Mamodupi Mohlala, the Pension Funds Adjudicator, has issued a ruling allowing a caregiver, in this case a grandmother, the same consideration as a legal or natural guardian with reference to managing a death benefit amount on behalf of a minor.
The complainant is AK Kowa, the mother of a man who joined the Corporate Selection Retirement Fund in 2000 and who died in November 2005. On his death, a total lump sum death benefit of R62 158.47 became payable.
In November 2000, Kowa's son nominated Kowa to receive 100 percent of his death benefit. The board of trustees decided to pay Kowa R3 000 because she was a nominated beneficiary, but the balance of the death benefit was placed in a trust for the deceased's minor child, Kabelo Kowa.
A monthly income of R300 is being paid to Kowa for the maintenance of Kabelo.
Kowa complained that she should be paid the whole amount of the death benefit in the form of a lump sum as she is taking care of the deceased's minor child.
She submitted that because the child's mother had also died, she was the sole caregiver of the child.
Kowa says R300 a month is not enough to buy food and pay school fees.
The Corporate Selection Retirement Fund and the administrator, Liberty Life, sent a joint response to the Pension Funds Adjudicator stating that in terms of the Pension Funds Act, legal dependants are considered before nominees and the trust makes separate provision for school fees to be paid.
The adjudicator found that the board of trustees has a duty to identify beneficiaries and has discretionary powers to decide on the proportions and manner of distributing a death benefit.
However, the adjudicator says the board must not follow a rigid policy that takes no account of the beneficiary's personal circumstances.
When paying a benefit to a minor, the benefit is normally paid to the guardian of the minor, unless there are reasons for depriving the guardian of the duty to take charge of her/his minor child's financial affairs and the right to decide how the benefit should be used.
"It is clear that AK Kowa is acting as the minor child's guardian as she is taking care of his daily needs, as a caregiver and not a legal guardian," Mohlala says.
Therefore, Mohlala ruled that the complainant was in the same position as that of a natural guardian.
"The approach of the board of trustees in this matter leaves much to be desired. The board fettered its discretion by automatically placing the minor child's share in a trust without investigating the ability of the complainant to administer the affairs of the deceased's minor child," says Mohlala.
She says the amount involved and the cost implications of placing the minor child's share in a trust were highly relevant considerations that the board of trustees should have taken into account.
Mohlala ordered that the decision to place the minor child's share in a trust be set aside. Corporate Selection Retirement Fund has been ordered to reconsider its decision regarding the mode of payment to Kabelo Kowa, taking into consideration that his grandmother is in the same position as that of a natural or legal guardian.