrawal benefit will often be payable. A withdrawal benefit becomes payable in an occupational pension fund when a member leaves the fund by reason other than retirement, section 24 transfer,/merger, disability, or death. A withdrawal benefit will therefore accrue when a member voluntarily resigns, is dismissed, or is retrenched. 72

73 Permissible Deductions Home loan or guarantee granted to a member in terms of section 19 of the RFA An amount representing the loss suffered by the employer due to any unlawful activity provided there is 1. Admission of liability in writing signed by the member and witnessed by a person chosen by the member, who has at least 8 years of formal education; or 2. judgment has been obtained against the member in a court. 73

74 Permissible Deductions An amount for which the employee is liable under a guarantee issued by the employer for purposes of obtaining a housing loan. 1. An original notarized document must exist to prove that the guarantee was made 2. Otherwise a court order will suffice. 74

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