Lize de la Harpe, Senior Legal Advisor at Sanlam Corporate

Introduction

Retirement funds are strictly regulated. Boards of Trustees must take all reasonable steps to ensure that the interests of members in terms of the rules of the fund and the provisions of the Pension Funds Act, 1956 are protected at all times. In addition, Trustees have a fiduciary duty to members and beneficiaries in respect of accrued benefits or any amount accrued to provide a benefit, as well as a fiduciary duty to the fund, to ensure that the fund is financially sound and is responsibly managed and governed in accordance with the rules and the applicable law.

Van Eijck v Alexander Forbes Unclaimed Benefit Pension Preservation Fund [2024]

The complainant was the son of Mr Eijck (the member). According to the complainant, he stumbled upon the unclaimed benefit due to his father by chance while looking for his own benefit.  After discussing this with his father – who was 82 years old, retired and living in the UK – he offered to pursue the unclaimed benefit on his behalf.

As such, he completed and submitted a claim form which he signed himself and provided the fund with an affidavit from his father stating that he may act on his behalf. He also requested that the benefit be paid into his bank account. Upon receipt of the claim form, the fund advised that in order to process the claim, it would need a copy of the member’s ID or passport from his current country of residence in order to verify it.

The fund however encountered difficulty in verifying the member’s identity, the issue being a discrepancy in the spelling of his surname. While in South Africa his official documents bore Van Eyck, while his official documents from the county of his origin, Holland, bore Van Eijck.

In addition, the fund advised the complainant that section 37A(4) of the Pension Funds Act makes provision for a retirement fund to pay a member’s or beneficiary’s benefit into the bank account of a third party. However, it may only do so if the member can give sufficient proof that he is not able to open a bank account. The complainant however failed to provide sufficient proof and, as such, the fund would not be able to pay the benefit to the complainant’s bank account.

Frustrated by the funds constant request for further documents and their refusal to pay to his joint bank account, he approached the Adjudicator to investigate.

Having regard to the provisions of sections 7C and 7D of the Pension Funds Act, the Adjudicator noted that the fund has a fiduciary duty to exercise its functions with care, due diligence, and good faith. The fund must liaise with members upon receiving exit documents to confirm the veracity and authenticity of the claim documentation. As in this matter, the fund received the member’s withdrawal claim forms signed by the complainant on behalf of the member. The only document provided by the complainant was an affidavit purported to be deposed by the member giving the complainant authority to claim the benefit on his behalf. The complainant furthermore wanted the member’s benefit paid into his bank account indicating that it is the member’s wishes.

Section 37A(1) of the Pension Funds Act prohibits a member’s benefit from being reduced, ceded, transferred, pledged, or hypothecated, except for deductions allowed in terms of section 37D of the Act. Further, section 37A(4)(a) provides as follows:

“Despite the provisions of this section, a fund may direct that a member’s or beneficiary’s benefit may be paid to a third party if that member or beneficiary provides sufficient proof that he or she is not able to open a bank account“.

The Adjudicator held as follows at paragraph 5.12:

“The complainant provided the member’s certificate of life and also provided a copy of an affidavit deposed by him. He did not provide any proof that the member is not legally capable of handling his affairs; thus, he is not under any legal limitation to act on his behalf. The member was able to depose an affidavit, and therefore it is not clear why he is unable to open a bank account. It is not a requirement to open one in South Africa. Whilst the Adjudicator sympathises with the complainant, benefits from retirement funds enjoy much protection and in many ways, the fund’s hands are tied.”

The complaint was accordingly dismissed.

Conclusion

Trustees have a fiduciary duty to exercise its functions with care, due diligence, and good faith. Should the fund fail to comply with the Pension Funds Act, it would amount to an improper exercise of its powers and maladministration of the fund.

Section 37A(4)(a) is clear – payment to a third party is only permissible where the member or beneficiary provides sufficient proof that he/she is not able to open a bank account. The fund therefore has no discretion in this regard.

ENDS